Silver Nears 30-Year High!
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In This Issue..

* Currencies rally back...

* Gold knocks on $1,300's door...

* U.S. tries to persuade China and Japan...

* Traders fight back in Japan and Brazil...

And Now... Today's Pfennig!

Silver Nears 30-Year High!

Good day... And a Happy Friday to one and all! Well... The one-day of profit taking and soft data selling in the currencies is water under the bridge, and the currencies are back to kicking sand in the face of the dollar. And Gold? The shiny metal is knocking on the door to $1,300, and Silver is near a 30 -year high! So... In my book, this is a Fantastico Friday!

Yes... The one-day of reprieve for the dollar is in the books, and it's time to get back to the task at hand, you know, the one the U.S. Gov't wants, and the one the U.S. Treasury wants, and the Cartel for that matter wants it too... And that is a weaker dollar, so that they can achieve two goals...

1. give the U.S. Treasuries they need to sell and continue to sell again and again to finance the deficit spending, a "discount price"... Which is what a cheaper dollar will do. And...

2. allow the U.S. Gov't to repay debts with cheaper dollars...

Let's not ever forget those two goals... When it gets dark and gloomy for the currencies, like last winter, with the Eurozone GIIPS, and it looks like the dollar will enter a multi-year strong trend, you have to pull those two goals that you've written down, out of your back pocket to reassure yourself that diversifying is the right thing to do!

This morning in Germany, the euro got a boost back over 1.34, when German Business Confidence, as measured by the think tank IFO, showed a nice increase, moving the index to a 3-year high! WOW! This is not some fly-by-night operation either folks! IFO surveys 7,000 business executives... For those of you keeping score at home, the IFO index is now 113.07...

I see where some Fed Heads are taking exception to the markets' reaction to the FOMC statement on Tuesday... The Fed Heads claim that the markets have overreacted. Yeah, and we all just fell off the turnip truck! NOT! Oh well... This will put a smile on your face, that is, if you laugh with me in my corner... Get this... Big Ben Bernanke is going to give a speech today titled: "Fixing Economics: Lessons from the Crisis".

I'm going to leave that one right there, as there are so many smart aleck remarks that are shooting through my brain right now!

Well... Our President met with China and Japan yesterday in attempts to get them to allow their currencies to gain VS the dollar (see, I told you the Gov't wants a cheaper dollar!) We saw the Chinese leader standing next to the President at the end of their meeting and they were taking questions... The Chinese leader just stood there with this smile on his face, that said, "I don't care what you want, we're not going to allow the renminbi to gain 20% like you have demanded we do"... Smile... HA!

I just don't see where the U.S. gets off telling other countries that buy our debt, and keep our economy from collapsing, and the dollar from defaulting, what to do with their currency... I'll tell you right now, that the U.S. Gov't, doesn't hold true the idea that each country has an obligation to its people/ citizens to provide price stability, and no to debase their currency! Other countries do... And that's where the rubber meets the road folks...

Having said that... It is thought that the Bank of Japan (BOJ) came back into the markets to sell yen again last night, as yen fell from 84.50 to 85.40 in a manner of minutes, although unlike last time, the Ministry of Finance (MOF) did not confirm that they had issued instructions to the BOJ to intervene... But, that's all it could have been... It looks like intervention, walks like intervention, and smells like intervention... It was intervention!

But guess what? The markets volleyed back the BOJ's serve, and pushed yen back to a level that was even stronger than the 84.50 it started out at! The markets are taking the fight to the BOJ and MOF... Good Show!

I just saw Marc Faber on the Bloomberg TV channel, talking about Asia... I see where he agrees with me that the Asian currencies (including the Pan Asian currencies) are the best positioned currencies to rally and gain VS the dollar. Of course, I would have gone further to say the Commodity Currencies wouldn't be far behind... But, you know me, I've got to get my two-cents in whenever I can!

I have been telling you about the fight going on in the markets over the Brazilian real... The Brazilian Central Bank (BCB) has been rumored to be spending $1 Billion per day on buying dollars and selling real, in an attempt to keep the real from getting too strong, and the markets are fighting back with their own treasure chest of money... Last week, there were 284,967 more bets on the real rising than falling, that's the most since June of 2007. Basically, each contract is worth $50,000, so doing the calculation, and using my new math skills, I come to more than $14 Billion!

As I've always told you, be yourself, no wait!, what I've always told you is that Central Bank intervention will not work in the long run... You see, in the real's case the rise is fundamental... Their economy is strong, their exports are strong, inflation is heating up, and in need of higher interest rates, which already are present in Brazil... Those things speak of a stronger real... In the long run, after the Gov't gives up, or runs out of money...

Not that this has anything to do with the Brazil story, but running out of money reminds me of a quote that I've used at my presentations before, and always gets a rise out of the audience, and that is what Margaret Thatcher said about socialism... "The problem with Socialism is that eventually you run out of other people's money."

I guess that would be a good one for everyone to remember here in the U.S...

