Risk Aversion Creeps Back Into The Streets!
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In This Issue.

* Currencies reverse gains from this week.

* Gold, dollars and renminbi rally.

* German Retail Sales plunge!

* New Zealand gets downgraded.

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

Risk Aversion Creeps Back Into The Streets!

Good day. And a Happy Friday to one and all! The feel good story of the Cardinals is still being felt around the city, everyone is talking about it, even people that normally don't talk about baseball! So, with all this giddiness going around, I'll proclaim this to be a Fantastico Friday, front and center this morning!

It's not so Fantastico for the currencies this morning though. Except the dollar, and Chinese renminbi, and I can't forget Gold! Yes, the price of Gold is higher this morning by $14, moving it deeper through the $1,600 handle. So. what's the skinny Chuck?

Well, I'm glad you asked! You see, the stronger feelings that the Eurozone problems will be kicked down the road this week, instead of them blowing up right here, right now, have faded. And the Risk Aversion campers are back out on the streets. You see, sometimes it can be a rumor, sometimes it can be a comment by an official, and sometimes it can be weak data that causes all the risk takers to gather their belongings and go home. And this time, that's what caused the reversal of risk sentiment. weak data. And not just from one source! The risk takers had to feel as though the data prints were ganging up on them. so. they went home.

This morning, German Retail Sales printed. and the outcome was just plain awful. August Retail Sales in Germany fell -2.9% in August VS July. Now. VS a year ago, Retail Sales in Germany are up 2.2%, but, it's all a "What have you done for me lately" crowd in the markets these days. And so, the euro took it on the chin this morning.

And why not? You know, I always talk about fundamentals, well, those fundamentals can go both ways, and when something like this report from Germany prints, I would certainly expect that country's currency to take one on the chin!

And inflation in the Eurozone is proving to be a real bear. Even after two rate hikes by the European Central Bank (ECB), inflation as measured by their form of CPI, picked up in September from a year ago, printing at 3%, VS the consensus forecast of 2.5%... So, 3% is a full 100 basis points or 1% higher than the ECB's ceiling target for inflation. Now. remember what I talked about earlier this week, regarding the markets rewarding countries that cut rates to promote growth. It doesn't look like the ECB is going to be able to join the rate cutting parties going on around the world. And they'll be singing. I don't want to spoil the party so I'll go. I would hate my disappointment to show. there's nothing for me here. so I'll just disappear.

Ok. there's more though! I sort of feel like the Sham-Wow guy, or the late Billy Mays, "And that's not all! Order now, and you'll get not one, not two, but three for the price of one"! HA OK. seriously. China will print their manufacturing report this weekend, and the "experts" believe that China's manufacturing will show a decline for the third consecutive month. The moderation of their economy continues. but any slippage causes the Chicken Littles to run loose and begin shouting that the sky is falling on the Chinese economy once again. But, as I tried to explain to the Chicken Littles for the past couple of years that they have claimed the Chinese economy would collapse. Moderate, is the word that is more like what is going to happen, and that's exactly what has happened! The great group, YES, did a song, called Time and a Word. The word for them was Love. but the word here is Moderate.

So, there you have it. data from all over that sends the risk takers home for the weekend. And Today, we'll see the color of the Personal Income & Spending for August from here in the good ole U.S.A. And if Personal Spending is as weak as forecast (.2% from .8% the previous month), then the Risk Aversion campers are going to set up camp and stay awhile, folks. For, if the U.S. spending machine is going to sputter, and I don't know why it wouldn't at this point, the global recession fears are going to begin to become reality.

And down under in New Zealand. S&P joined Fitch and downgraded New Zealand's sovereign credit rating from AAA. So, now tiny New Zealand has seen their rating downgraded just like in the U.S! Unfortunately for the New Zealand that news didn't bring them buyers like the news brought buyers of dollars when the U.S. debt rating was cut. And guess why New Zealand's rating was cut? Ahhh grasshopper you've been paying attention in class. of course, the answer is debt levels! Same reason the U.S. rating was cut! Of course we're talking apples and bananas here, considering that New Zealand's economy is the size of a pimple on the face of the U.S.

But long time readers will recall me saying that New Zealand's debt was getting too high, and one day sons and daughters, investors will look past that lofty interest rate New Zealand once had, and realize the debt behind the curtain. Well. first the interest rates were cut, and the debt was revealed, investors fled, and then the ratings agencies moved in. You can run, but you can't hide from debt. I use this quote in my presentations.

