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This February 25 to 27, Chuck Butler is partnering up with The Sovereign Society to hold an intensive, 2-1/2-day currency boot camp in Scottsdale, Arizona.

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In This Issue..

* A back-n-forth day in currencies...                                 
* Aussies create 3X more jobs than forecast!                                     
* Euro to remain alternative reserve currency...                                           
* Brazilian Sov. Wealth Fund achieves weaker real...                                                                                                        

And Now... Today's Pfennig!

Aussie Jobs Soar!                                          

Good day... And a Tub Thumpin' Thursday to you! The daytime temperature reached 49 yesterday... As our little Christine would say... "get the sharts out!" HAHAHA!

Today, we're chock-full-o-stuff to look for, starting with a European Central Bank (ECB) meeting, and going through the morning here in the U.S. there'll be more "stuff" for us to look for, like Retail Sales, and since it's a Thursday, the Weekly Initial Jobless Claims will also print. The Fed's Beige Book printed yesterday afternoon, and we've got that to discuss this morning too... So, let's get this Tub Thumpin' Thursday going, eh?

Front and Center this morning... The Australian Jobs report printed yesterday afternoon, and it looks like we'll be able to put another mark in the "pro" column for an Aussie rate hike in Feb... Here's the skinny... Australian employment soared for a 4th straight month, as jobs created were 3 times more than economists estimated! The total jobs created was 35,200, and the jobless rate fell to 5.5% (from 5.6%)...

So... The economists or "experts" if you will, got this one completely wrong... Their estimate was for jobs created to be 10,000... This is very strong employment growth for Australia, and once again places the spotlight on the Aussie dollar (A$) as one of the best yielding currencies with a prospect of even higher yields as soon as February!

OK... This report doesn't "seal the deal" in any shape or form, but it does "nudge" the Reserve Bank of Australia (RBA) in that general direction, for sure!

Traders took notice, right away, and began buying Aussie dollars, pushing the A$ past 93-cents on the night...

The interest rate spread / yield differential between the U.S. and Australia really was put up on top of the desk and asked to dance when U.S. Fed Head, Dudley, said that short term interest rates may remain low for at least 6 months and "possibly for as long as two years"!

Hmmm... Ok, Dudley said that it all "depended on how the economy develops"... WOW! A new MR. Obvious! No dookie! You mean, the Fed is going to react to how the economy develops? WOW, what a novel idea!

OK... I'm sorry, I got carried away there... Since he mentioned it, we might as well take a look at the Fed's Beige Book that printed yesterday afternoon...

The Fed's Beige Book, which is a report on the pulse of the economy from each Fed region, showed that while the economy is slightly better, it continues to operate below capacity, or in their words... " the economy continues to operate at "low levels"...

The Fed Heads also noted that holiday spending in 2009 was "slightly better than in 2008, but still far below 2007 levels... In fact, it was added that the 2009 improvement was so small it did not really represent a shift in trend...

OK... So... Now, looky here! We have December Retail Sales printing this morning! Front and Center, Retail Sales is expected to rise for this period, by .5%, a moderate rise, and one that's disappointing, I would think, when talking about the month of December!  And off quite a bit from November's rise of 1.3%...

Now... This paragraph is going to border on boring for I will be describing things in Retail Sales data, so if that doesn't float your boat, go ahead and skip ahead... OK, those of you still with me... I read a great description of what was going on in that 1.3% gain in Retail Sales from November, and thought it would be good to share... A lion's share of the increase reflected a price-related 6.0% surge in gasoline station receipts. As well, the earlier-reported rise in unit motor vehicle sales was reflected in a 1.6% increase in sales at auto dealerships. Excluding these two components, retail sales rose a relatively robust 0.6%...

OK, it's safe to come back now... We'll also see the Weekly Initial Jobless Claims, which will remain above +400,000, for sure...

As I said above, the European Central Bank (ECB) is meeting as I type my fat fingers to the bone... What do you get when you work your fingers to the bone? Well... You get bony fingers! HA!

The ECB will keep rates steady Eddie this morning, but will probably announce more stimulus removal... Recall, that last week I told you how the ECB had already removed a large chunk of stimulus, while the Fed continues to supply the monetary candy to the U.S. economy...

The euro spent yesterday going back and forth, above and below the 1.45 figure... This morning, the single unit has already been above 1.45 and now it's back below that figure! There's just no conviction to take the single unit much higher right now... And that's because, there's nothing coming from the ECB... That will change this morning, hopefully!

The boys and girls over at Government Sachs, OOOPS did I say that out loud? I mean Goldman Sachs believe the euro will remain supported by its status as the dollar's sole rival for currency diversification by Central Banks... "Given the Eurozone is pretty stable overall, although not overly attractive either, swings in dollar sentiment will likely be reflected in the extremely deep and liquid euro/ dollar cross."

Yesterday, I did a video and talked about why the euro, even with all the problems in Greece, Spain, Italy, etc. is far more valuable than the dollar... I noted all sorts of things, but said, that "The euro's problems can't be as bad as those in the U.S. with California, New York, Michigan, Illinois, etc."  Then later in the day, it was announced that Standard & Poor's (S&P) cut California's credit rating for the second time in less than a year... Now... That's going to be a problem for the state of California, when it comes time to issuing Municipal bonds, given the rating cut... It will make it more expensive to the issuer for sure!

