German Investor Confidence Declines...
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In This Issue..

* Risk makes a comeback... At least today!                                            
* ZEW / German Confidence slips 5th consecutive month...                                        
* Something scary at the Treasury auction...                                                
* Popping the ego bubble...                                                                                                             

And Now... Today's Pfennig!

German Investor Confidence Declines...                                               

Good day... And a Terrific Tuesday to you! Thanks to all who sent along their thanks for my Valentine's Day Special Pfennig... It's not what I wanted to send you, but what I had to do, to properly inform you of what's going on... You know, I've been accused by more than a few people over the years as being a cheerleader for the currencies, and doing nothing but reporting bad news for the dollar to promote the currency business here at EverBank.

You know... If all I ever report is bad news, then maybe that's all there is! But... I've fought those things for years, and this is but one more time, that I've warned about something regarding currency values...

OK... The good/nice stuff first... On Friday, I told you about how my son, Alex, playing his guitar with the middle school jazz ensemble, performed a guitar solo that was outstanding... Quite a few readers wanted to know if there was a link to see / hear that performance... Well, here it is... The performance was captured by a parent and the video isn't exactly great, but shoot Rudy, this is something great! It's on You Tube, which eliminates us here at the bank from viewing this, so all of you who have access to You Tube, here's the Sperring Middle School Jazz ensemble performing at the Fabulous Fox... (the song is 6 minutes long!)

http://www.youtube.com/watch?v=tJagsadQ0Dk&feature=youtube_gdata

Now... Onto the currencies, economies and the dolts that make the decisions for our investments, economies and lives!

This news is so BIG, you're going to wonder why I waited so long to tell you about it!

Well... Remember last week, when I told you about the 10-year Treasury auction results? I told you that the yield had to be driven higher by 7 BPS to attract investors... Well, that's cotton candy compared to the news from the 30-year Treasury auction!

Let me put this as easy to understand as possible... "indirect buyers" are the foreign Central Banks, and they normally take down 40% of a Treasury Issue... Well, last week, they only took down 28% of the issue... Uh-Oh! But then, there was the "direct buyers" upping their participation in the auction to a record level of 24%!

Now, most of the market participants don't have a clue what these numbers are telling us... But, as Pfennig readers you will now know... The "direct buyers" are "unknown"... Yes, there is no way to tell who makes up the "direct buyers"... For all we know, the Fed took down the entire amount! Why, you may ask is this a problem? Well... We almost had a "failed auction" here in the U.S. If not for the "unknown buyers" it would have failed!

To speak of a U.S. Treasury auction and say that it failed would almost be akin to the day the earth stood still! Then... We would see yields soar, and the dollar get deep sixed... So, until that day happens, if it would happen I should say... Every auction should become quite interesting, as long as the U.S. continues to drive up deficit spending, and keep rates at ultra low levels...

So... What did the currencies do yesterday, with the U.S. closed for Washington's Birthday? (his actual birthday is the 22nd) Well, not much... The beleaguered euro, traded in a tight range around 1.36... The Aussie dollar tried on a couple of occasions to rise over the 89-cent level, and the Canadian dollar / loonie remains well bid over 95-cents.

In the overnight markets, the bias to return to risk began slowly, and built steam as the cold and dark of the night went on for us here. German Investor Confidence, as measured by the think tank, ZEW, fell for a 5th consecutive month in February. This makes sense to me, given the threat of a double dip for the economy, and all the Greek bashing... However, the Confidence Index fell less than forecast!

So... For the record, and for those of you keeping score at home, the Confidence Index fell from 47.2 to 45.1 (but was expected to fall to 41!)

There was no word overnight regarding a bailout of some sorts for Greece... Nothing but strong words, like a parent gives to a child about spending too much money! The other Eurozone states don't like the idea of supporting Greece...

You know, if we could go back to the archives of when Greece was added to the euro, I believe that I said jokingly something about how "they let anybody join the euro these days"... Little did I know that years later Greece would be the Thailand of the Asian Crisis...

The return of the risk bias overnight has really lit a fire under the Commodity/ higher yielding currencies... Aussie and New Zealand dollars have shot up past 89 and 70-cents respectively... The Brazilian real is looking better this morning, and Gold is up $12 this morning... So... For now, things are as they should be, considering the fundamentals...

Now... If the markets were really paying attention... Today's report on the TIC's Data would be important... As it will report on the net foreign securities purchases in December...

And later today, we'll see the color of the latest FOMC meeting minutes. I don't know how many times the Fed has to repeat itself that they are going to keep rates at current levels for some time, before the markets believe them...

Speaking of that... I got a call from a reporter at the Wall Street Journal yesterday, asking me some questions a the Carry Trade... I said that one of the reasons the dollar has been rallying is a reversal of the Carry Trade that used the dollar as the funding currency, because the holders don't believe the Fed when they said that about rates staying low... They fear aggressive rate hikes by the Fed...

On a side bar... I hung up the phone, and said, very proudly to my beautiful bride, "who would have imagined that a poor kid from South St. Louis would have the Wall Street Journal  calling me on a holiday." I'm looking for a slap on the back here folks... But instead, I get... "they probably couldn't get anyone else because of the holiday"  POP! Went the ego balloon!

Then there was this... Did you see that lobby spending in D.C., (I thought they were going to get thrown out of D.C.) hit a record level in 2009 of $3.5 Billion? Hey! Is Washington for Sale? Yes, we've had lobbyists for years, but the previous high was $2 Billion... Sure looks to me as though the heat is on to sell, eh?

Currencies today 2/16/10: American Style: A$ .8940, kiwi .7025, C$ .9560, euro 1.3650, sterling 1.5690, Swiss .9310, European Style: rand 7.7020, krone 5.8985, SEK 7.2365, forint 199.25, zloty 2.9435, koruna 19.0550, RUB 30.14, yen 90, sing 1.4075, HKD 7.7705, INR 46.19, China 6.8333, pesos 12.90, BRL 1.8540, dollar index 80.16, Oil $75.23, 10-year 3.71%, Silver $15.88, and Gold... $1,114.50

That's it for today... I hope your Valentine's Day weekend was grand... We received a couple of inches of snow this weekend, and brother is it cold! To get me feeling warm, Cardinals pitchers and catchers report tomorrow... And on that note... I'll give you this quote by the great Rogers Hornsby, that I live by... "People ask me what I do in the winter when there's no baseball. I'll tell you what I do. I stare out the window and wait for spring."  OK, it's not that bad, I do like Football in the fall, and follow hockey, but they just aren't baseball! Speaking of sports... The Winter Olympics are in full swing... It was good to see that a U.S. skier finally won a medal in the Nordic skiing events. First one ever! WOW! I always thought those Nordic skiing events were the property of the Nordic countries! HA! OK... It's a new day, and maybe the markets will take us in a new direction today, and put all this PIIGS stuff behind us... Probably not, but maybe! I hope your Tuesday is Terrific!

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





Posted 02-16-2010 10:50 AM by Chuck Butler