Sounding The All-Clear Horn.
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In This Issue.

* Being the first to make the call.

* FOMC meeting today.

* China loosens the purse strings.

* Gold gives back Friday's gains.

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

Sounding The All-Clear Horn.

Good day. And a Tom Terrific Tuesday to you! Boy did it warm up here yesterday! Typical for March here, in that we'll get warm weather that gets everyone to break out the shorts, and short sleeved shirts for a few days, and then winter will return for a few days. Of course I haven't really been here for a complete March in years, but this is what I remember! HA!

Well, just about every story I read last night, and this morning is talking about the turnaround in the economy, especially in housing. So, it must all be over. sound the all-clear alarm, we have nothing to worry about from here on out, so go about your business of spending, and forget about all the things that have been going wrong. The dollar will recover, and be as strong as ever, and our debt will just slowly disappear. There. that's the Reader's Digest version of what I've been reading the past 24 hours.

For instance, this was in the WSJ. "As home prices continue to drop in most cities, a nascent real-estate rebound in Phoenix holds lessons for the rest of the country. The sprawling desert metropolis was one of the hardest hit housing markets during the bust, but prices are beginning to rise again."

So. no worries, it's all over, and we can come out now, like the good witch told the munchkins. come out, come out, wherever you are, and meet the young lady that fell from the stars.

Oh. there's that little thing called debt. that won't be wiped away with newspaper stories of revival. But, think about this. as they used to say in the markets about an asset that showed life when it was defying the fundamentals. "a dead cat bounce". (no animals were hurt, it's just a saying). That's what I believe is going on. but, you can't argue with 100's of screaming Mimi's that truly believe that we've turned the corner as an economy. Well, that may be, but there's another corner coming.

So. The news regarding Greece and the Eurozone is fading into the background. That is until money exchanges hands on March 19th. Next Monday. Chris and Mike will bring that news to you.

The currencies are a bit stronger this morning, nothing to write home about, but stronger nonetheless. Stronger, except the Japanese yen, and the Chinese renminbi. The yen is weaker, because of the news from the U.S. that the all-clear alarm has been sounded, and because of the news from the Eurozone, that a "safe haven" is no longer needed. (Not that I ever thought yen to be a safe haven, but the markets did)

Gold, which had a strong rally on Friday, lost most of those gains yesterday, and is down another $3 this morning, because, like yen, people are removing their "safe haven" positions.

But all this reminds of a story I wrote, when I was writing for the Sov. Society, a couple of years ago, and I found a ton of statements from people that should have known better about how the stock market was going to soar from here, and how the depression was over, and all kinds of things, only to be proven very, very wrong.

Here's the thing to think about. Everyone wants be "the guy that says it first". I've done a heck of a lot of speaking over the years, and if you go to a person's talk, the introduction will tell you that they claim to have called this or that, first. So, you have to be careful, just like the guys after the depression, to not make a statement about something when you don't really have the info or data to back it up.

And we'll see more of this euphoria with the economy today, as Retail Sales for February print. I told you yesterday that I expect this data to print strong today, as the BHI tells me to expect it. Speaking of the BHI, we all know that it's something I made up years ago, but. a dear reader pointed out to me that if you Google Butler Household Index, it references the BHI. pretty cool, I must say for something that I just made up years ago!

I see where the national average of a gallon of gas is up to $3.87. I wonder what the crazy campers blowing the economy's horn right now, have to say about what the high price of gas is going to do the economy.

Ok. enough on the economy. I've said that we're in the eye of the storm, and I'm sticking to that!

And once again, the U.S. is choosing to bite the hand that feeds us. from the WSJ this morning: "The Obama administration on Tuesday will bring a new trade case against China that seeks to pressure the country to end its export restrictions on materials used to manufacture hybrid-car batteries, flat-screen TVs and other high-tech goods.

Senior officials in the administration said the U.S. will ask the World Trade Organization to facilitate talks with China over its curtailment of exports of rare-earth minerals. The U.S. is bringing the case to the WTO along with the European Union and Japan, the officials said."

I don't see how this benefits us. but, you know those boys and girls in Washington D.C. have far more gray matter than I. so, you know, they've got it all figured out, right? Probably not, they are probably just winging it, like everything else they do. remember Cash for Clunkers? Boy that really was a great idea, NOT!

Speaking of China. China's central bank indicated that it is ready to loosen monetary policy further to encourage lending by banks and stimulate the economy, as export demand weakens. Zhou Xiaochuan, governor of the People's Bank of China, said the bank might continue relaxing the reserve ratio for banks. "We have a lot of room to adjust the reserve ratio," he said..

And then we have the FOMC today. The Fed Reserve will meet and no one's opinion but Big Ben Bernanke's will count. And then he'll tell us that rates remain unchanged, and that the Fed is seeing signs of recovery, but rates will remain at zero for some time. I do believe that if Big Ben doesn't mention QE3. in any name or form, that stocks are going to feel the wrath of all the built in trades that were counting on QE3. But I'm no stock jockey, so don't take my word on that, besides it's just a gut feeling I have.