OK... I came in this morning, and turned on the TV's... And there on one of the TV's there was a discussion about foreclosures in the U.S. There was a guy from RealtyTrac, the people that count the beans in the housing sector... He was talking about how there had been 300,000 plus foreclosures in December... Now that's rotten! Foreclosing on someone in December? That's cold Willis! Ok, I digress, let's see what else RealtyTrac had to say... How's this for size? Nearly 3 million households received at least one foreclosure notice in 2009... That's one in every 45 homes that were in default... That's a 21% increase over 2008...

I understand that there are so many foreclosures that some are delayed simply because there are delays in processing delinquent loans!

OK... Now... You have to understand that this is something that I find to be disgusting, people losing their homes... But... You can go back to 2006, when I was banging the drum and saying there was a housing bubble... I can remember talking to some Home Loan guys back then, and telling them about the housing bubble, and them telling me that I was loony toons!

The reason I talk about this is to illustrate the problems the Fed will have in removing stimulus... And... Add to all this the fact that there are still millions of loans that will re-set later this year into next year... If the Fed moves rates higher, those loans will be at a huge risk of default...

Let's talk about something else... Yeah, right here, right now, we can talk about Brazilian Retail Sales, which printed this morning... Brazilian Retail sales soared 8.7% in November VS the previous year... OK, let me take you back to December, when I wrote about how traders in Brazil were trading on thoughts that holiday sales would be brisk... I said then that all this confirms domestic demand... So, if November's Retail Sales were this strong, one can only imagine December's bounty!

One has to believe that the Brazilian Central Bank (BCB) will have to entertain thoughts about raising interest rates soon, given this strong domestic demand... I'm going to go out on the limb here, and say that the BCB will raise rates by the end of April... Probably 50 BPS (1/2%) So, go ahead and mark it down, and see if I nailed it, or fell on my face...

I have to say that I'm impressed by the Brazilian Sovereign Wealth Fund's ability to move the real weaker... They've been in the markets buying dollars by the truck load, and pushing the real weaker... Hmmm... Think about this for a minute... The Gov't announces a Sovereign Wealth Fund that will buy dollars... And the BCB is probably about ready to raise rates, which would make the real more attractive... You don't think these two opposite pulling forces on the real were done as a package deal by the Gov't do you? Nah... That couldn't happen... NOT! I personally truly believe that the Gov't knew the economy was soaring and that they would have to raise interest rates aggressively at some time in the near future, so why not introduce a way to keep the real from soaring at the same time? Pretty darn smart on their part... But then, what happens with the Wealth Fund runs out of money?

Gold found a way to add about $5 to its figure yesterday... (it's given back $4 this morning though! UGH!) I saw a headline story on Gold the other day shoot across the Bloomie, that said... "Gold may increase to $5,000"... I laughed out loud and said, these claims by people are crazy! I mean, I could say, "Gold may increase to $10,000" It's just a guess folks... That's all these people that spout this, that and the other thing about the price for Gold, are just guessing... And... Probably attempting to get rid of their inventory! HA! The thing I always come back to when talking about Gold at $2,000, $3,000, $5,000, whatever is this... For Gold holders, $2,000 Gold or what ever price, would be nice... But stop for a minute and think about that... Think about what the economy must look like if Gold is at $2,000 or above... That's a scary sight right there folks...

Then there was this... Yesterday, I gave you a link to a story in Business Week about how the Gov't might look to our IRA's and 401K's to fund annuities for a "steady stream of Income for us"... Yeah, right! That's the same lie they told us about Social Security... Of which didn't they spend all those funds? Of course they did! It's my opinion, that the Gov't will need a chunk of change to pay the interest on Debt in the future, and where's that chunk of change? It's our retirement accounts, that's where!

Well... A reader sent me a report from May of 2008, where a Washington Think Tank came up with this idea of taking a piece of our pie... Oh boy! That's just great! NOT! Now, if you didn't read the story yesterday, I bet you'll want to now!

To recap... The currencies traded in a very tight range yesterday, with Gold adding $5. The ECB meets today, with no rate movement expected, but maybe an announcement of more stimulus removal. U.S. Retail Sales holds the key to the markets today, and U.S. foreclosures were 21% higher in 2009 than 2008! UGH!

Currencies today 1/14/10: American Style: A$ .93, kiwi .7425, C$ .97, euro 1.45, sterling 1.6265, Swiss .9795, European Style: rand 7.44, krone 5.6350, SEK 7.0180, forint 184.25, zloty 2.80, koruna 17.95, RUB 6.8272, yen 91.80, sing 1.3880, HKD 7.7565, INR 45.62, China 6.8272, pesos 12.74, BRL 1.7680, dollar index 77, Oil $79.77, 10-year 3.77%, Silver $18.53, and Gold... $1,134.20

That's it for today... Remember in the fall of 2007, when I did the "Currency Tours"? I traveled with other speakers to 8 different cities in two weeks to give talks as a part of FX University, a business under the Sovereign Society. That was something! Well, this year, we decided that all that travel was crazy, and that we would do a 3 day FX University gig in Arizona... I've been running ads for this at the top for some time now, but wanted to make certain everyone that wanted to go, knew about it, so go back to top and check it out!

Not much going on at the Butler house these days, after the great times of December, it's always a let down to get to January... But shoot Rudy, pitchers and catchers report in just 4 weeks! That's what I keep my focus on in January, to keep my mind off the cold! I leave March 11th for spring training... That's just 55 days away! Alrighty then... Mike's here, so it's time to get this out the door... I hope your Thursday is Tub Thumpin' for sure!

Chuck Butler
President
EverBank World Markets
1-800-926-4922
1-314-647-3837





Posted 01-14-2010 9:19 AM by Chuck Butler
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