The Big Events Week.
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In This Issue.

* China makes an announcement.

* FOMC meets this week.

* Silver continues to go higher!

* Touting Singapore!

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

The Big Events Week.

Good day. And a Marvelous Monday to you! Man. did we ever have some damaging storms and tornados on Friday night in the St. Louis area! Thank you to those that took a minute to send along an email asking if we were OK. Yes, the major damage was around the airport, which is about 25 miles north of where I live. I sent a text to the kids on the trade desk yesterday, asking them if everyone was OK, I didn't hear back from a few, so I can't say for certain that everyone was OK...

I have to tell you that the storms just keep coming through this area. And the storms are building for the dollar, and the U.S. economy folks. There are a couple of things happening this week that could give us a clear indication as to which road we're going to take. the Big Events Week! But first, while we were pounding down our Easter feasts, the Chinese were making plans to diversify their $3 Trillion in Reserves, and reduce their dollar holdings. Here's the skinny.

OK. remember last week when I told you that China's Central Bank head, Zhou, had said that China had too much in reserves? (read dollars, folks). Well, this past weekend, a member of the monetary policy at the Central Bank, Bin, said that "$1 Trillion dollars in reserve would be sufficient.". So, in case you're searching for a calculator right now, (I know I did! HA) that would be a "skimming off the top" of $2 Trillion dollars! It just so happens that $2 Trillion is about the same amount that the Fed Reserve has printed with their QE1 and QE2!

Now, the question would be, just what are they going to do to get rid of $2 Trillion dollars? Ahhh, grasshopper. We all know what they are going to do. They're going to buy resources for their economy. They'll spread a little to the problem children of the Eurozone, and they'll invest in their infrastructure. The sleeping giant, that my dad used to warn me about when I was a kid, has awakened, eh?

Ok. so with that news spreading throughout the world last night, Gold & Silver, as they should, took off for new levels. Gold $1,517.20, and Silver $49.10. It's just crazy out there folks! Investors are running for the cover of these metals for they are the True Store of Wealth. and, as I always call them, and coined them, as the "uncertainty hedges". And brother are we walking in uncertain times right now!

Oh. and I guess it would be fair to say that this news from China, has caused some widespread dollar selling. Even with most of Europe, Australia, and Hong Kong on holiday last night and today, the fear in the markets is that of, "don't get left holding dollars".

Now. the Fed Reserve will meet this week, and here's where I think the circuit breaker that I talked about last week, will get turned on. So, be careful this week, folks. The Fed could pull a rabbit out of their hat, ala-Bullwinkle, and come to save the day. (yes, I'm laughing hysterically right now) Or. Top Fed Head Big Ben Bernanke, will simply repeat what he, and his fellow, Quantitative Easing loving, Fed Heads have had to say, recently, which is that "it's too early to pull the stimulus away". And they are going to go the distance with QE2, which is the end of June.

A few weeks ago, I talked to you about, what happens at the end of June, when QE2 officially ends. I was concerned that with QE2 ending, the markets would take that as a signal that the Fed believes all is OK in the U.S. and a flight back into dollars could take place. for Treasury yields will certainly go higher with the Fed removed as the major buyer of them. When the Fed removes their stimulus or financial cocaine as I call it, stocks are going to get hit with a hammer. and all the flow will be into Treasuries.

But, that only lasts as long as it takes for the economy to fall on its face, after going cold turkey, and then the Fed will be back with QE3, and QE4, etc. This shouldn't be anything new to your eyes to read, for I've talked about this for some time now.

My friend, old colleague, and writer extraordinaire, David Galland, talked extensively about this in his letter last Friday, of which I have a snippet of here: The politicians and their friends down at the Fed can pretend, as they do, that the overhang on the economy of some $14 trillion in debt, and another $50 trillion or so in longer-term entitlements, is much ado about nothing. This view of theirs is confirmed by the current budget discussions that talk of slashing $4 trillion out of federal spending over the next 12 years - but ignore that this slashing still anticipates annual deficits on the order of $1 trillion. There are facts and fictions in this universe of ours, and it's a fact that the notion of spending our way to better days is a fiction.

And so, in my mind, there is no question that the Fed will ultimately be forced to unleash QE3 and, as Marc Faber so eloquently stated in the video clip we ran in last Friday's edition, that will be followed by QE4, QE5 and so on through QE26 - or whatever number is in force at the time of the dollar's collapse."

You can read David's excellent piece titled: "Forlorn Hope", by clicking here:

Ok. so, it's all gloom and doom this morning, I apologize for that. But, this is the kind of stuff you won't get from your cable or local news or Katie Couric on the national news! My beautiful bride loves Katie Couric, so I threw that in just to see if she's reading today or not! HA! So, with all the gloom and doom, I'll try to soften it up a bit, with some thoughts of other things.

So. Silver is up $1.91 this morning. That's almost $2 Bucks! WOW! I remember when you would be happen with a $2 move in a month! 2-Buck Chuck! But, Gold and Silver aren't the only anti-dollar assets moving higher this morning. The euro is knocking on the 1.46 door once again, and the Aussie dollar (A$) hit, yet another, post-float all-time record high overnight of $1.0777. (the A$ has backed off that a bit since hitting the new high). The Canadian dollar / loonie is back above $1.05.

