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In This Issue.

* Dollar & so-called Safe Havens rally.

* U.K. news story sends risk assets reeling.

* The markets now focus on Italian debt.

* The poor Japanese Gov't & Central Bank.

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

Who's Reading The Pfennig?

Good day. And a Terrific Tuesday to you! You know. every Tuesday that I write that, I think of Tom Terrific. Sorry Youngsters, you'll have to Google Tom Terrific. for us "old timers" we get to smile and think back to the days, when the U.S. was the creditor to the world. But then, I don't want to become a Crabby Appleton! HA!

Yesterday, I received an email from Chris Gaffney who is on vacation with his lovely family and their two dogs. The email told me how he read the Pfennig out loud to the family yesterday morning! So, if that's the daily M.O., then hello, Tina, Brendan, and Lauren!

Well. enough of that stuff. I've been beating around the bush this morning, but there's no more beating to do. Here it is. Front and Center this morning, It's a Major Risk Off Day. It's crazy folks. it's as if all the reasons investors and traders bought currencies and metals for, have been thrown out with the bathwater, and the only investments on earth, are: dollars, francs, yen, and Treasuries. Everything else is getting sold, Big Time!

Now. if you asked me, let's say, I'm at my favorite watering hole, and someone asks me what I do, and I tell them, and after I give them a cocktail napkin to wipe the glaze off their eyes, then they proceed to ask me questions. And those questions would be answered, from the heart, just like I write the Pfennig. So, if this guy in the watering hole asked me, what would he should be doing with his investment portfolio, I would say. diversify, with an allocation to Gold (& Silver) and currencies outside the dollar. And dollars, francs, yen and Treasuries would not be on that list!

I have a bumper sticker hung up at my desk. It has a picture of my friend, The Mogambo Guru, with his hands about to slap his head, and the caption reads. "What Would Mogambo Guru Buy? Then below that question it reads: Gold, Silver, and Oil, moron."

You have to know the Mogambo, he doesn't mean to call anyone names, the bumper sticker is a joke. but, it doesn't take away from the fact that for the past decade, those three investments have outpaced all other investments. So, the question now, is this. "has it all come to an end, and we are about to go into a multi-year strong dollar trend?"

I think you know my answer on that, as I've been through this many, many times in the past. Fundamentals drive trends, and an asset goes into a weak or strong trend because of a fundamental reason, and doesn't leave that trend until the Fundamental reason has been correction, or taken away, or is well on the road to either of those things. As I told a crowd in La Jolla in May, the U.S. hasn't even turned on to that road to correction!

Yes, but all that doesn't make up for the fact that the so-called, "Safe Havens" are being bought by the truck load this morning!

U.S. stocks took one on the chin yesterday, as are the foreign stocks this morning. And that doesn't bode for any turn-around today of this flocking to the so-called "safe havens".

So. apparently a news story is what triggered this selling of risk assets, and refocusing on the Eurozone debt problems. A UK Guardian report entitled, "Greece set to default on massive debt burden, European leaders concede" really got the risk aversion campers' motors started, and they've been running on all 8 overnight.

The euro, being the offset currency to the dollar and seeing the dollar rally, is getting hammered this morning. It now seems that Italy is being called out by the markets, as the cost of financing their debt climbed to records and doesn't look to be stopping for a breather either! The talk about the contagion risk spreading has become a virus, if you will. it has infected traders' and investors' minds, and now we're heading to a serious thing here, folks. There are times when a thing like a "Chaos Theory" takes over. much like earlier this year, with Greece. And there's no stopping the movement, until somebody stands up and says, "That's enough"!

Remember, though. I told you all months ago, that once QE2 was over, the summer trading would bring about dollar strength, and we needed to batten down the hatches, and look for bargains. This is the type of thing I was talking about then. But, I really didn't think, months ago, that the Eurozone problems would be going back into the woodshed. Yes, I knew they were not good. but, I thought then, and I still think that they are bad, but not AS bad AS those here in the U.S. regarding our debt problem. But, here they are, slapping the euro around like a rented mule, and taking no prisoners. (don't worry no animals were actually hurt!)

So. the euro is trading with a 1.39 handle this morning, and had fallen into the 1.38 handle overnight. The single unit hasn't been here since March. And with the euro being so weak this morning (relatively, weak, as it is still more than 1/3rd stronger than the dollar) the other currencies, which are not francs, and yen are getting hammered too. Shoot Rudy! Even the Chinese renminbi, has lost ground to the dollar for the 2nd consecutive trading day.

