National Debt Passes $15,000,000,000,000!
Daily Pfennig

Blog Subscription Form

  • Email Notifications


.........But First, A Word From Our Sponsor..........

Announcing EverBank Wealth Management, Inc.

It's another great day for the EverBank family of services. We're delighted to announce the launch of a new wealth management company offering global investment advice through a personalized approach.

Led by you. Guided by experience.(sm)

EverBank Wealth Management brings together a team highly experienced in the global marketplace that will listen, evaluate and then advise you to create a plan to meet your goals. Our team uniquely understands how you view the marketplace. We offer comprehensive and unbiased institutional grade investment advice based on what you have and what you want to accomplish.

It all starts with a conversation...877-613-EVER (3837)

EverBank Wealth Management is an investment adviser registered with the Securities and Exchange Commission. It is not a bank. Investment solutions offered through EverBank Wealth Management are: NOT FDIC INSURED | NOT BANK GUARANTEED | MAY LOSE VALUE.


In This Issue.

* No answer from Bullard.

* Mini-rally in euro fades on Spanish auction results.

* Cap U & Ind. Prod print stronger!

* CPI falls. an indication of what's to come?

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

National Debt Passes $15,000,000,000,000!

Good day. And a Tub Thumpin' Thursday to you! No contact from James Bullard, so I guess he doesn't read the Pfennig. HA! I was hoping he would read yesterday's letter, and answer my questions in writing, since I was unable to ask him in person the other day. But I guess that was like wishing, and hoping, and thinking, and praying that someone at the Fed would answer those questions, because. I know that someone at the Fed does read the Pfennig. wink, wink.

OK. let's put that aside for the moment, and talk about something else. The euro is seeing some big selling this morning, after a mini-rally yesterday. Spain, and remember I told you the importance of Spain yesterday, had to go to the markets today to auction 3.5 Billion euros of 10 year notes. The auction was covered at 1.5x, which isn't bad, but isn't the greatest either, and at a yield of 6.98%... That's key here folks, for, the Italian bond yields have gone back and forth through 7%, and 7% is where Portugal and Ireland had to ask for help.

Currency traders knowing all this, have marked down the euro this morning after those auction results. But, as I said, the euro did have a mini-rally yesterday, on news that German Chancellor is joining with France President Sarkozy to ask the European Central Bank (ECB) to step in and deal with this mess. To administer the EFSF (European Financial Stability Fund), and to issue a common bond, and. to buy bonds that the markets won't take without demanding higher yields. In other words. Merkel and Sarkozy want the ECB to become the Fed.

I can see the Bundesbank (Germany's Central Bank) members of the ECB just shuddering, as what is before them. They know in their heart of hearts that they will have to deal with this mess, and the things they end up doing will not have been a part of their banking training, that is unless they took a course on how not to provide price stability. But. in the end. the euro was Germany's idea. They shoved the idea on everyone's plate, and with that in mind, now it is Germany's central bankers that will have to put their banking morals in their back pockets.

I don't like that anymore than they do, folks. but, just looking at what's going on over there, you're left with very few options. And I've said from the get-go, that a common bond would have to be issued to deal with this mess, and people snickered at me, and said that will never happen, for these countries will not accept losing their sovereignty. And of course, you've all heard me say this before, but these countries in the Eurozone already gave up their sovereignty when they turned their legacy currencies into euros.

Geez Louise, Chuck, are you going to spend the morning talking about the Eurozone? Well, maybe. But probably not. I've got a whole pocket full of things to talk about this morning, and we don't' have the time or space to do it. But I'll get to as many as I can!

I have to say that I was impressed with the Capacity Utilization and Industrial Production numbers that printed yesterday here in the U.S. October CU and IP were both stronger. CU was 77.8 VS 77.3 in September. People have asked me for years, why Capacity Utilization is one of my fave economic reports, and it is simply that Cap U, is one of the very few "forward looking" pieces of data and I would rather look forward than in the rear view mirror all the time! The TIC Flows were strong too in September, which makes sense given the flight to safety that went on in September. October saw a reversal of the flight to safety, with November turning around again.

Today's data cupboard has the usual fare, of Weekly Initial Jobless Claims, which has slipped below 400,000 the last two weeks at 398,000 and 390,000 respectively, is expected to be around 395,000, so no "real improvement". The rest of the data centers around Housing Starts and Building Permits. Tomorrow we get the other forward piece of data, Leading Indicators.

So. I'm hoping that I don't have to even begin to say that "with the euro getting sold, the rest of the currencies are struggling too". I'm sure that my dear readers are well aware of this scenario now. But just in case. there you go! And individual fundamentals for the countries has been thrown out with the bathwater. Where's the white flag? I'm getting ready to raise it, with regards to being a fundamentalist!

But is all this just window dressing for the real fireworks that will begin to get shot off next Wednesday? What's next Wednesday, you ask? Well, other than being the busiest day of travel (ahead of the Thanksgiving Holiday). it will be the deadline for the Debt Super Committee (DSC) that was formed as a part of the agreement to raise the debt ceiling back in August, to come up with $1.2 Trillion of cuts. I told you about a month ago, that they would fail to do this, and look at what I see on the news this morning. reports of the DSC members bickering, and playing the he said, she said game of placing blame. I'm telling you again, a month later and less than a week before the deadline that the DSC will fail to reach their objective.

