Another Bill Of Goods?
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In This Issue.

* The President speaks tonight on jobs.

* A perfect storm is brewing.

* Gold & renminbi only currencies rallying today.

* Ted Butler on the Gold Manipulation.

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

Another Bill Of Goods?

Good day. And a Tub Thumpin' Thursday to you! Well. Chris spilled the beans on me yesterday, telling everyone where I was. No worries. I'm back, and full of you know what and vinegar this morning! I'll have to weigh that against my new kinder, gentler self.

Front and center this morning I have to tell you that I do believe that a Perfect Storm is brewing for some dollar strength. You see. first we had the Brazilian move last week that allowed the dollar to recover lost ground against the real. Then we had the Swiss announce a floor for the franc, which on the pairs, carried over to dollar strength against the franc. And now tonight.

I had a lot of time to read yesterday, as I rested. and everything, including the kitchen sink is going to be thrown at the markets tonight, when the President gives his "new and improved" idea for jobs. And then I began to connect the dots. stay with me on this folks. Recall, when I told you all about the whispering campaign in D.C. regarding a new Homeland Investment Act (HIA)? Yes, it was a couple of months ago, but I told you how the first HIA was in 2005, and how the dollar rallied for 9 months that year, due to the repatriation of profits earned overseas by U.S. Corporations at a discounted tax rate..

Recall that I told you that the Corporations sold this bill of goods to Congress under the guise of the Corporations being able to increase employment in the U.S. Well. do you see the line connecting the dots now? The Corporations are selling that hill of beans again to Congress, that if they can repatriate their earnings at a discounted tax rate, that they would increase employment. And the President is in dire need of a rabbit to pull out of his hat tonight, folks. So. I'm afraid that he will announce that HIA II is on the way. No, it won't help employment, it didn't in 2005, why would it now? But that's not important right now. The President can sell it as the latest, greatest thing for creating jobs, and the public will follow it without asking questions to the edge of the cliff, and jump off if that's what it takes to prove they are behind the idea.

So. IF HIA II is announced tonight as part of the jobs creation ideas the President has, you can expect some dollar strength to begin. It won't begin right away, as the bill has to go through Congress, but you can expect the tracks to be greased for this bill. in 2005, around $350 Billion was brought back to the U.S. and the dollar was the belle of the ball for the 9 months that the tax amnesty was in place. Most of the currencies were hurt VS the dollar in 2005, the euro, and franc especially. The only currency to really amass some positive movement VS the dollar in 2005 was the Chinese renminbi, which as you may recall, dropped their peg to the dollar in July of 2005. Oh, and of course Gold continued to rally VS the dollar, during the first HIA.

Maybe, maybe I'm wrong. to sing this song. And it won't be mentioned tonight. but I'm not holding my breath, because all the signs point to this being the piece de resistance for the President tonight.

So. what do we as currency investors do if this HIA II is announced? Well. if you are a true diversification investor, then you simply batten down the hatches, and look for bargains. That's what I'll be doing. You could sell now ahead of the HIA II to lock in profits, and buy back when the bargains appear. But that creates tax events, and I'm always for paying the least amount of taxes as I can! (Not like that helps me, considering my tax bill every year!)

Well. the letter is half over and I haven't even begun to talk to you about what's going on this morning! Well. the HIA II thing is BIG folks. OK. this morning. most of the currencies are weaker VS the dollar, but Gold is up $15 as I write.

Speaking of Gold. once again, the price manipulators worked in the afterhours markets to bring the price of Gold to its knees the other night. hacking over $75 off of Gold's price. I have a great explanation of what happened from Silver Guru Ted Butler (no relation that I know of) but it's really long. I'll have to save it for the monthly newsletter to clients, The Review & Focus. But, here's a snippet just to wet your whistle. Here's Ted Butler on the Gold manipulation the other night.

"The dramatic sell-offs, particularly at times when the markets are thin, greatly outnumber in frequency any dramatic price rallies. One would think in a free market that dramatic sell-offs and rallies would roughly compare in frequency, especially when one considers that the general sweep of gold and silver prices over the past 5 or 10 years has been to the upside. That is clearly not the case."

Chuck again. (the "other" Butler!) As I look out on the currency horizon this morning, I see that only Gold and Chinese renminbi are moving stronger VS the dollar, just like in the HIA days of 2005.