Speaking of the loonie. last week, I said something about how the Canadian Gov't didn't care for the loonie above $1 because it hurt tourism. And a Canadian reader reminded me that it's not just tourism, but manufacturing that suffers when the loonie is so strong. Correct-o-moon-do! But, right now, with energy prices soaring, and pushing inflation higher, the Canadian Central Bank (Bank of Canada) would be wise to allow the loonie to help with the heavy lifting with regards to fighting inflation.

The Economist had a good story in this past week, regarding Singapore. Yes, even the Economist is jumping on our Singapore bandwagon these days. Shoot Rudy, I saw the Daily Reckoning even talking about the Singapore dollar the other day! Here's a snippet from the Economist. "During the past several years, Singapore has emerged as one of the leading financial centers of the world, partially thanks to its ability to take advantage of upheaval, according to The Economist. While some financial hubs, such as Switzerland and London, have tried to balance attracting bankers and punishing them for some activities, Singapore has welcomed them with open arms. Thousands of financial-services companies have registered with the city-state's monetary authority, and derivatives and other ancillary operations have thrived."

Remember, what I told you a week or so ago about how China had chosen the Singapore Central Bank as a clearing bank for renminbi. All of this noticing of Singapore is going to carry over to the Sing dollar. and that's a good thing!

Another country that's beginning to get a lot of recognition is Russia. and with the price of Oil trading near a 30-month high at $112.64, it only makes sense that the ruble has reached a 27-month high! Let me say that as long as you have protection like our BRIC MarketSafe CD did with 100% principal protection, owning rubles is OK. otherwise, without protection, I wouldn't touch them with your 10-foot pole!

Remember, last Monday? The Big news was that S&P had downgraded the U.S. rating to a negative outlook. One would have thought that this news would be the tipping point for Treasury values to plummet. but NOOOOOOOO! For some strange reason, the markets are taking the S&P downgrade and thinking that this is a warning to the President, and that something will be done about it. Ok. will someone please come to help me off the floor, I fell there laughing so hysterically! But, not just that the President won't do anything. The lawmakers won't either! Oh, I know, they're trying, but in reality folks, unless you're talking about something more than $4 Trillion over 10-years, that's like removing a bucket of sand from the beach. Who's going to notice?

And of all of you who live and trade based on the "Big Mac Index". The Chinese renminbi (like we needed the Big Mac Index to tell us this), is among the most undervalued currency along with The Hong Kong dollar (Honkers). I'll try to remember to look at this again in about 6 months, and then in a year, to see how much it has narrowed. Right now, a Big Mac cost the equivalent of $2.18 in China, and $3.71 here in the U.S.

Then there was this. A couple of weeks ago, I told you how a friend of mine, and a very smart guy, said that Silver had "gone parabolic", which is chartist talk. Well, if it had gone parabolic 2-weeks ago, I don't know what the chartists are saying about it now, for it is $9 higher than it was two weeks ago! I have to tell you that last week, I received a note from a "source" that said that CFTC had given the Big Banks that had major short positions in Silver, notice to begin to close them out. If that's true, then it certainly explains the $9 two-week move, eh? Now, I don't know that it's true. But, it certainly makes sense for it to be true, and would explain why the chartists are still saying "sell at these levels", for they don't know about the rumor.

To recap. China throws a cat among the pigeons with members of their monetary policy calling for a reduction of their dollar reserves, which would be about equal ($2 Trillion) to what the Fed has printed during QE1 & QE2. This has sent investors running to Gold & Silver. Gold has set a new record level, and Silver has a $49 handle this morning! The FOMC meeting this week will tell us a lot about the direction of the dollar. You know, I just thought of this. when it eventually comes down to the cheese that binds, the FOMC will have to decide whether they want to save the dollar, or the stock market.

Currencies today 4/25/11. American Style: A$ $1.0755, kiwi .8025, C$ $1.0520, euro 1.4615, Sterling 1.6550, Swiss $1.1390, . European Style: rand 6.6965, krone 5.34, SEK 6.0650, forint 180.65, zloty 2.70, koruna 16.4950, RUB 27.83, yen 81.90, sing 1.2335, HKD 7.7705, INR 44.48, China 6.5180, pesos 11.59, BRL 1.5660, dollar index 73.82, Oil $112.64, 10-year 3.38%, Silver $49.06, and Gold. $1,517.60

That's it for today. I'm beginning to think that those aliens from "The Event" found a portal and transported St. Louis to either Seattle, or Oklahoma/ Texas. Rain has been with us for a week now, and will continue today, and the tornados. Remember the ones that hit near my home on New Year's Eve? And now these. Alex was a scoring machine in his game Saturday, scoring 4 goals! And my beloved Cardinals almost swept the Reds this past weekend. When the manager stops putting a certain pitcher in to pitch in tight games, the Cardinals will be on a roll! Easter was soggy, rainy, and chilly here, but that didn't stop little Delaney Grace from having a ball! And her brother, Everett, the EverBaby, was so darn cute! I hope your Easter (if you celebrate it) was grand! And with that, I'll get out of your hair today. I'll talk to you tomorrow, before I head to the airport, and 5 days in Panama (UGH!) . I hope your Monday turns out to be Marvelous!

Chuck Butler


EverBank World Markets



Posted 04-25-2011 10:25 AM by Chuck Butler