LTRO Holds The Key.
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In This Issue.

* Eurozone econ confidence rises.

* Italy auctions bonds at lower rates!

* Gold & Silver rally.

* Look at everyone turning 65!

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

LTRO Holds The Key.

Good day. And a Tom Terrific Tuesday to you! And. A great Big Happy Birthday to my sister, Barbara, who reads the Pfennig diligently. Barbie doll, is two years older than me, but looks younger! Hmmm. Oh well, I hope it's a grand day, Barb. We do get an extra day this year, tomorrow, which just adds one more day of winter on the calendar, as far as I'm concerned! Anyone born on Feb 29, only gets to celebrate every 4 years! Now that would be strange, eh? I'm sure there are Pfennig Readers out there with that birthday.

Well. I told you yesterday, that the Aussie dollar (A$) was weaker because of the uncertainty of the leadership vote that PM Gillard won over the weekend, but that it would bounce back quickly, and that's exactly what it did. I had just hit send, and I noticed the A$ ticking higher, and by mid-morning, the A$ was back to $1.0750, where it seems to stall out, but remain a buy for those investors around the world looking for yield, and don't want to go out on the limb with Brazil.

The euro is stronger this morning by 1/3-cent. Yesterday morning, the euro looked like it was about to catch a cold, and this morning, it looks like it has beaten the cold back, and ready to move on. We've got a couple of very important things to look at this morning with regards to the euro.

First, Eurozone Confidence for economic outlook improved more than economists forecast this month. I can't point out enough times without sounding like a broken record, that this is another step in the stabilization of the Eurozone that I talked about in December. Yes, while writers all over earth, are writing about the Eurozone breakup, I'm here alone, talking about stabilization, and so far, stabilization is winning. But that can all change in a heartbeat, so, I'm not slapping myself on the back, just yet. But again, like the so-called experts that called for a collapse of the Chinese economy more than two years ago, and I said it would be moderation instead, the experts that have far more gray matter than me, and have large numbers of research team members, say that the Eurozone will break up. so it must be, eh? Not so fast! Not yet.

The other thing to talk about in the Eurozone is tomorrow's European Central Bank (ECB) LTRO (long term recovery operations) day where the old 3 month loans get turned in and rolled for another term, (Most likely) and there is an amount allocated to new loans, that the ECB would love to not have to tap, but I think that's like wishing for all the weight I've accumulated over the years to just melt away.

So. here's the skinny. there are three tenders expiring this week totaling Euro 255 Billion. There are 7-day loans, and 3 month loans. I think that almost all the loans that are expiring will be rolled, and some will be rolled out to 3 years. I read where those people that follow this very closely believe that new loans totaling Euro 400 Billion would be a good result, and any number greater than 500 Billion would be a bad result.

I think this operation tomorrow holds the key to the near term direction of the euro, folks. This is important to the euro's value. Today, we could see a lot of forecasting of the outcome, and that could swing the euro in one direction and then another. So, be careful today, this could get crazy today with the so-called "experts" calling for this and that.

And then finally, with the euro. Italy sold 6.25 Billion euros of debt in bonds this morning, 3.75 Billion of 10-year bonds at 5.5%, the lowest rate on that tenor of bonds for Italy since last September. they sold 2.5 Billion of 5-year bonds at 4.19%, down from 5.39% at the last auction. and so on. The most important thing here is the sign of additional stabilization.

The price of Oil remains around $108. The other day I highlighted the fact that the Canadian dollar / loonie, which normally is sensitive to moves in the price of Oil, was lagging the other Petrol currencies' reaction to the higher price of Oil. Well, that remains to be true. The Russian ruble, Norwegian krone, Brazilian real, and even the U.K. pound are finding it easier to gain VS the dollar with the higher price of Oil by their side, than the Canadian dollar / loonie.

I think that the markets are just leery of pushing the envelope with the loonie right now, given the nascent recovery in the U.S. But the loonie is back to parity with the green/peachback this morning, so maybe the loonie can play some catch-up.

I mentioned two of the 4 BRIC currencies above, in Russian rubles and Brazilian real and right now, they look strong. But, they bounce around so much. The other two BRIC currencies, the Indian rupee, and Chinese renminbi are moving in the right direction again, after some weakness. So, maybe these BRIC currencies can finally all get moving in the right direction.

Speaking of India. Man I was tough on the Beaver, when I took the Indian Central Bank (RBI) to the woodshed for failing to identify the inflation pressures last year, which put the rupee behind the inflation 8-ball. But, in the past 3 months the Indian rupee is the best performing currency in Asia. Pretty unreal to me. given what was going on with the rupee 3 months ago!

Gold & Silver are stronger this morning. I wanted to talk about Silver for a minute, given all the talk I do about Gold , I thought Silver needed some love. Anyway, I read a report yesterday that highlighted what the writer thought was a tough line of resistance at $36 for Silver. They drew a chart line and talked about how it indicated that $36 was going to be tough to move past.

And then I read a report by a Pfennig Reader, that I've highlighted before named Scott Pluschau. Scott says that "The path of least resistance will be higher." So, then I thought. Hmmm. That doesn't sound like $36 is going to be much of a problem to me. So, I'll stick with Scott's version!

You can read the whole report here:

Besides. the demand for Gold & Silver remains strong, folks.