The Norwegian krone which soared the other morning after the SNB announced their floor for the franc, is bouncing along remaining pretty steady Eddie, while the euro & Aussie dollar (A$) lose 1/4-cent.

The two Biggest Losers this week are the Brazilian real, and Swiss franc. The Governments of real and francs put these two currencies on major weight programs this week, and they have put the rubber suits on and gone for a run. I shake my head in disgust at Governments that manipulate their currencies lower. Basically the Government is saying that the currency should be debased. And haven't I always told you that the you should always view the currency of a country as the stock of that country? So, if the currency's own Government isn't proud of their own stock, then they apparently don't have much to think about themselves as a country!

You know. last week. I told you that I didn't think the Swiss franc would hold $1.25 for long. But I never thought that the Gov't would do what it did! But they did. and now it's time for the markets make them pay, by offering up some pastries, or cakes or other high calorie foods to these currencies, by pushing back and gaining ground again. Of course that will be difficult to do, should the HIA II get announced tonight. UGH!

Yesterday, Chris told you that a potential speed bump was removed when the German Federal Constitutional Court decided the country's participation in Eurozone bailouts was legal. Truth be told, I was very surprised to hear that decision. I was of the opinion that they were unconstitutional, and that hell was to be paid for bailing out Greece, Ireland and Portugal. So, I was wrong about that. but on the other hand, somewhat relieved that this too, wasn't added to the perfect storm brewing for a period of dollar strength.

In a report yesterday that gets little fanfare. Mortgage Applications in August fell -4.9%, which is better than July's figure of -9.6%, but still, pretty bad considering where mortgage rates are these days. I think that this just shows that 1. Home prices are still too high and 2. That there are too many unemployed people or people living from paycheck to paycheck to even consider buying a house. So. I sure hope the Fed Heads are watching these figures print month after month.

I heard that the Fed Heads are discussing implementing something called "Operation Twist". When I first read the story, the print was small, and I read: Oliver Twist. HA!

So.. Then there was this. from the Wall Street Journal. "One step getting considerable attention inside and outside the Fed would shift the central bank's portfolio of government bonds so that it holds more long-term securities and fewer short-term securities.

The move-known to some in markets as "Operation Twist" and to some inside the Fed as "maturity extension"-is meant to further push down long-term interest rates and thus encourage economic activity. The program draws its name from a similar 1960s effort by the U.S. Treasury and the Fed, in which they tried to "twist" interest rates so that long-term rates were lower relative to short-term rates."

Chuck again. So there you go. more manipulation of rates instead of just allowing the markets to dictate what rates should be. the kinder, gentler me, is taking hold right now, folks, because the things going through my head to say about this, will have to remain there and not here!

To recap. Currencies are weaker this morning, with the Chinese renminbi and Gold being the only "real movers" against the dollar. Tonight's speech by the President on his new and improved ideas for job creation, might include a new HIA which could spell dollar strength. and add to the perfect storm that's being created for dollar strength with moves by Brazil and Switzerland in the past week.

Currencies today 9/8/11. American Style: A$ $1.06, kiwi .8350, C$ $1.0160, euro 1.4050, sterling 1.5965, Swiss $1.1575, . European Style: rand 7.15, krone 5.3830, SEK 6.3690, forint 196.50, zloty 3.0135, koruna 17.3850, RUB 29.53, yen 77.25, sing 1.2105, HKD 7.7960, INR 46.24, China 6.3832, pesos 12.48, BRL 1.6565, dollar index 75.61, Oil $89.04, 10-year 1.99%, Silver $41.99, and Gold. $1,838

That's it for today. Europa is playing on the I-Pod right now, and that takes me back to Tuesday night, watching one of my all -time fave guitar players, Carlos Santana perform. Quite a performance. Carlos Santana is in his 60's now, so I wonder how long he'll keep doing concerts? Alex was with me, and he thinks that he could do everything that Carlos Santana does. But. as I explain to Alex. Santana was first to do it! Tuesday night was also a swim meet, so Alex was busy. His times were better again, and I explained to him that the goal is to consistently get better times every time out until he reaches his overall time goal. He'll figure it out. And with that. I bid you farewell for today, and hope you have a Tub Thumpin' Thursday!

Chuck Butler


EverBank World Markets



Posted 09-08-2011 11:22 AM by Chuck Butler