A Risk On Day...
Daily Pfennig

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In This Issue..

* Euro rallies on ECB lending amount...
* Gold and Silver back on rally tracks...
* Waiting on the Riksbank...
* U.N. wants a global currency...

And Now... Today's Pfennig!

A Risk On Day...

Good day... And a Wonderful Wednesday to you! Well... We get a two day break in the World Cup, with only 8 teams left. Too bad, the U.S. team isn't one of the "great 8"! But that's what happens when you play the games, eh?

The games people play now... Every night and every day now... Never meaning what they say now... Never saying what they mean...

Yes, Joe South had it completely correct back in the 60's... I was watching a video of an interview with the famous, Jim Rogers, last night. And Jim was talking about the reason why Fed Chairman Big Ben Bernanke fought the "audit the Fed" bill... And Jim said that Big Ben fought it because, he and the Fed Heads (my description), have spent trillions of dollars on complete junk paper, and he didn't want us (the taxpayers) to know what he had done. Ahhh... The games people play now...

OK... Let's get to the currencies.... The Big Dog euro is leading the little dogs off the porch to chase the dollar down the street again today, after spending yesterday in the dog house! Here's the skinny...

The European Central Bank (ECB) announced today that they would lend Eurozone banks a total of 131.9 Billion euros ($161.5 Billion in dollars)... Which on the outside sounds like there are problems... But a quick look under the hood reveals to us that this amount (131.9 Billion euros) is far less than what the analysts were expecting, which lead the markets to believe that funding pressures among the Eurozone banks are easing...

So... Just like that... The euro turns around the selling it saw all day yesterday on that report... Yes, it's an encouraging sign... But come on! The ECB still needs to lend the Eurozone banks money, folks! To me, I would say that this is no reason whatsoever to rally... But, it is what it is, and who am I to argue?

As I told you on Monday, Sweden's Riksbank, is meeting this morning, and also like I said on Monday, I'm one of the few, that are calling for a rate hike from the Riksbank this morning.

However, given what I talked about yesterday, you know, the scenario, where the markets reward currencies from countries that promote growth, instead of strengthening on interest rates differentials, a rate hike probably won't help the krona... At least not now, while this stupid scenario hangs around.

The China Syndrome that hung over the markets yesterday like the Sword of Damocles, still hangs this morning, but it's not so focused on by the markets this morning. What the heck is Chuck talking about now? I hear you saying... Sorry... I'm talking about the info I gave you yesterday regarding how the markets are now fearing that China is going to slow down, once again!

As I told you the other day... The markets are looking for global growth, and need either the U.S. and / or China to deliver the economic growth engine... Well, we all know that the U.S. isn't going to deliver us anything economic wise, unless you count a double dip, and plunging home prices once again, with over 4 million foreclosures about to hit the fan... But China... We've seen these fears before, many times before, and they've always been wrong! I do believe they will be proved to be wrong once again. You see, these guys don't know... And I don't know for sure...

However, what I do know is this... Last week, China announced that they would resume the flexibility of the renminbi that was put on hold after the financial meltdown of 2008... Now, you, me, and the guy down the street and his brother, know that if China is resuming the flexibility of the renminbi, that the renminbi is going to appreciate VS the dollar... Now... Riddle me this Batman... Would china allow their currency to appreciate if their economy was about to lay an egg?

So... The global fears that triggered the risk assets sell off yesterday, remains, but has been put on the back burner today... And that means it's a Risk On day! Just like Wayne and Garth's street hockey game... Game on... Game off... Or, Mr. Myagi's wax on... Wax off...

There's an election going on in Germany today... The Germans are electing a new President, and unless Chancellor Merkel's choice fails to win, this should be mostly a non-event... But just in case, Merkel's "boy" loses, it could hit the euro hard... But like I said, this should be a non-event.

Gold is stronger this morning, taking Silver along for the ride. The boys and girls over at Barclays Capital, released a report showing their technical analysis has Gold rising to $1,385 an ounce this year.... WOW! Of course that's a "technical analysis" of Gold... But shoot Rudy! That would mean another 12% added to Gold's already booked 13% gain this year...

