China Grows at +8.9%!
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In This Issue..

* Currency rally is reversed overnight!                     
* Pay Czar dreams...                          
* Brazil may reverse capital inflow tax...                                     
* An Asian Union?                                                                                    

And Now... Today's Pfennig!

China Grows at +8.9%!                              

Good day... And a Thunderin' Thursday to you! It's raining outside, so... It must be a Thursday! Amazing how many Thursdays have seen rain this fall! The ground isn't the only thing that's getting watered down this morning...

Front and Center this morning, the euro traded well past 1.50 yesterday afternoon, and drug all the other non-dollar currencies higher as the day went on. But overnight, all that giddiness with seeing the euro over 1.50 for the first time since August of 2008 (and then it was on the way down, instead of this time on the way up!), has been watered down...

Here's the skinny... China printed a very strong 3rd QTR GDP number overnight of +8.9%, and instead of basking in the glow of that report, currency traders took a different route, and decided that if: China is growing that strongly, then stimulus in China will be removed soon, and other countries will follow suit... No one in the markets believes that the U.S. economy can withstand a removal of stimulus... Big Ben Bernanke might believe so, but the markets say "ain't no way!"

So, here we are once again with this stupid trading theme of "what's bad for the U.S. is bad for the world, and thus a flight to the dollar and Treasuries is required"... I just love how these guys "decide this is what's going to happen and the rest of the trading world follows them"... The non-dollar currencies got all caught up in this, and thus were sold off almost throughout the Asian and European sessions... I have seen the euro pop back up since I came in though, so maybe this will be short-lived...

There was news out of Brazil yesterday that was interesting... Yesterday I told you about the "tax" on capital inflows to slow down the stock market, and the real... Well, there were rumors yesterday that the Brazilian Gov't would change this from "Capital inflows" to "Capital outflows"... This would apply to balances that were in the country for less than 2 months... So... This removes the albatross from the real's neck, in my opinion that is...

I came across some news yesterday that just kind of hit me right between the eyes, and the light bulb went on, and so on... The news about the "Pay Czar", just got me thinking. ( I know that's a dangerous thing!)

Well... Too bad the new "Pay Czar" (man I hate that term "Czar"! I mean really, when did we become the Soviet Union?) any way... Too bad the new "pay czar" doesn't work for us in Congress! The new "pay czar" slashed compensation at 25 of the financial institutions that took Gov't. funds, lowering compensation by 50%! 

But, he doesn't, and nor would his colleagues on "the Hill" like it very much if he started slashing their compensation! But wait! That's a great idea! When he's finished with the financial institutions, he can go to "the Hill" and start slashing compensation there Freddie Krueger style!

Because... Today, every dollar of growth comes with about 4 dollars of debt.

Again, the same dude sent me another email yesterday, telling me that I need to stop banging on the current administration, for deficit spending, it wasn't their fault the annual deficit went from $450 Billion in 2008, to $1.42 Trillion in 2009! AGAIN! I DON'T CARE WHO SPENT IT, WE DIDN'T HAVE IT TO SPEND! And once again, let me be perfectly clear about this... When the first $150 Billion of checks were sent to kick start the economy, I ranted and kicked and screamed... When the first TARP was introduced, I screamed to the heavens! I stated then, that I would NOT have bailed out anyone! I would not have spent the money we didn't have! I would have let those that could not stand on their own, fail... Think about that... The Big Ben's and Summers' of the world are telling you that "they saved the world"... Saved us from what? Financial ruin? We're freakin' broke now, what difference would it have made on that front? Job losses? Oh! And 10% (really 16%) unemployment is "saving us"? Or how about collapsing the markets? Well, I personally doubt that would have happened, folks... That's just a scare tactic they use...

Think about this for a minute... If we had done nothing... Like Ronald Reagan did after the stock market collapse of 1987, we would have suffered some great losses... But we would be past it by now... Instead, the same firms that took Billions from the Gov't, are still hurting... Did you see that Bank of America (BOA) booked a $2.2 Billion loss for the 3rd QTR! Even the Fed's Beige Book revealed that the Fed's regular report found that the overall economy is still plagued by weakness in banking and increasing unemployment.

Ok, I'm sorry... But once I get on a roll about this stuff, I can't stop! Just ask my kids... Their eyes begin to glaze over, they stare at the ceiling, and you can almost hear them thinking..."here he goes again with that deficit speech, when will he ever figure out that we heard it and understood it the first 50 times he's gone through this with us"! HA!

OK, back to the currencies... One currency you would have thought would have gone through the roof on the news that China's 3rd QTR economic growth was +8.9%, is the Aussie dollar (A$)... But NOOOOOOOOO! That didn't happen... Once again the thought here is that economies around the world can not withstand the removal of stimulus.... Starting right here in the U.S., but traveling around the world to China too... The thought process (strange as it might seem, and I do believe it's strange) is that if China grew this fast with stimulus the Chinese Gov't might see this as an opportunity to remove the stimulus, and when they do... All hell breaks loose!

While I don't disagree that stimulus removal in the U.S. would send our economy spiraling down the slippery slope of a double dip, I don't agree that it would be the same in China...

So... The A$ is about 1-cent cheaper than it was yesterday afternoon... Looks like, smells like, walks like, and talks like a cheaper buying level opportunity!

Remember when I thought that Sweden's Central Bank, the Riksbank, was prudent? Well, that all changed a few months ago, when the Riksbank joined the Bank of Canada in saying that they would not raise rates until the 2nd half of 2010... Well, the Riksbank repeated that line this morning after they left rates unchanged... I just don't get it... What the heck are these Central Banks thinking? I guess they just don't have a brain... The need to go visit the Wizard of Oz, I heard he's giving out brains! In fact, they're probably singing this right now!
I could wile away the hours
Conferrin' with the flowers
Consultin' with the rain
And my head I'd be scratchin'
While my thoughts were busy hatchin'
If I only had a brain

Oil is back to $80 this morning... Gold is $1,055...  And that means the Canadian dollar / loonie is back on the rally tracks heading toward parity against the dollar once more!

