N. & S. Korea Exchange Artillery Fire.
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In This Issue.

* The dollar heats up!

* Ireland's Gov't to collapse.

* Eurozone manufacturing soars!

* Flaherty to balance Canada's budget!

And, Now, Today's Pfennig For Your Thoughts!

N. & S. Korea Exchange Artillery Fire.

Good day... And a Terrific Tuesday to you! Well. how do you feel about the roller coaster ride we went on yesterday? I know, it knocked the wind out of me, and the risk assets. And yes, I did keep my arms and legs inside for the ride, but the whipping around was just too much for me! And. the risk assets. So, I'll stop beating around the bush, and get to the meat. which reminds me of the old commercial with the two older ladies asking. "Where's the beef?"

Front and Center this morning. North Korea fired artillery at South Korea's Yeonpyeong island in the Yellow Sea off the countries' west coast, setting houses on fire. According to residents, the South returned fire. A spokesman for South Korea's Joint Chief of Staff confirmed the exchange but didn't have details except to say "scores of rounds" were fired by the North.

OK. just what the world needs, right? Another war! I know, I'm getting ahead of myself here, as right now this is just the "exchange of pre-Christmas cards" right? NOT!

So. here was the roller coaster ride yesterday. as I signed off yesterday, I told you that the NY traders were already marking down the euro. Well, all the euphoria of an Irish bailout / rescue package, was put on the shelf, when not wanting to stand any prosperity, the Irish Gov't announced that it would resign leaving the country in turmoil. Then. the ride got a little more tricky and wild when questions began to come to the forefront about the health of banks in the U.K.. and then while the markets were questioning the U.K. banks, they decided to wonder aloud as to the health of Spain and Portugal. Would Spain and Portugal need bail outs too?

And so. the euro, was sold, which led to a selloff in all the currencies on the day. Gold and Silver were destinations of these sold currencies, and enjoyed strong performances VS the dollar on the day. But that was yesterday, when all Gold and Silver's troubles looked so far away, but it looks as though they're here to stay.

But really. one would think that with the geopolitical risks on "high" with the goings on in North & South Korea, that Gold would be kicking some dollar rear-end and taking names later. But, the risk assets of currencies, precious metals and stocks have all been thrown into the same barrel since the Financial meltdown of 2008, and until that changes, Gold's fundamentals get thrown to the side of the road.

But hold on, folks, because as the roller coaster ride showed us yesterday, things can change very quickly, sentiment can change on a dime, and focus shifts. It can happen that quickly.

Which is why I always, always say, be yourself. No wait! That's what Mr. Wizard said! What I always say is that short term moves in markets cannot be forecast. It's the Trends, that win. And trends develop because of fundamentals. and trends are what move currencies and metals, not technicals.

(I'll be sure to get a few emails on that last statement)!

The Swiss franc, which had seen some rough days recently, is getting bought this morning, with the Geo-Political risks flaring. The Canadian dollar / loonie has shown that parity with the U.S. dollar is easier gained then held. Of course the price of Oil has slipped in the past week too, which doesn't help the loonie.

Why might help the loonie down the road, is the determination of Finance Minister (FM) Jim Flaherty, who is seeking to balance the budget (novel idea, eh?) through spending cuts. Remember when Canada was the first G-8 country to raise interest rates earlier this year? Well, Flaherty is determined to make Canada the first G-8 country to balance their budget by 2015.

The Aussie dollar (A$) and New Zealand dollar (kiwi) are still reeling from the grenade thrown into New Zealand's lap by the rating agency, S&P this past weekend. You may ask, if it is bad for New Zealand, why would the A$ get dragged down. Hey! Good question! And this is where I would normally say. Ahhh grasshopper, come sit. You see, Australia and New Zealand are kissin' cousins across the Tasman, and while one can outperform the other for periods of time, these two are normally seen as one. and therefore, they get bought and sold on each other's fortunes. But remember, Australia is the larger of the two, with a much larger economy. So, Australia can weather storms that come across the Tasman better than when the storms go the other way.

OK. the Fed / Cartel sure is getting stones thrown at them ever since they announced the next round of Quantitative Easing (QE). And this time, it's not just me doing the stone throwing!

Criticism from foreign officials, have introduced enough uncertainty into global financial markets to potentially undercut the Fed's plan to drive down interest rates, which rise or fall as investors anticipate Fed action. And while yields have come back a bit in the past couple of days, they are still considerably higher than when the QE was first announced.

