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In This Issue.

* BOC hints of rate hikes.

* Overnight currency rally fades.

* PM Gillard tests Chuck's patience.

* RIP Dick Clark.

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

More Gyrations.

Good day. And a Tub Thumpin' Thursday to you! Well, my beloved Cardinals did a Tub Thumpin' on the Reds last night, so they got started on Thursday early! Have you ever heard the Rev. Al Green sing How Can You Mend A Broken Heart? Well, that's what's playing as I begin today's letter, and I have to say that hearing the Rev. sing, really starts my day right!

Well. the gyrations and volatility continue in the markets, one day up the next day down. One day a piece of data matters, the next day it doesn't. But we carry on in spite of these daily movements back and forth.

For instance, the euro is rallying this morning, which gives all the other currencies a chance to spread their wings. Spain was able to auction their target maximum amount of euro bonds this morning, and while the yield rose from the last time 10-year bonds were auctioned, the fact that the whole allotment went off without a hitch, is giving the euro some breathing room this morning.

For those of you keeping score at home, in January, Spain issued 10-year Gov't bonds at a yield of 5.403%... This time, they had to sweeten the pie a bit for buyers to take a bite of the debt ridden nation's offerings. The current auction saw 10-year yields rise to 5.743%.. France also auctioned some debt issues this morning, and they too say yields rise. As I keep telling you, and anyone in the U.S. Gov't that will listen. This is what will happen to us someday. the markets will demand a higher yield to take on more U.S. Debt.

This U.S. Debt really gets me riled up. but the thing I keep coming back to, is that most Americans have no idea the depth of the Debt here in the U.S. I saw a story headline come across the Bloomberg this morning, that said, "World's Richest Worth $1 Trillion." The story went on to say that the 40 richest individuals on Earth are worth $1 Trillion. OK, think about that for a minute. If the 40 richest individuals gave everything they had to the U.S. to pay down the Debt, it wouldn't make a difference, really. In fact, it would take the current Congress about 9 months and they would go right through those riches. Does that help illustrate how bad our debt has gotten?

Or.. how about this. The total National Assets are $83.3 Trillion. The total U.S. Unfunded Liabilities are $118.5 Trillion. If each taxpayer were to "ante up" and give the Gov't money to pay off our Unfunded Liabilities, each taxpayer would have to put up $1,045,026.00. A million dollars! I don't make these numbers up folks. each Friday, I give you a link to the U.S. Debt Clock. here it is for you to look at. http://www.usdebtclock.org/index.html

Ok. sorry I went off on that tangent with Debt. But, I've been banging this Debt drum for over a decade now, and believe me now and hear me later, the Debt was nowhere near where it is today.

Back to the currencies. Well the Bank of Canada (BOC) left rates unchanged the other day, and tried to throw the markets a bone, by saying that stimulus could be removed sooner than later. But since then, the BOC has made an upward revision to their forecast for 2012 GDP from 2% to 2.4%. They also said that they believed the Canadian economy would hit its capacity limit in the first half of 2013, with economic growth then moderating the remainder of 2013.

OK, that's all well and good, but what about now? If the BOC believes that GDP growth is stronger than they previously did, then why aren't interest rates going higher right here, right now? Well. I've explained this before, but just to review, the BOC can't wander too far away from the interest rates in the U.S., which we've been told by more than a handful of Fed Heads that they will remain near zero through 2014. And I totally dislike the saying, "but this time it will be different". So. I'll just say that the BOC is going to have to wander from the U.S. near zero rates, because, inflation is going to be a real problem in Canada if they don't!

So. here I am, sitting here in St. Louis, Mo. And I see rate hikes in Canada. Where are all the "large research departments" with their calls for Canadian rate hikes? OK, Chuck, quit rubbing it in, these rate hikes haven't happened yet, so you had better be careful calling out the "large research departments". Ok. let's mark this down, right here, right now, there is no other place I'd rather be, no wait! Come on Chuck, people don't read this to see Jesus Jones songs! OK, I apologize, that was my evil twin that took over the Pfennig for a minute. But I'm back now, and I want to say that I think we'll see one rate hike of 25 Basis Points (1/4%) before year-end, bringing the internal rates in Canada to 1.25%... But, in the first half of 2013, we could see the BOC really ratchet up the rate hikes. Can you say 2% by the end of 2013? And where will U.S. rates be? Still near zero.

But just keep the legal beagles happy. This is just what I see, it's my opinion, and I could be wrong.

The euro has sold off by 1/4-cent since I came in, so the gyrations continue.

Over in Japan, I'm still not used to saying this, but Japan posted another Trade Deficit, although it was weaker than forecast (Yen 82.6 Billion VS forecast Yen 223 Billion). But still, no matter the size, it's still strange to report a Trade Deficit for Japan. the yen traded off, or sold off either one, pick the one you like, but yen is weaker this morning on the Trade Deficit news. Apparently, the markets are like me, and seeing the Japanese Trade Balance in red still shocks them.

In Australia. things are getting pretty hairy regarding the May Reserve Bank of Australia (RBA) meeting. I told you earlier this week that the RBA tied their monetary policy to the outcome of the 1st QTR CPI (inflation), which is set to print on April 24th. But last night, Prime Minister (PM) Gillard argued that the Gov't's plans to return to a budget surplus this year would give the RBA scope to cut rates.