I do think that if all things remain equal, and Big Ben doesn't wander off the previous script on the economy, that the dollar will see some selling today. but, this isn't a market moving thing, so the selling would be nascent at best.

I had a reader ask me why I didn't talk about the Mexican peso much. Hmmm. because there's not much to talk about. Really. the news from Mexico is void of market moving stuff, and the peso is a crap shoot, and always has been. Remember, I was trading currencies and bonds in 1994. that was a very interesting time. and not fun for peso holders. But, when there is news that will move the peso, I will talk about it, my bad for forgetting about the peso.

As if 1994 wasn't bad enough already, with the World Series cancelled!

The Aussie and kiwi dollars are stronger this morning, as they sift through the news from the weekend that China posted a very large Trade Deficit, and then the news last night that China will further loosen their monetary purse strings.

And the people of Iceland are coming out of the shadows that have hung over the country since the meltdown that wiped out their economy, their banking system, and their currency. I read last week that the Icelandic people are demanding the Gov't switch to the dollar. Ahhh, not so fast, not the U.S. dollar. the Canadian dollar!

Then my friend, and guitar playing buddy, Dr. Steve Sjuggerud, wrote about this yesterday, and he said that he sees this as "something Iceland is doing as a warning sign about the future of the U.S. dollar and the end of the dollar standard."

I agree wholeheartedly. just add this to the roster of things / baby steps the world is taking to put a 100 miles of desert between them and the dollar.

Then There Was This. from the Wall Street Journal this morning. "The Federal Reserve is fighting a subpoena from lawyers in a civil lawsuit who want the central bank's chairman, Ben Bernanke, to testify about conversations he had with Bank of America Corp. executives before the lender completed its purchase of Merrill Lynch & Co.

The three-year-old class-action suit alleges that the Charlotte, N.C., bank and Kenneth D. Lewis, then its chief executive, misled shareholders about ballooning losses at Merrill before the $19.4 billion acquisition was approved. The government provided $20 billion in U.S. aid after Bank of America officials told Mr. Bernanke and then-Treasury Secretary Henry Paulson in December 2008 that they might abandon the deal because of the losses.

The Federal Reserve opposes efforts to make its chairman, Ben Bernanke testify on the Merrill Lynch takeover.

Lawyers for the six plaintiffs, which include the State Teachers Retirement System of Ohio and the Teacher Retirement System of Texas, want to question Mr. Bernanke about conversations he had with Mr. Lewis before the Merrill purchase closed in January 2009, said a person close to the case. The lawyers from several firms, including Bernstein Litowitz Berger & Grossmann LLP, disclosed the subpoena to Mr. Bernanke in a document filed with the Southern District of New York.

It would be highly unusual for an acting top regulator to be compelled to testify in a private lawsuit. The Fed has argued that the regulator's behavior isn't central to the case and that the Fed itself isn't a party in the case, said people familiar with situation."

Chuck again. Hmmm. I guess I would have to say that if there are no bones in the closet, then why not testify, and get it out of the way?

To recap. The all clear alarm has been sounded on the economy, so go out and spend, folks. but be very careful, for everyone wants to be the "first to make the call". The currencies are a bit stronger this morning. China has announced they will loosen their purse strings to stimulate more domestic lending, and the FOMC meets today.

Currencies today. American Style: A$ $1.0535, kiwi .8220, C$ $1.01, euro 1.3130, sterling 1.5656, Swiss $1.0875, . European Style: rand 7.5445, krone 5.6815, SEK 6.7980, forint 223.90, zloty 3.1325, koruna 18.7240, RUB 29.55, yen 82.70, sing 1.2605, HKD 7.7615, INR 49.91, China 6.3268, pesos 12.63, BRL 1.7966, Dollar Index 80.03, Oil $106.84, 10-year 2.04%, Silver $33.49, and Gold. $1,694.55

That's it for today. and hopefully for me for the rest of the month. I'm hoping I can talk Mike Meyer into writing for me tomorrow, so I can officially begin my vacation by sleeping in! on a sad note. a good friend, and colleague, the woman I refer to as Suzie Q, Sue is retiring, and her last day here will come while I'm gone. So this is so-long. not goodbye. I guess I'll have to make the coffee every day now! Good luck in your new life, Suzie Q! The first Water Polo game of the year was a rout. Alex did get one goal, before the coach had to "call the dogs off" and let all the freshmen play. Andrew's varsity team also won, so a great start to the year! This Friday, the whole family will be together in Florida, as my two older kids (Dawn & Andrew) with spouses, Jerry and Rachel, and grandkids, Delaney Grace, Everett, and Braden all arrive. (I'm glad I'm not on that plan with them! HA!) and we will enjoy a week of baseball & beach together. I'm looking to it! And with that, I'll get out of your hair. I thank you for reading the Pfennig, and I hope you can get out there and make this a Tom Terrific Tuesday! Bye. (for now!)

Chuck Butler


EverBank World Markets



Posted 03-13-2012 12:10 PM by Chuck Butler
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