The January Trade Deficit for New Zealand that I told you about yesterday is really weighing heavily on the N.Z. dollar / kiwi. For just when you thought it was safe to get back into the kiwi waters, the sharks return! If you go back 4 years, when New Zealand had the highest interest rates in the Industrialized world, investors would look the other way when N. Z. would print a Trade Deficit. I remember warning investors about this, and saying that once the interest rate goes away, investors will notice the Deficits then.

Well, this proves that point. First, we all know that the Reserve Bank of New Zealand (RBNZ) made emergency rate cuts after the two earthquakes last year, and that the RBNZ has chosen to not reverse those emergency rate cuts, thus leaving N.Z. with lower rates, which don't hide the Trade Deficits. But, don't get too discouraged here. if we truly get back to fundamentals, and the U.S. dollar heads back down, kiwi will be pulled higher by the Aussie dollar.

Did you know that our Government's projected tax receipts for next year, 2013, total $2.90 Trillion? Yes, that sounds good enough, right? Ahem. Not so fast! $2.90 Trillion is roughly equal to our Government's actual spending of $2.98 Trillion in fiscal year 2008! That's right, I said 2008! What's our projected spending for 2013? Oh, around $4.25 Trillion, which is how we get the Budget Deficit of $1.33 Trillion.

When will all this madness in deficit spending end? Not any time soon, folks. The Gov't will deficit spend until it hurts. or until daddy takes the T-Bird away. Yes, not to get cute, but when the Gov't gets its credit card rejected by foreigners, the Gov't will have to stop deficit spending, but not until then will they stop. Which just continues to be a drag on the dollar, and ruin your purchasing power. That is unless you have taken steps to protect your purchasing power.

How does one do that? I heard all the new readers asking. Ahhh, grasshoppers. it's simple! I personally believe that every investors all over the world needs to diversify their investment portfolio, and allocate a portion of it to foreign currencies and metals. That way, should the dollar continue to be weighed down by debts and deficits, you will protect your purchasing power. Please notice that I said allocate a portion of your investment portfolio. not go "all-in". You'll still need dollars, in this case, for gas, groceries and giggles.

Here's another thing that will weigh heavily on the dollar going forward. and Thanks to Pfennig Reader and friend, Dennis. 2 out of every 3 American workers aged 21-64 (67%) that HAVE ACCESS to an employer-sponsored 401(k) DO NOT PARTICIPATE in the pre-tax retirement plan (source: Employee Benefit Research Institute). No, instead these people are going to make demands on the Gov't to take care of them in retirement.

And think about this too. 7,671 Americans turned 65 years old on average each day during calendar year 2011. And in 2012, the number will prove to be close to 10,000 per day. And for the next 18 years these number of people turning 65 will be high.

Now think about the Debt Clock that I show you each week, and that "unfunded liabilities" number. scary, eh?

Enough with the depressing stuff, Chuck!

Then there was this. Last night the IMF Board concluded and approved the 5th review of the Irish Bailout. The Board cited "strong implementation" of the program. This allows Ireland to receive its next trance of funding (euro 14 Billion). The Irish beat the 2011 deficit target, the continued to downsize their banking system, and other austerity measures, and they didn't burn bank buildings doing it!

I said it before. but I think Ireland will be fine. You've gotta love the way they've gone about the business of getting back in line very quietly. And since we're getting to March, which also brings about St. Patrick's Day, I thought this news from Ireland was good stuff! I'll be in Jupiter, Florida on St. Patrick's Day, so. I'll leave the Happy St. Patrick's Day stuff to Chris, who always likes to tell the story of his grandfather.

To recap. The currencies and metals are rallying this morning. The euro saw some love after the Eurozone economic confidence showed a strength, and Italy auctioned bonds at much lower rates. The A$ is back on terra firma after weathering the storm of the leadership vote this past weekend, and the BRIC currencies are finally moving in the same direction at once!

Currencies today 2/28/12. American Style: A$ $ 1.0775, kiwi .8390, C$ $1.0040, euro 1.3450, sterling 1.5850, Swiss $1.1160, . European Style: rand 7.5280, krone 5.5285, SEK 6.5655, forint 215.45, zloty 3.0820, koruna 18.5375, RUB 29, yen 80.45, sing 1.2515, HKD 7.7545, INR 49.07, China 6.2990, pesos 12.81, BRL 1.6975, Dollar Index 78.33, Oil $108.48, 10-year 1.93%, Silver $35.90, and Gold. $1,779.50

That's it for today. I got here even early for me, and I'm still bumping up against my personal time limit for writing! UGH! Which means I don't have much time to be talking about personal stuff! I'm sitting here though bouncing around in my seat to the beat of Santana's Soul Sacrifice. Remember that from Woodstock? His drummer was about 17 years old and just ripped off a fantastic drum solo in front of 350,000 people! WOW! And of course a young Carlos Santana. I used to make the youngsters that worked for me watch the VHS of Woodstock that I would hand to them. But I don't do that any longer. probably best, eh? HA! OK. time to go. Happy Birthday, Barb. now go out and have a Tom Terrific Tuesday!

Chuck Butler


EverBank World Markets



Posted 02-28-2012 12:04 PM by Chuck Butler
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