Singing From The Same Song Sheet.
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In This Issue.

* The Big Two have a plan.

* Juncker throws a cat among the pigeons!

* Debt ceiling talk begins to wear on me.

* Chinese economy begins to "moderate".

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

Singing From The Same Song Sheet.

Good day. And a Tub Thumpin' Thursday to you! I remembered! Yahoo! So, I'm calm, cool, and collected this morning. HA! Cool, maybe, but never calm! And collected? Not since I was a young man, I'm afraid! So, there you go, right out of the starters blocks this morning, I'm going down paths I shouldn't go!

Well.. just one reader got the reference to a Motley Crue song yesterday. I guess I've stretched the limits of my I-Pod, eh?

OK.. Well, it looks as though the Eurozone's "Big Two" leaders, of Merkel, and Sarkozy have come up with a "plan" that they will present to the other Eurozone leaders at the Eurozone Summit today. Last night, the Big Two emerged from a 6-hour meeting with smiles, and a "plan" in their pockets, that they wouldn't share, choosing instead to present it at the Eurozone Summit. So, since they are hours ahead of us, by noon today, we should know what the "plan" consists of.

The thing I find as Key here, is the fact that the Big Two are singing from the same song sheet, which previously had not been the case. And this singing from the same song sheet, has really pushed the euro higher this morning. One of the key points that had divided the Big Two, was a "bank tax" that would be used to fund the bailouts. Not gonna happen. and Eurozone banks are breathing a bit easier this morning..

So, with a stronger euro, the usual suspects that follow the Big Dog euro, are all stronger this morning too. Except. the Aussie dollar (A$). word came out last night that China will print a softer Manufacturing Index, and that slapped the A$ on the wrists. The thing that just gets my blood boiling is the fact that all last year, while China was hiking interest rates, I kept saying over and over again that it was being done to "moderate" the Chinese economy. So, the markets act like this is a "new development" that China might print a softer Manufacturing index. THIS IS WHAT ALL THE RATE HIKES WERE SUPPOSED TO DO!

The forecast for a softer Manufacturing Index, didn't throw a spanner in the works for an appreciating renminbi though. the renminbi booked gains VS the dollar, and is getting ready to move a figure below 6.50! (remember, renminbi is a European Priced currency, which means the lower the number, the greater the value / return of the currency is)

The IMF was beating on China yesterday (remember, the IMF is controlled by the U.S.) The IMF didn't have many nice things to say about China's currency policy, and called the renminbi "undervalued". GREAT! We have a new "Mr. Obvious" in the IMF! My 16 year old son, could tell you that the renminbi was undervalued if you asked him! Shoot Rudy, I bet little Delaney Grace would have the same answer! HA!

As you can guess. China disputed the IMF's opinion of their currency policy. Why can't lawmakers and IMF, and the rest of the lot, leave China alone? The more they push China to move faster, the more China pushes back, and we end up getting nowhere..

No "resolution" on the debt ceiling deadlock yesterday, folks. this drama just continues to wear on me. The mindset of anyone that believes raising the debt ceiling is a "good thing" also continues to wear on me. If you have a drug addict, you don't give them more drugs. If you have an eating problem, you don't give them more food. And if you have a debt problem, you don't add more debt! That's what raising the debt ceiling does. However, IF and that's a BIG IF, they can show me significant cuts that slash the debt in the next couple of years, you could almost make a case for raising the debt ceiling. But, I don't want to ever be discussing this debt ceiling again! A readers sent me the excellent newsletter from Jim Sinclair, of whom I've quoted many times over the years in the Pfennig. Jim Sinclair had a great line about raising the debt ceiling. "The idea that an increase in the debt ceiling is a solution to anything is nonsense. Calling increasing the debt ceiling a solution to a debt problem is too stupid to be stupid."

Hey! Chuck again. this just in. Eurozone PMI's (manufacturing index) are showing another big decline in July, thus indicating that there is major weakness in the manufacturing sector of Germany. Hmmm. I received an email a few weeks ago from a reader, who had just spend some time in Germany, and had nothing but good things to say about the appearance of the economy, so. this report of weakness is surprising to me. And could begin to wear on the euro a bit. But for today, the Eurozone Summit and the "Big Two's" plan will far outweigh any data from the Eurozone.