OK... Back to Brazil, sorry for the sidebar... The Brazilian Gov't has made claims about "not losing" this battle for the real... I don't believe the Brazilian Gov't has had a chat with reality lately... It would behoove them to do so, before they go and throw Billions more down the drain...

OH! And looky here! I see where Petroleo Brasileiro, Brazil's state-controlled oil company, will be able to develop mammoth offshore oil reserves after raising $70 billion in the largest share offering worldwide... This just puts more demand for reals, folks...

But... Like I always do, when talking about Brazil... It is to remind you that Brazil is an Emerging Market, and strange things can happen in Emerging Markets. So be careful to use only the "speculation money" of your portfolio here...

OK... Enough of that! How about what's going on here in the U.S. besides the President wasting time urging the Chinese to allow a 20% appreciation in their currency? Well... Former Fed Chairman, Paul Volcker, is telling people to "not worry about deflation here in the U.S." Hmmm... Sounds like old Paul must have become a Pfennig Reader! I've been saying that for some time now, and even showed you some food price items that had been rising...

Well, my friend, and colleague over at the Sovereign Society, Eric Roseman, pointed out to me the other day that there are some indexes that track agriculture are really beginning to move higher... For instance, the Dow Jones- UBS Agriculture index is up 27.7% this year... Hmmm... Didn't I tell you once that the Fed/ Cartel will take their eye off the inflation ball, concerning themselves with deflation, and before they know it, inflation will be soaring, and they'll rush to hike rates, but they will be so far behind the inflation 8-ball... Well... It's beginning to look that forecast will come to fruition, eh?

Recall a couple of weeks ago, I told you that there were reports that back customers with time deposits (CD) were allowing them to mature, and moving the dollars into checking accounts, so they would have liquidity? Well... Time-deposit balances declined from $2,365 billion on January 1, 2010 to $2,165 billion on June 30, 2010, as $200 billion in maturing CDs were not rolled over. Out of the $200 billion decrease in CD balances, consumers used $29 billion, or 15%, to pay down credit card and other revolving debt, according to the guys over at Market Rates Insight...

I'll tell you one thing... Those people need to be opening EverBank checking accounts, because the EverBank checking account, besides being called the "Best Checking Account in the country" by Kiplinger's, also pays interest on the balance, that beats the national average by a country mile!

OK... For those of you who don't like it when I advertise something in the letter, sorry... For those of you who don't already have an EverBank Checking Account, what are you waiting for?

Well... Of course, basically, I would be telling those people that they need to shift some of their dollars to currencies and precious metals... But, that's my message wherever I go, people wanna know, and I tell them... Diversify a portion of your portfolio out of dollars and into currencies and metals...

The U.S. data cupboard today has August Durable Goods, and New Home Sales... Durable Goods data has been quite volatile in recent months, and I expect August to be no different. New Home Sales are expected to rise... I'll bet a dollar VS a Krispy Kreme that the only way this happens is if the Home prices fall...

Then there was this... From the Washington Post... Senate Democrats said Thursday that they had abandoned plans for a pre-election showdown with Republicans over taxes, postponing any vote on extending Bush administration tax cuts until after the November midterms...

Chuck again... You don't think this decision to delay this vote on taxes has any thing to do with the mid-term elections do you? HA!

To recap... The one-day of profit taking is over, and the currencies are back on the rally track this morning. The euro is back over 1.34, and Gold is knocking at the door to $1,300, with Silver near a 30-year high! It looks like Japan intervened last night, temporarily taking the yen weaker, only to see the markets reverse the trade, and push yen stronger! The President met with China and Japan yesterday... I doubt any thing will come of it, and it will turn out to have been a waste of time...

Currencies today 9/24/10: American Style: A$ .9545, kiwi .7310, C$ .9715, euro 1.3420, sterling 1.5730, Swiss 1.0215, ... European Style: rand 7.0475, krone 5.9230, SEK 6.8530, forint 207.85, zloty 2.9650, koruna 18.3465, RUB 30.90, yen 84.35, sing 1.3245, HKD 7.7585, INR 45.25, China 6.69, pesos 12.58, BRL 1.7225, dollar index 79.65, Oil $75.38, 10-year 2.55%, Silver $21.40, and Gold... $1,299.20

That's it for today... I want to send a BIG Happy Birthday Wish to our colleague and long time friend, who's at home battling cancer, Don Ries... It's been a tough row to hoe for Don, but I think he's almost out of the woods... I just shudder whenever I have to say or type the word, cancer... OK... I won't be here on Monday and Tuesday next week, so Chris Gaffney will have the conn on the Pfennig. (he just found out reading this letter! HA) I'm heading to Jacksonville on Sunday morning, to watch the Jaguars' game at EverBank Field! And then meetings on Monday, and fly home on Tuesday... Congrats to my buddy Alex and his freshman football team as they beat their Big Time rival, last night in the 90 degree heat! WOW... I'm watching a lot of people walking through the door, I must be later than usual! OK... So... I hope to have a great weekend, and I hope you do to... Let's go out there and make it a Fantastico Friday!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837





Posted 09-24-2010 10:08 AM by Chuck Butler