To Raise Or Not To Raise The Debt Ceiling.
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In This Issue.

* Dollar rally hits a snag in Europe.

* Gold falls below $1,500!

* Oil price drop hurts petrol currencies.

* Ready for financial calamity?

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

To Raise Or Not To Raise The Debt Ceiling.

Good day. And a Marvelous Monday to you! My beloved Cardinals are feeling quite Greekish this morning, as it seems that everyone is getting to beat up on them these days. Another Monday morning, in the "sauna" here. Oh, well, it beats not having a place to go to work! At least now, while I've still got a youngster at home!

Well. the dollar rally that we talked about last week, continued during the Asian session last night, with the beaten and beleaguered, euro, falling through the 1.42 level. There has been a bit of a reversal of the Asian session selloff, in Europe this morning, but the damage has been done. Gold fell through the $1,500 level on Friday, and remains there this morning. The dollar buying, as you know dear reader, always is a bug for me.

And before we go any further, I would hope that the markets come back to the realization that Greece's economy is about the size of Kentucky's.

However, I do realize that the goings on in Europe have the markets' attention right now, and that plays into the dollar buying. Shoot Rudy, if there were "real reasons" to buy dollars, I would be a happy camper, for that would mean that we would have yearly Budget Surpluses, our debt would be shrinking by large chunks, the U.S. would have invented another "hoola-hoop" thus allowing manufacturing to have a renaissance, we would have full employment, and Housing would have found that all elusive "bottom". I wouldn't have to worry about my kids' and grandkids' tax and freedom burdens any longer. It would all be seashells and balloons!

But since none of that is happening. why buy dollars? I told an audience in La Jolla in May, that you eventually have to be well down the road of booking Budget Surpluses, and reducing debt before your currency can be taken seriously, and. "We haven't even turned on to that road yet".

I saw a great article this past weekend that really surprised me. It said that in a recent poll, 41% of the people surveyed, were against raising the debt ceiling. WOW! People like David Galland, Doug Casey, Bill Bonner, Addison Wiggin, and little old me (HAHAHAHA!) are finally getting through to people? That's very interesting to me, that a large number of people felt that way.

And then I saw another article about the current fiscal state of U.S. consumer. A survey showed that only 24% of consumers have the recommended cushion of at least 6 months' expenses set aside, and another 24% don't have emergency savings at all! Folks, if we have another financial calamity we could be circling the bowl very quickly. UGH!

OK. what's going on in the Eurozone today. Well, I'm glad you asked! First off. French Finance Minister Lagarde provided us comments that the government has a "first draft" of an agreement with the French banks on rolling over Greek debt. Hmmm... OK... But what's going on in Greece? Again, I'm glad you asked... First of all, nothing today or tomorrow, except jawboning... But Wednesday we'll see a Greek Austerity vote... Wednesday's vote is a "in principle" vote... Then on Thursday they vote to implement the measures... Wednesday's vote should be a lay-up, and Thursday's vote could get quite ugly... But, the measures need to be implemented, with no cheating!

So... by the end of the week, we should know if Greece is going to play ball with their creditors... And we'll know more about banks agreeing to extend the maturities of current debt issues... If those things fall in place, the euro could be breathing a bit easier on Friday morning... But, that's a lot of stuff to happen between now and then... A busy week, for sure!

You know... George Soros is calling for a breakup of the European Union and the euro.. he said it was "inevitable"... Well, just so you know, dear reader, I dislike George Soros very much, and so on that note, I would like to see the EU and euro succeed just to throw it in his face!

Yes, there are lots of writers jumping on the breakup of the euro bandwagon... I said long ago that there might need to be a paring of the members... Allowing Greece or Portugal, or both, to leave, go back to their respective currencies, devalue the heck out of them and get on with their lives... And the euro would suffer at first, but eventually be rewarded for not having the likes of the debt laden countries as members... The Slowest Buffalo theory... Without trying to sound like Cliff Clavin...

But a complete dissolving of the euro? Well, again, long ago, I addressed this with you all... I told you that Germany is the key... As long as Germany wants the euro system, then the key members will remain... Germany, France, Holland, Austria... You can add Finland, as they have no fiscal problems having gone through all that in the 90's... (I'm sure I missed a country, and I'll hear about it from someone!)

So... that's why Germany's opinion of how to deal with the Greece's and others is important... For you don't want them to get "mad, take their ball and bat and go home"...

OK.. on to other things... Well, last night I was reading that there are calls now for an "emergency rate cut" in Australia... And the interest rate futures are now priced to show a 25 Basis Point rate cut... WOW! That's a bit premature, I would say... Given that a month ago, the call was for more rate hikes... But you see, I even warned you about this, Australia posted a very weak GDP report... and the Chicken Littles came out to claim the sky was falling on Australia... I sure hope the Reserve Bank of Australia (RBA) remains calm, and waits for other evidence before cutting rates... One has to remember that first it was a drought, then floods, and a cyclone the size of the U.S.'s lower 48... Their economic growth was bound to take a hit...