You know. we've spent a lot of time talking about Singapore in our monthly newsletter, The Review & Focus, which is sent each month to EverBank World Markets customers. And whenever something actually happens in Singapore I try to make sure I report it here. and in that circle, Singapore's Central Bank sent out a communiqué' last night that raised its inflation forecast, and a pledge to remain "vigilant" against risks to growth.

Now, wouldn't that give us all a real warm and fuzzy to have a Central Bank that was on top of this stuff like the Central Banks that can be found in Singapore, Australia, Sweden, Norway, Eurozone, and there are more, but these are the ones that popped into my mind. the point here is that the U.S.'s Federal Reserve Bank will not be found anywhere on that list! And that's our Central Bank.

And in news that they almost got to fly under the radar so that investors around the world wouldn't know. The Brazilian Central Bank raised their internal rate again yesterday.. The internal rate in Brazil is 12.5%... The Central Bank also issued a statement that said they believed this "might be" the last rate hike needed. They obviously aren't real sure about that, eh?

I say that they tried to fly the news under the radar, because, Brazil has done everything but throw the kitchen sink at investors, putting up roadblock after roadblock for investors, as they attempted to stem the appreciation of their currency, the real. So, when they announce that interest rates are going higher, it attracts the world's investors, and that's something the Brazilian Gov't doesn't want!

As I look over the Calendar of Events/ Data for today, I see that Big Ben Bernanke will be speaking this morning.. I wonder what Big Ben has on his mind today. could it be. laying the groundwork for more stimulus? I bet he would love to do that, but, the timing might not be great right now. So, I guess we'll have to wait-n-see what Big Ben has on his mind!

With it being a Tub Thumpin' Thursday, we'll see the Weekly Initial Jobless Claims. Remember last week, when jobless claims dropped 22,000? I told you that what the media had forgotten to mention was the fact that the data was taken during a Holiday shortened week. So, now we get a full week of data, and I truly expect the total of 405,000 in the previous report to show a healthy (really unhealthy) gain.

Then there was this. ECB member, Juncker, has thrown a cat among the pigeons this morning, by warning everyone that the Eurozone Summit might not yield a resolution. these damaging words at a time when the markets were about to believe that the Big Two had a plan, has really taken a bite out of the euro strength I saw when I first started writing this morning. UGH!

To recap. there is a plan in place that the Big Two have agreed on, and will present to the Eurozone leaders this morning. That news had rallied the euro and other currencies VS the dollar. However, in a later development, ECB member Juncker downplayed the Eurozone Summit, and that has really deep sixed the euro and the rally. The A$ has backed off this morning, after reports that China will print a softer manufacturing report surfaced.

Currencies today 7/21/11. American Style: A$ $1.0705, kiwi .8560, C$ $1.0545, euro 1.4185, sterling 1.6145, Swiss $1.2175, . European Style: rand 6.8624, krone 5.5025, SEK 6.4480, forint 189.85, zloty 2.8255, koruna 17.2610, RUB 27.99, yen 78.90, sing 1.2135, HKD 7.7935, INR 44.49, China 6.4515, pesos 11.66, BRL 1.5655, dollar index 75.05, Oil $97.39, 10-year 2.94%, Silver $39.70, and Gold. $1,599.00

That's it for today. Cards take another hit from the Mets last night. they've only won 1 game since the All-Star Game. the wheels are falling off the wagon here.. Alex and his pals were "band practice" when I got home yesterday. they need to learn some new songs! HA! I'll be speaking at a private function tonight, right here in St. Louis. don't know what I'm going to say yet, but I'll figure it out today. I've done these so many times, I think I could do them in my sleep! I leave for Vancouver on Monday, hopefully it's cooler there than here, usually is, but the heat wave is all over North America right now. And, now. it's time to get ready for work. so, I hope you have a Tub Thumpin' Thursday!

Chuck Butler


EverBank World Markets



Posted 07-21-2011 10:17 AM by Chuck Butler