I guess the meeting of Eurozone ministers didn't calm any nervous Nellies yesterday. The Eurozone finance ministers agreed to give the European Financial Stability Facility more money and power to stem the spread of the sovereign-debt crisis. The 17 Eurozone nations backed lower interest rates and extended maturities for Greece and other countries in financial trouble.

I guess the markets are saying. money talks, and B.S. walks, right now, eh?

There's another meeting of the ECOFIN members going on as my fat fingers fly across this keyboard. (yeah, right!) I don't know if they can invent another hoola hoop, but they sure need to!

Yesterday, the Aussie dollar (A$) lost 1-cent, and today, it is down another cent. And Gold. while lower than yesterday when it traded to $1,554 and change, is down $7 this morning. Gold was unable to pull Silver out of the red yesterday, as it had for the latter part of last week. Gold traded up, and Silver traded down. Hmmm. interesting I must say. I must say. (do it in your best Ed Grimley voice!)

The Japanese yen is trading below 80 again. This has to just tick off the Japanese Gov't and Central Bank to no end! They've tried and tried to weaken the yen, and then the Risk Off Days, take it right back to the lofty levels the Gov't and Central Bank tried so hard to get away from! Look for some comments from either the Gov't or Central Bank on the strength of the yen. They've got to save face here, and try something to weaken the currency!

If you're new to class, the Japanese Gov't has long sought a weaker yen, to spur exports, yes, but to also invite inflation into their economy.. Something you will find to be difficult to achieve when the currency is setting all-time records for strength!

Until last night. The Asian & Pan Asian currencies have been the better performers over the European currencies and the North American currencies. But, even the Asian currencies got caught up in the dollar hammering last night.

So. I really don't expect these Asian & Pan Asian currencies down in the dumps too long. I have to say though, I prefer the straight Asian currencies above all others. but, let me remind you. That's just my opinion, I could be wrong!

The data cupboard will yield, the May Trade Deficit report this morning, which is expected to remain around $44 Billion, which is another ½ Trillion ($528 Billion) annualized, that has to be dealt with, folks. The Fed will also release their meeting minutes from the last meeting on June 22-23. The minutes might have some wording in it that could take the markets by surprise. But, I doubt the markets will react violently to any such surprise, for Big Ben Bernanke will be giving his testimony on the economy to lawmakers tomorrow and Thursday. And that testimony would far outweigh anything the Minutes might have it them.

Then there was this. I was really amused yesterday when the President said, "'Professional Politicians' Understand Debt Crisis Better Than General Public". It was as if he had read the Pfennig yesterday morning, and saw my blip about how in recent polls Americans say they don't want an increase in the debt ceiling. Doesn't it look that way to you? Maybe I'm just making too much out of his statement. I do get the feeling quite often that people read the Pfennig, and then go say things in print, etc. I guess I should be proud that they do that! Yeah, come on Chuck, you're getting too big of a head on this, I doubt the President, even knows the Pfennig exists!

To recap. A U.K. news story really sent the risk assets to the woodshed overnight, and it's all about the so-called Safe Havens of: dollars, francs, yen and Treasuries today. Now the markets are focusing on Italian debt, so the threat of contagion is cast upon us like the shadows of a late afternoon game at Busch Stadium! The Eurogroup leaders met and discussed their debt problems by allowing their Financial Stability fund to grow. ECOFIN (finance ministers) are meeting this morning, trying to invest a hoola hoop for the debt problems. And Gold & Silver have given back some of their gains, as risk assets get sold.

Currencies today 7/12/11. American Style: A$ $1.0570, kiwi .8160, C$ $1.0265, euro 1.3925, sterling 1.5810, Swiss $1.20, . European Style: rand 6.94, krone 5.5870, SEK 6.63, forint 193.55, zloty 2.9110, koruna 17.4050, RUB 28.38, yen 79.65, sing 1.2290, HKD 7.7950, INR 44.70, China 6.4720, pesos 11.85, BRL 1.5775, dollar index 76.37, Oil $94.25, 10-year 2.87%, Silver $34.86, and Gold. $1,542.80

That's it for today. Home Alone again last night, as everyone was "out". Watched a bit of the Home Run Derby, but it just wasn't holding my interest last night, as in previous years. I sat at the computer, most of the night, waiting for Alex to come home. Yesterday, at work, was a blur to me. I looked up and it was time to leave. And then I sat in my doctor's office for an hour. Hey! The mass in my chest still hasn't grown, so that's good news! And I'll just leave it at that! Time to get this process going to get it out the door, so. go out and have a Tom Terrific Tuesday!

Chuck Butler


EverBank World Markets



Posted 07-12-2011 11:38 AM by Chuck Butler