But, that news of the interest rate futures in Australia, has really been a body blow for the Aussie dollar (A$)... And Until we get further down the road and put this all in our rear view mirror, the A$ will suffer...

The Swiss franc is knocking on the door to a $1.20 price tag... Geopolitical problems continue to support a strong franc, much to the chagrin of the Swiss National Bank (SNB), who last year at this time was spending hundreds of Billions to keep the franc from getting stronger... Just for grins, and to rub it in the SNB's face a little for attempting to intervene, the franc was 91-cents a year ago... yes, do the math, that's a better than 30% gain in the franc in the past year...

So, once again, the fact that a currency doesn't pay any interest, doesn't stop investors from driving the price higher... The year before it was the Japanese yen... But... having interest sure helps pay the bills... Take the Brazilian real... The higher interest rate there, sure has been a key to the real's gains VS the dollar the past 3 years.

And, long time readers know that I can't mention Brazil without the disclaimer that the real is considered an Emerging Markets currency, which means it can be volatile, and should only be purchased with the money you have allocated to "speculative" investments...

OK. did you see that the 1st QTR GDP revision for the U.S. ticked up to 1.9% from 1.8%? Oh wow, I say sarcastically. That's still not very good, in fact, it's still very bad! Today, we'll see two of my faves. Personal Income and Spending. While, I would really like to see the Income outpace the spending, I'm afraid that the economy can't handle that right now, especially with the Fed pulling up stakes as the "stimulus provider" for the economy.

I said at the top that it's a very busy week, with the Greek stuff, and with data. I already talked about the Personal Income and Spending, but that's not all! If your order now, we'll give you second data release free! HA! Tomorrow we'll see the S&P/CaseShiller Home Price Index, which I believe will continue to show Home prices falling. Consumer Confidence will print for June, and then after going through a lot of 2nd Tier data prints, on Friday, we'll see if there was further rot on Manufacturing's vine, when the ISM Index prints for June. Remember the Huge drop in the index number last month (60.4 to 53.5), but it's not just been a one month drop. This index has been edging down since February.

And then, the drop in the price of Oil (down to $90) is really causing the petrol currencies to weaken further. Canada, Norway, Brazil, Russia, U.K, and Mexico. Did you see this from the WSJ on Friday? "U.S. commodity regulators are examining whether word of a decision to coordinate a release of global oil stockpiles was leaked ahead of Thursday's announcement by the International Energy Agency, according to a person familiar with the matter."

Sure. but the afterhours whippings that Silver gets, is nothing to investigate?

Then there was this. I was reading this weekend at the computer, and came across a story that plays well with the survival of the Eurozone and euro, and. my claim that China has become the financier of the world, a title that was once held by the U.S..

"Chinese Premier Wen Jiabao said China will keep investing in Europe's sovereign bond market. This news spread quickly, and provided a vote of confidence in the Eurozone. Wen, said, "China has actually increased the purchase of government bonds of some European Countries, and we haven't cut back on our euro holdings."

Chuck again. So. the old Chuck would say, "put that in your pipe and smoke it, George Soros". But the kinder, gentler Chuck, can't do that any longer, so I'll just say. neener, neener, neener.

To recap. The dollar rally continued throughout Friday, with Gold falling through the $1,500 handle, and the euro falling through the 1.42 handle. The dollar buying continued through the Asian session last night, but has stopped on a dime in Europe, as there's news that could help the Greek situation. French banks are on board to roll the maturities of Greek debt, which is huge. But this is a big week for Greece and the euro. stay tuned. same bat time, same bat channel.

Currencies today 6/27/11. American Style: A$ $1.0445, kiwi .8025, C$ $1.0110, euro 1.4210, sterling 1.5990, Swiss $1.1990, . European Style: rand 6.90, krone 5.49, SEK 6.4750, forint 189.35, zloty 2.8170, koruna 17.19, RUB 28.33, yen 80.70, sing 1.2420, HKD 7.7875, INR 45.03, China 6.4790, pesos 11.92, BRL 1.6040, dollar index 75.50, Oil $90.65, 10-year 2.88%, Silver $34.14, and Gold. $1,502

That's it for today. A tough weekend for my Cardinals, getting swept by the Blue Jays. That didn't stop us from having fun at the park Friday night. Thanks to Rick for the invite! Yesterday, I celebrated (in my mind) the 4-year anniversary of the removal of my cancerous femur, and the replacement of a prosthesis that allowed me to keep my leg, and walk (with the help of a cane). I'm always very careful with that leg, and hip, for I would never want to go through that surgery again! I can endure a lot of pain, but that was too much for even me! Tomorrow is Alex's 16th birthday. it will also be the 8th wedding anniversary for my darling daughter Dawn, and husband Jerry. OK. let's get this going, and star that Marvelous Monday!

Chuck Butler


EverBank World Markets



Posted 06-27-2011 11:59 AM by Chuck Butler
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