And then according to the agreement made in August, if the DSC fails, we are supposed to see $1.2 Trillion of discretionary spending cuts automatically kick in. Again, a month ago, I believed and still believe that those "automatic cuts" won't happen. The ratings agencies will begin to take the U.S. credit rating to the woodshed, and the problems for the dollar will come right back.

Oh, and by the way. our national debt reached $15 Trillion this morning. $15,000,000,000,000 it's more intimidating with all the zeroes, don't you agree? But that's just a drop in the hat to the Unfunded Liabilities that keeps creeping higher and higher. How's this look? $116,428,974,000,000 pretty scary, eh? But.

If we do nothing, and continue to go along believing that deficits don't matter. on this day in 2015, that's just 4 years from now. The national debt will be $23,651,000,000,000 and the unfunded Liabilities will be $142,602,000,000,000.

OK. this is interesting. REM's the end of the world as we know it, is playing right now on my I-Pod.

And U.S. traders, leaders, Administration, think that the Eurozone has a problem? That's what I keep thinking about folks. Yes, the Eurozone has a problem, but on a scale, the U.S. is in deeper dookie, it's just that the Eurozone problem is now. I read a story yesterday that just plays well with my conspiracy frame of mind. Now, let me makes sure I do this properly. This was something that I read, this is NOT ME SAYING THIS. But, as conspiracy theories go, this one would be interesting to play out. It all began with a TV reporter in Australia, doing a report on the Eurozone mess. and then it came to this thought by someone. "U.S. financial institutions advised the PIIGS how to hide debt, and borrow more, and did so with the idea that eventually these "debt bombs" would explode, thus making the euro collapse VS the dollar."

Now, I'm not saying this is what really happened, but one can imagine this happening, right?

OK. as long as I'm getting into trouble this morning, I might as well go down this next road in the TTWT section of the letter.

Then there was this. Here we come again. Catch us if you can. ooh, ooh.

That great Dave Clark 5 song came to my mind yesterday, when I saw the CPI print.

According to the U.S. Gov't statistics people, Consumer inflation is on a downward slope.

Interesting, don't you think? Is gas cheaper at the pump? NO!

Did it cost you less this year, when you signed the check for your kid's tuition? NO!

And so on.

So, the catch us if you can, is me thinking that the Gov't is trying to pull the wool over our eyes once again. Let me take you back. The Fed's biggest fear is deflation (we all know it makes things cheaper, but that doesn't count here). What did the Fed resort to the last couple of times deflation popped up? They implemented Quantitative Easing.. They also mentioned that unless we visit deflation again, there wouldn't be any more QE. Well. by the time I head to spring training, we'll have 3 months of CPI data. if my hunch is true, we'll have three straight months of the Gov't telling us that inflation is falling. The Fed will then have the ammunition to implement QE.

I'm not afraid of being wrong here folks. for. if I am, that means the U.S. economy is recovering nicely, people are going back to work, and so on. That certainly is a better scenario for all of us, eh?

The price of Oil hit $100 yesterday, and then proceeded to trade through that all the way to $102! Apparently, the wind in Oil's sails came from news that the Cushing to Seaway pipeline would see improvements allowing it to transport 400,000 barrels a day. This announcement means that Canadian oil-sands production would be delivered to the Gulf Coast market, competing more directly with Brent-based barrels.

So that we're not confused. here in the U.S. we use West Texas (WTI) price of Oil, and the rest of the world uses the Brent Oil which is more expensive (currently priced $111). Hope that helps..

To recap. The euro is getting sold this morning, after seeing a mini-rally yesterday. The selling is coming from the fact that the Spanish debt auction this morning, was OK, but not great, with yields nearing 7%, the level that led Ireland and Portugal to ask for help. With the euro down, the rest of the currencies are struggling. Even the Chinese renminbi is weaker this morning. And then Chuck talks about the U.S. debt. and talks some more, and talks some more, until you were tired of hearing about it!

Currencies today 11/17/11. American Style: A$ $1.0055, kiwi .7632, C$ .9745, euro 1.3465, sterling 1.5750, Swiss $1.0860, European Style: rand 8.3505, krone 5.7930, SEK 6.80, forint 232.80, zloty 3.2970, koruna 19.0575, RUB 30.81, yen 77, sing 1.2960, HKD 7.7860, INR 50.90, China 6.3505, pesos 13.69, BRL 1.7850, dollar index 78.27, Oil $102.30, 10-year 1.98%, Silver $33.30, and Gold. $1,748

That's it for today. today marks 4 consecutive days at work for me. that's the best I've been able to do in a month! And, if God permits, tomorrow will mark a full week in the office for me. It's gotten so bad, that new people want to know who I am and how everyone knows me, when I come back! And I still can't talk much, without pain, so, I just kind of grunt, and give hand signals! And they wonder just who the heck I think I am, to demand things be done! HA! Alex got his schedule for wrestling this year last night. Busy! They even have a tournament during Christmas Holiday break! Oh well. keep 'em busy, right? And with that. let's go have a Tub Thumpin' Thursday!

Chuck Butler


EverBank World Markets



Posted 11-17-2011 12:52 PM by Chuck Butler
Filed under: , ,