Speaking of Gold and Silver... We closed our 2nd issue of the Diversified Metals MarketSafe CD yesterday... It's been quite popular, I must say... And it's 100% principal protected! No wonder it's so darn popular! Well... Due to its popularity, we're going to come right back and have a 3rd issue of the 5-year CD...

You know, our very first Gold MarketSafe CD (5-year) will come due this October, just 3 months away... We had a customer that owns it, call the other day and complain that the return (right now) was "only" 75%!  You've got to be kidding me!

OK... On to other things... How about this story... The IMF, whom I told you months ago wants a "global currency", must have gotten to the United Nations, for the U.N. issued a report saying that "the U.S. dollar should be phased out as a reserve currency." They go on to say that "the use of a currency issued by a single country is a trap that encourages an account deficit by the issuing country and an accumulation of foreign currency reserves by other nations."

I chuckle... The U.N. is in cahoots with the IMF folks... This idea of a global currency is beginning to get talked about more and more... You have to wonder when the President gives us his "these are not ordinary times, and they call for unordinary measures" speech about a global currency...

I sure hope voters don't fall for that one... But think about this... Our National Debt will be $20 Trillion by 2015 (my estimation), and we as a nation are never going to be able to pay back these debts, without a complete collapse or, inflating the dollar away to Zimbabwe like numbers... OR... They could fold all these debts in with the global debts under the IMF, and U.N. and issue a new "global currency"...

OK... I have to stop there... I want to make it perfectly clear that I'm not saying that this is what is going to happen! And I'm not saying that because I think it's a good idea!...  I'm just playing out a scenario that, while is way out on a limb, is doable...

Hey! But we've got the new "tan tax" to help reduce the deficit! You haven't heard about this one? Well... A new tax of 10% will be levied on those that go to tanning booths/ beds... Yeah, that'll do the trick!    NOT!

Remember last spring / summer, when the currencies were back on the rally tracks VS the dollar? Japanese yen, was getting love from both sides of the aisle... It rallied when the "flight to safety" would return for a few days, and yen would rally along with the other currencies when the "flight to safety" wasn't in play... Well, it looks like we've returned to the scene of the crime here with yen...

Yen rallied on Monday during the flight to safety... And then rallied along side the euro and other currencies overnight...

Of course, I'm not a real fan of Japan or the yen, although I do like most Asian currencies... But if the drinks will flow and blood will spill, and yen continues to rally, then I have to stop and acknowledge it...

Then there was this... This story was on CNBC... "For American taxpayers, now on the hook for some $145 billion in housing losses connected to Fannie Mae and Freddie Mac loans, that amount could be just the tip of the iceberg.

According to the Congressional Budget Office, the losses could balloon to $400 billion. And if housing prices fall further, some experts caution, the cost to the taxpayer could hit as much as $1 trillion."

Oh, the games people play now... Every night and every day now...

To recap... The currencies rally back overnight, as the ECB announced a lending amount of 131.9 Billion euros, which was far less then the analysts forecast would be needed, which led the markets to believe that things are so bad in Euroland, and this resulted in a strong euro rally this morning. Gold and Silver are also back on the rally tracks this morning, as it's a Risk On day.

Currencies today 6/30/10: American Style: A$ .8530, kiwi .6915, C$ .9530, euro 1.2290, sterling 1.5025, Swiss .9260, ... European Style: rand 7.61, krone 6.4735, SEK 7.7525, forint 232, zloty 3.36, koruna 20.8910, RUB 31.17, yen 88.70, sing 1.3950, HKD 7.7855, INR 46.44, China 6.7816, pesos 12.80, BRL 1.8130, dollar index 85.72, Oil $76.49, 10-year 2.96%, Silver $18.75, and Gold... $1,244.10

That's it for today... Good luck to those in the path of Hurricane Alex, which is headed toward Mexico and Texas. Happy Birthday to my younger brother David... It's been a week with my "new eye", and I've gotten used to it... The other day I had a new crown put in and the thought of "an eye for an eye, and a tooth for a tooth" kept popping into my head! Albert Pujols lit up the ball park last night with two home runs! Day game at Busch today.... Wink, wink... This weekend we celebrate our independence on the 4th of July... If have to travel this weekend, please do so carefully... And on that note, I'll get this out the door! I hope you have a Wonderful Wednesday!

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





Posted 06-30-2010 8:49 AM by Chuck Butler