The Fed / Cartel, and its chairman, Big Ben Bernanke, are pushing back, (according to the NYT) making their case on substantive grounds but also haltingly adopting the tactics of Washington battle, like strategically placed interviews, behind-the-scenes assuaging of opponents and reaching out to potential allies on Capitol Hill.

I heard a battle cry yesterday from a Fed Head, that was a cry to "not make the Fed political". Well, you probably need to go talk to the boss, because according to the report in the NYT, that's exactly what he's doing.

I've long considered the ECB, Reserve Bank of Australia, Norges Bank, Riksbank, Bank of Canada, and Reserve Bank of New Zealand to be what I would call "prudent". These are all banks that do not allow political interference, and do not seek it either!

OK. as promised yesterday. today we begin "stuffing" the turkey. the two days of economic data being stuffed this week begins today. First off, we'll see the second print of 3rd QTR GDP here in the U.S. The first printing showed us that GDP was 2%... The "experts" believe that this revision will show that GDP was 2.4%, which would be a nice upward revision, if it were true.

Today, we'll also see the color of the October Existing Home Sales. Then there's the Personal Consumption data for the 3rd QTR, and the Fed meeting minutes will print this afternoon from the infamous QE announcement meeting. Those should be interesting, eh?

I was just reading a story that caught my eye regarding the Eurozone. This morning, Eurozone manufacturing for this month was stronger than forecast, and last month! The Eurozone manufacturing index printed at 55.4% (their index is just like ours, anything above 50% is expansion and good!)

One would think that data like this would have helped the euro to regain some ground, instead the markets are focusing on a mis-statement by German Finance Minister, Schaeuble, who said that "Germany is not swimming in money but rater drowning in debt" .

He did not mean to say that Germany had the problem with debt. he meant to say that the Germany had all these periphery countries around it with debt problems. Germany's creditworthiness is not open to question, folks. that's a fact.

Somebody needs to say something to clear this up now, as the euro just got sold off another 1/2- cent!

Then there was this. I was there the first day. The first day, the TSA began their new pat-down searches instead of wanding. Basically, since a good part of my right side is titanium, I've gotten wanded and then patted down for 3 years. No biggie. But now, the TSA not only pats you down, they basically grope you. ( I'm sure anyone having pat me down, is not a happy camper about it! HA) Now, personally, I let this roll off my back like water on duck's back, but apparently people do not like being groped in public! I Look at this new screening process like everything else in life. we let things lapse, then attempt to correct them only to have the meter go 180 degrees the other way, after a while things get back to normal. So. patience will help you as you travel this Christmas season.

To recap. we had some artillery exchange between North and South Korea overnight to add to the wide roller coaster ride the risk assets took yesterday. The Irish Gov't is near collapse, and questions about the health of U.K. banks, and the overall creditworthiness of Spain and Portugal came back causing a flight to quality, with Treasury yields going down, the dollar and Swiss franc going up. Eurozone manufacturing is strong, but the markets have ignored that data. And New Zealand is still reeling from the shot across its bow by S&P this past weekend.

Currencies today 11/23/10: American Style: A$ .9825, kiwi .7670, C$ .9815, euro 1.3555, sterling 1.5935, Swiss $1.0115, . European Style: rand 7.0380, krone 6.0410, SEK 6.9180, forint 202.60, zloty 2.9125, koruna 18.2145, RUB 31.21, yen 83.45, sing 1.31, HKD 7.7585, INR 45.57, China 6.6431, pesos 12.34, BRL 1.7250, dollar index 78.93, Oil $81.29, 10-year 2.77%, Silver $27.33, and Gold. $1,361.50

That's it for today. I was remiss yesterday in not remembering that it was the 47th anniversary of the day President Kennedy was assassinated in Dallas. 1963. I remember, as the "AV kid" being the first in our school to know about it, as I was sent to the AV room to get the TV for something, and I always turned it on first to make sure it was working. I came back to the room with the TV, visibly shaken, telling my teacher that the President had been killed. That day, was also the day the old Mark Twain Bank began. I cut my teeth on currencies at Mark Twain Bank, so I always remember it fondly. Ok. Brandy, you're a fine girl, is playing on the I-Pod this morning. remember that song? Well, I received a lot of emails, asking me to make sure I tried to retain my zest for life, and continue to keep everyone informed. No worries. I know of no other way to do this! And with that. I hope you have a Terrific Tuesday!

Chuck Butler


EverBank World Markets



Posted 11-23-2010 10:03 AM by Chuck Butler
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