Currencies and Commodities Sell Off...
Daily Pfennig

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In This Issue..

* Overnight markets ambush risk assets...           
* Germany's IFO Business Confidence gains again...            
* A$'s get pounded by opposite thought story...                           
* More supply to auction off for the U.S....                                                          

And Now... Today's Pfennig!

Currencies and Commodities Sell Off...           

Good day... And a Marvelous Monday to you! I hope your Father's Day weekend was grand... Mine sure was! I'm feeling the affects of the "grand" weekend this morning too! And... It was the first day of Summer! So we had all that going for us, eh?

Front and center this morning, I'm as proud as a peacock this morning. I just read an email from good friend, and excellent market analyst, Mary Anne Aden... Mary Anne sent me a note letting me know that the one and only Richard Russell had quoted me in his letter June 10th... She said it went something like..."this is from Chuck Butler's always terrific column..." WOW! Being quoted in Richard Russell's letter is like the top of the list for me!

OK, Chuck, you have to come down from cloud 9... Hey You, get off of my cloud! Even the fact that the currencies and commodities have sold off in the overnight markets can't stop me from this seashells and balloons feeling...

Yes... The currencies and commodities have sold off in the overnight markets... Even a good print by Germany's think tank IFO on Business Confidence, hasn't wrapped a tourniquet around this sell off... This wasn't a "one and done" for Business Confidence in Germany either! This happens to be the third consecutive month of positive gains for this data. Now... One would think that this should signal something, right? I mean, if I walked up to you on the street and said, "Germany's Business Confidence has posted positive gains for 3 consecutive months"... You would probably, no wait, definitely think (because I know you are very astute, and pay attention in class each day), that Germany's economy must be coming out of their recession... Hmmm... Yes, that's what I would think too! But... The euro isn't showing any thoughts by traders like that!

I think that in the next print of GDP in Germany (the Eurozone's largest economy), we'll see a nice improvement from the previous quarter's negative -6.7% decline! I'm not thinking that GDP will go to a positive print... But if it knocks out half of that decline, that would show that things are improving... And if things are improving in Germany, the rest of the Eurozone will grad on to the coat tails!

The U.S. Fed meets this week, in an otherwise quiet week data, and talks, and we'll have to see what's up Big Ben's sleeve now... I would suspect that this week will be a non-event... But in August, the Fed will most likely be setting off some late fireworks, with an increase in their bond buying program... Quantitative Easing... UGH! And that  thought leads me talk about the amount of supply hitting the markets in the near future... But I wont' bore you with my description of the supply... Here are my friends, Addison Wiggin and Ian Mathias...

My friends, Ian Mathias and Addison Wiggin over at the 5-Minute Forecast, never cease to amaze me the way they describe things! Here's a piece of their letter from Friday, June 19th...

"The U.S. government announced yesterday it will auction a record $104 billion in debt next week. Despite obvious warning signs that the world has had its fill of American paper, the Treasury will forge ahead: $40 billion in 2-years Tuesday, $37 billion in 5-year notes Wednesday and $27 billion in 7-year garbage on Thursday.

They must "get it." Last week's sharp rise in 10-year yields was as sure a sign as any that investors everywhere are getting cold feet. A prudent government would take a break. let things cool off. But there's no rest for Uncle Sam, or his Treasury. They've got the mother of all Ponzi schemes to run:"

I'll get to meet up with Ian and Addison next month in Vancouver... I'm looking forward to that!

So... Like I said, the data is pretty weak this week... So, we'll be scratching and clawing for the markets to throw us bone.

Down Under... The Aussie dollar (A$) has taken on some water overnight after a story printed and quoted the Morning Herald's economic editor... The quote went something like this... "the market was wrong in discounting little to no chance of another RBA cut this year, and a high chance of a hike in the first few months of next year" ...

You might recall last week I told you that the market in Australia had basically decided that the Reserve Bank of Australia (RBA) had come to an end of their rate cut cycle... I then threw in my own 2-cents and said that the first rate hike would come in the 1st QTR next year... Well, the Economics Editor at the Morning Herald doesn't agree... And the A$ has sold off big time since the paper hit the news stands! Come on! That's just one person's opinion, isn't it? Last week, the market players were all about the end of rate cuts... And they are now going to be swayed by one opinion? Where's the intestinal fortitude?

And then there was this... Not happy with having their heavy hand in just about everything these days... The Fed is reviewing the Repo market... Apparently, the poor old Repo market is getting blamed for exacerbating the financial turmoil that followed the collapse of Lehman Brothers last fall. For those of you not familiar with this market... It's a utility for overnight funding... (some go longer than overnight, but the overnight repo and rev repo market is what is being reviewed) So... Look for more Gov't. reforms in a market that has existed for many years just fine and dandy...

I'm going to stop there this morning, as I forgot to print a "Corporate feel good story" on Friday, I will do so today... So, look for that after the "that's it for today" segment...

But... First, speaking of feel good stories... I saw this flash across the screens this morning... New York Times reporter David Rohde, who disappeared in Afghanistan in November 2008, has escaped from his Taliban kidnappers and is under U.S. military protection.... Cool, eh?

Currencies today 6/22/09: A$ .7960, kiwi .6350, C$ .8745, euro 1.3845, sterling 1.6440, Swiss .9190, rand 8.1575, krone 6.4950, SEK 8.00, forint 201.65, zloty 3.2575, koruna 18.80, yen 96, sing 1.4580, HKD 7.7503, INR 48.59, China 6.8355, pesos 13.42, BRL 1.9750, dollar index 80.75, Oil $68.30 (this has really backed off the past couple of days!), 10-year 3.73, Silver $13.88, and Gold... $925.35

That's it for today... My little buddy, Alex, and I were on our own for part of the weekend, and we did just fine! Last week, I bought a used Bass Guitar, and now I can add some bass to Alex's guitar playing... It's fun! The two of us, "jamming" in the basement! All we need is drummer, so people can feel a beat, yeah..... HA! It's alive! It's alive! My beloved Cardinals actually had their offense come alive this past week... A nice weekend sweep of the cross state Royals, was sweet! I just heard on the radio that the "heat index" could hit 110 today here in St. Louis! My mind immediately flashes back to when I was a kid, and we didn't have air conditioning! Then we got one that cooled one room... I had 6 siblings so the 9 of us would all sleep in that one room! We were NOT allowed to go in that room during the day! And look! We survived! HA! OK, thanks for going with me on the trip down memory lane... Time to go to the Corporate Feel Good Story... I hope you have a Marvelous Monday!

I have my own business, working out of my home, representing a small agency called Markle & Associates here in the Pacific Northwest. We represent six wool carpeting mills and a bamboo and hardwood importer. And because our products are "green", environmentally friendly, we do have an edge over the synthetic products and anything tied to petroleum. But nevertheless, we have still been affected by the economic downturn. What I've found to keep the business coming is a simple tool we all know about: networking. Years ago I heard a statement about the success of networking that said it was the single most powerful way to increase business. Faster results than advertising, and cheaper than any other marketing attempt.

So, I've made that my thrust over the years and make sure I stay involved in my industry organizations, participate in meetings on the  chapter and national levels and volunteer for positions to help these organizations grow. In my industry, it meant remaining connected over the years with design organizations like NKBA (National Kitchen & Bath Association), NWSID, (Northwest Society of Interior Designers), American Society of Interior Designers (ASID) and  International Interior Design Association (IIDA). The reason networking works is because people buy from people, rather than simply from businesses. Learning that key has helped my business to keep going in diverse economic climates, including this one.

Chuck Butler
EverBank World Markets

Posted 06-22-2009 10:15 AM by Chuck Butler