OK.. two things pop into my head when I read that statement by Gillard. 1. That she must know something about the CPI report next week, so she's trying to persuade the RBA to look past the CPI report and to the plans for a budget surplus. or.. 2. She's trying to apply pressure to the RBA to cut rates.

I have quite a few Aussie readers of the Pfennig, and they send me notes all the time, telling me of their dislike for the PM. Hmmm. I now see why! The RBA used to be completely independent, but if they go ahead and cut rates next month, they are going to appear to be under the thumb of the PM.

The Aussie dollar (A$) is weaker this morning on those comments by Gillard. When will Gov't leaders learn to keep their hands out of the cookie jar? When will they ever learn? When, will, they, ever, learn?

And this just came across the screens. The Brazilian Central Bank (BCB) cut rates this morning 75 Basis points (3/4%). That's a shocker to me, in that while I know that the BCB and the Brazilian Gov't believe they are in a currency war, and need to get the real weaker, I really didn't see them going to this length. But they have, and like I said the other day, I'm not sure the currency market guys are willing to fight them any longer. They are going to do a Dieter. and that won't be good for the real.

I haven't mentioned Gold (& Silver) for a couple of days. I can tell you this. that most observers of the precious metals that have done this for some time, and not your Johnny-come-lately crowd, believe that Gold is simply forming a base here before it moves higher once again. but, the chart guys don't see it that way. So. you choose your sword here. Me? After all these years of reading and researching these two metals, I can't change horses in the middle of the stream here. My colors are still pinned to the mast of higher values for Gold & Silver. But remember that's just my opinion, and maybe the chart guys are right.

And the price of Oil remains above $100. I see where the President is going to get his hands in the cookie jar. I have to say that all the things I've told you in the past about why Oil prices are high are very important to keep in mind, when you hear politicians spouting off about those "evil Oil companies". The cost of getting Oil out of the ground continues to rise. Think about that.. Yes, we've found all sorts of oil deposits, but it's not like we can go out and stick an oil rig in the ground and start pumping oil! Any way. that's just one of the things that keep the price of Oil high. But it's not manipulated markets, folks. There's just too many trades going in and out of Oil and no concentrated positions. This is not Gold & Silver, folks.

Yes the price if high, and I don't like it. But the price of just about everything these days is higher. Where's all the complaining from the Gov't that a beer at a ballgame costs $9? Don't even get me started on this stuff, we could be here all day, I think you get my point here.

And that brings me inflation here in the U.S. I'm not buying the story in the Bloomberg today about how the Bureau of Labor Statistics has all these people around the country going out and checking the prices of items for the calculation of inflation. Yes, maybe they do that, but that's just one piece of the puzzle folks. I've told you for years about the "substitutions" that are made in the CPI calculation.. I've told you about the adjustments that are made to the weightings of items, and I've told you about this whole housing thing. it's in the calc, then it's not. right now they use "owner's equivalent rent" which replaces the cost of owning a home with what it cost to rent it. How dumb is that?

So. as I get ready to head to the Big Finish today. I want you to keep in mind a couple of things. that you don't want to get mixed up in the gyrations. and everything isn't as it appears to be. you have to look closer.

Then There Was This. Ok... yesterday I gave you a couple of items that scare the bejeebers out of me... but forgot one that I was going to talk about... it goes like this:

The WSJ reported that the U.N. had agreed to send "observers" to Syria...

How about you? Does the word Observer when it comes to observing a war bother you? It does me... Vietnam comes to mind... and several places since then that the U.S. was just an "observer"... And yes, I know it says the "U.N." not the U.S. but do we really think there's a difference?

To recap. The euro is leading a currency rally on the good news from Spanish and French bond auctions this morning. Both sold their maximum target of bonds, but both also saw yields rise. The Bank of Canada is greasing the tracks for a rate hike by raising their forecasts for GDP growth in 2012 and 13. Aussie PM, Gillard, is doing her best to get on Chuck's persona non gratis list. And Chuck takes us on a ride to visit the Debt Clock.

Currencies today 4/19/12. American Style: A$ $1.0365, kiwi .8185, C$ $1.0110, euro 1.3115, sterling 1.6030, Swiss $1.0915, . European Style: rand 7.8220, krone 5.7440, SEK 6.7320, forint 226.25, zloty 3.1860, Koruna 18.9150, RUB 29.49, yen 81.70, sing 1.2510, HKD 7.76, INR 51.98, China 6.3037, pesos 13.17, BRL 1.8780, Dollar Index 79.62, Oil $103.02, 10-year 1.99%, Silver $31.55, and Gold. $1,639.60

That's it for today. RIP Dick Clark. I remember watching American Bandstand with my older sisters when I was young, and we would try to do the dances they did on TV. And before going out on New Year's Eve was viable, I watched Dick Clark's rockin' New Year... I made a mistake yesterday and said our Blues played last night, but they play tonight, sorry to all that made a point of telling me I was wrong. So. Go Blues tonight! A day game at Busch Stadium today. hint, hint. Alex came home dead tired last night, after a good water polo game on the other end of town. Some of these schools are so far away, but still in the same conference. strange. And little Braden Charles (B, as we call him) was at the house yesterday. he's a scooter. he doesn't crawl, he goes across the floor, Army style. funny stuff! OK. time to go, thanks for reading the Pfennig, I hope you have a Tub Thumpin' Thursday!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837





Posted 04-19-2012 1:01 PM by Chuck Butler
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