Gold is the money of kings; silver is the money of gentlemen; barter is the money of peasants; but debt is the money of slaves. -- Norm Franz in his book Money and Wealth in the New Millennium (2001)

It gets two birds with one stone. why own Gold & Silver. and why not to have debt!

Of course we all experience debt. we buy homes, cars, kids tuitions, etc. but for the most part, most of us are not "consumed by debt". Which a lot of countries, states, and municipalities around the world are these days.

Today, we'll also see another regional manufacturing index here in the U.S. this time it will be Chicago's turn to report. The regional reports in the past month, have all been weaker. thus indicating to me that we could see the ISM (national manufacturing index) fall below the 50 level, which as you know, is the line in the sand between expansion and contraction. And we'll see that report on Monday next week.

And in other data news. The number of Initial Claims last week, fell 37,000! WOW! Now that's a good number! That drop left the total at 391,000 initial claims filed last week. So, any upside revision could very well bring it right back to 400,000. But, still, I don't want to take away from the 37,000 drop! WOW!

So. I read a story on the Bloomberg this morning about regarding Gold. The story talks about how Central Banks are adding Gold to their reserves. Thailand, Bolivia, and Tajikistan increased their Gold reserves by a combined 18.2 metric tons in August. (bet they wished they had waited until Sept to buy!) The story goes on to talk about how more than just these three central banks are adding to their Gold reserves. And that's a good thing for Gold, folks!

Japan was back to the business of attempting to rattle the markets, when they announced that they had increased the size of their intervention fund by Y15 Trillion. Again, they are not using the bullets in their gun. they just now have a bigger gun, that can shoot bigger bullets. And they wanted the markets to know. more jawboning.

Then there was this. Well. here I am. Rock you like a Hurricane! Not exactly. I'm here with my tail between my legs, begging for forgiveness, for I did go down a wrong path yesterday with my tirade about the U.S. being the economic engine of the world. The Big Boss, Frank Trotter reminded me that while the U.S. remains the largest economy in the world. The combined Eurozone countries make up a GDP of $12.5 Trillion, VS the U.S. GDP of $14.3 Trillion. So. the problems in the Eurozone could be responsible for a slowdown in the world's economies. However, take the U.S. and the Eurozone economies together, and the rotten state that both are in. and you have a global recession!

Thanks Frank!

To recap. Risk sentiment has moved back to Risk Aversion this morning, as some data printed in the Eurozone, and the will print in China this weekend, will prove to be weak. thus taking the shine off the risk assets that basked in the light earlier this week. That means the currencies are losing ground this morning, and are much weaker than earlier this week. German Retail Sales dropped more than forecast, Eurozone inflation popped up to 3%. New Zealand saw a ratings downgrade, because of their debt, and Central Banks are increasing their Gold reserves.

Currencies today 9/30/11. American Style: A$ .9725, kiwi .7650, C$ .9570, euro 1.35, sterling 1.5595, Swiss $1.1090, . European Style: rand 8.1060, krone 5.8465, SEK 6.8585, forint 216.50, zloty 3.2730, koruna 216.57, RUB 32.15, yen 76.85, sing 1.30, HKD 7.7910, INR 48.95, China 6.3780, pesos 13.78, BRL 1.84, dollar index 78.35, Oil $81.83, 10-year 1.95%, Silver $30.59, and Gold. $1,623.15, and since I mentioned debt (when don't I mention it?) here's the link to the U.S. debt clock: www.usdebtclock.org/index.html

That's it for today. I am dead tired this morning. I drank some juice to help me get the motor started, but I do believe it's going to need some ether to get the job done! HA! I wonder how many youngsters even know what ether is? One of my first cars, was a real "beater", that needed a shot of ether in the carburetor to start, which caused a fire or two in the carburetor. yes. my kids have no idea what a "beater" is. but, I paid $250 for that car, what would you expect? HA! Little Everett the EverBaby is standing on his own now, and takes a step or two. He's a very happy guy. 10 months old now. WOW! Where did this last year go? The playoffs begin this afternoon, for the junior circuit, and tomorrow for the National League, and my beloved Cardinals. The redbirds will need to keep playing loose, and receive a lot of luck! So, good luck to them! And with that. this ends this week, and month, and quarter! When we talk next it will be October, or as a radio station here in St. Louis calls it. Rocktober! I hope you have a Fantastico Friday, and a wonderful weekend. bye!

Chuck Butler


EverBank World Markets



Posted 09-30-2011 12:31 PM by Chuck Butler
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