And for those of you that like to take a walk on the wild side... The South African rand has really taken a blow to the mid-section in the past couple of days... You see, there was a rumor floating around that the South African Reserve Bank (SARB) was going "freeze" the rand, to keep it from getting too strong VS the dollar. It was rumored that the Economic Development minister, Patel, was going to propose that the rand be "frozen"... Both the ministry and the Central Bank have denied ever discussing this proposal...

Let's hope that they haven't! That would be awful! Just look at the damage the rand has suffered on the rumor! So... If the leaders in South Africa can calm down the markets, we'll see a rebound in the rand, and it will have been a case of "sell the rumor, buy the fact"...

Our office coordinator extraordinaire, Danielle Goodman, gave me one of those fake $1,000,000 bills yesterday and wanted to know if that was enough to buy a BRIC MarketSafe CD! She just wanted to hear me do Dr. Evil from Austin Power, and say with my little finger aside the corner of my mouth... One Mill-ion dollars... HA!

But that got me thinking about the hyper-inflation story I told you about the other day... Let's hope that we never have inflation that bad that $1,000,000 bills are floating around like $100 bills, c-notes, Benjamins...

The new Japanese PM is beginning to take some direction for his new Japan... For instance, this caught my eye... Prime Minister Yukio Hatoyama has advocated creation of an East Asian Community, modeled after the European Union, with China at its heart and the U.S. left outside. Hmmmm... The Big Boss, Frank Trotter and I did a report about 6 years ago for the Daily Reckoning, where we outlined this Asian Union, and called the new currency there the "Pan"... That would be truly amazing if that Asian Union came to reality!

But like we said then... The wounds run pretty deep between China and Japan, and it will take  quite a lot of love and tenderness to get past that! Which country has the love and which one has the tenderness? HA!

Well... The euro has continued to push back against the dollar since I came in this morning... So, maybe it can get back to 1.50, which sure looks like a nice crooked number to me!

As I said above, Gold is $1,055 this morning having lost $5 this morning. Don't you just "love" all those commercials on TV these days with guys telling you to buy Gold? Where were they when Gold was $250, or $500, or $750? They were afraid that Gold's rise was not on terra firma, and they rolled up in a ball in the basement of their buildings, shaking with fear! HAHAHAHAHAHAHAHA! Nah... Just kidding... But I do find it weird that these guys are coming out of the woodwork like bugs now... Guys like Casey, Bonner, me, and the Mogambo Guru, have been here all along with the same message about buying Gold...

Speaking of the Mogambo Guru... I had the honor of exchanging emails with him the other day... He absolutely cracks me up!

The Data Cupboard finally yields some data worth looking at this morning, as the Weekly Initial Jobless Claims prints along with Leading Indicators... We're still seeing +500K new jobless claims every week folks... When will this stop? I contend that the U.S. economy can not sufficiently recover until the unemployment situation is addressed... Why is our Gov't trying to shove this, that and the other thing down our throats these days, and not addressing the unemployment situation? I mean, a tax cut for businesses would be a great move there don't you think?  The other thing the Gov't is ignoring is the deficit... Instead they're thinking of new expenditures! I've written my congress people until my fingers won't write any longer about this... What have you done? Come on people! This is immoral what they're doing to our grandkids, and we just let them?

OK, I've got to get off that subject!

Let's go the recap and Big Finish now, as I feel myself getting all lathered up to scream at the walls about this stuff!

To recap... The euro traded past 1.50 yesterday for the first time since August 2008, then, however, it was going down, this time it was going up! The non-dollar currencies have given back yesterday's gains after China announced a +8.9% GDP for the 3rd QTR, thus making the traders think that stimulus worldwide will be removed and that would be bad for the U.S. and thus, we return to the stupid trading theme of rewarding the dollar when things are bad! UGH!

Currencies today 10/22/09: A$ .9235, kiwi .7545, C$ .9525, euro 1.4975, sterling 1.6550, Swiss .9915, rand 7.47, krone 5.5650, SEK 6.90, forint 177.30, zloty 2.2770, koruna 17.3250, RUB 29.0845, yen 91.30, sing 1.3970, INR 7.7497, China 6.8290, pesos 12.96, BRL 1.7320, dollar index 75.34, Oil $80.17, 10-year 3.39%, Silver $17.55, and Gold... $1,056.20

That's it for today, and this week for yours truly. I will be at the hospital most of tomorrow, for annual tests, scans, needles, etc. Let's keep our fingers crossed that all's well, eh? I don't get the results until Monday afternoon, so I'll have to find something to keep my mind off what's in the results this weekend! It's Homecoming at the University of Missouri this weekend. When our older kids were there, we used to go down to look at the house decorations on Friday night, and then stay for the football game on Saturday. I won't make it there this weekend, but I hear that the game has been picked as the location for the Tailgate Tour 2009! So, if you're going, stop by and check that out! My poor beloved Missouri Tigers are having a rough go of it this year... And they picked #3 Texas as their homecoming opponent! UGH! My little buddy, Alex has a football game Saturday too! OK... Let's say our goodbyes for the week... Goodbye... And get this out the door! I hope your Thursday is Thunderin' (good that is!) Thanks for reading the Pfennig...

Chuck Butler
EverBank World Markets

Posted 10-22-2009 1:08 PM by Chuck Butler