Two-Day Rally Ends Abruptly.
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In This Issue.

* NY traders return as stop currency rally.

* Chinese manufacturing rebounds!

* Canadian economy shrinks in August.

* krona is worst performer overnight.

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

Two-Day Rally Ends Abruptly.

Good day. And a Tub Thumpin' Thursday to you! Well, I had Ariel, Steve from Blue's Clues, and a turtle running around my house last night, as Delaney, Everett, and Braden were loving Halloween. I hope you got to see some cute Trick-or-Treaters last night. of course my grandkids were the cutest I saw all night!

Well. the two-day rally in the currencies didn't last too long, once the NY markets participants returned to their desks. They were in no mood to continue the two-day love affair with currencies. The euro, which had bounced back to 1.3010 in the morning, saw about 2/3-rds of a cent go away from its value by noon. The single unit has attempted a comeback, but just keeps shooting itself in the foot. Earlier this week it was the awful result of German unemployment, which has led the markets to believe the recession that has a grip on most of the Eurozone countries, is about to take hold of the German economy, which would not be good for global growth.

Canada received its first piece of data that indicates a slower economy yesterday. Canadian August GDP dropped -1%, after posting a 2% gain in July. So, September's report will decide if the 3rd QTR posts a better than 2% GDP. 1.9% was the gain in the 2nd QTR, so, it would be good if they could show some growth VS the 2nd QTR. The August report really throws cold water on that thought. But. as far as I can see August seems to have been a real data downer all around the world, and those that have already reported September data, have shown rebounds. So, maybe that will hold true for Canada. I think it will. and if it does, then the current downward push on the loonie, should stop. but, you never know what will be in the traders' heads. Canada will print their latest report on Manufacturing (PMI) today, so that print will be important to the short-term direction of the loonie.

Well. looky what we have here. Chinese Manufacturing (PMI) showed that the index number had indeed pushed over the 50 line of demarcation. Yesterday I told you, well, let's go to the tape and see what I said. from 10/31 Pfennig: Last month the number came close at 49.8, so I expect to see a better than 50 number for October. I'm not saying it will be like 52 or higher. I'm saying it will be 50 point something. like 50.5. And the actual index number was. drum roll please 50.2! So. once again, I get to say to the economists and analysts that told you for over 2 years now that the Chinese economy was going to collapse. neener, neener, neener!

One would have thought that with this good result of Chinese manufacturing which had posted negative numbers for the previous two months, would have given the Aussie dollar (A$) some legs to move to $1.04. But that didn't happen, as Australia saw some mixed data of its own that pretty much put a lid on the A$ last night and this morning. The Aussie Oct PMI (manufacturing index) showed an improvement, and the 3rd QTR export and import price reports indicates that we could see an improvement in the Aussie Trade Balance.. But, to water these reports down, the Reserve Bank of Australia (RBA) reported that their October Commodity Price Index fell to a 2-year low at 87.3.

I've read a lot of reports lately were economists and analysts are dissing commodities again. Hmmm. have we reached the 17-22 year average bull run in Commodities already? No! We're only 13 years into the bull run. So, just like I always say about these trends, they are not one-way streets, you can have volatility, and this looks like one of those stretches where volatility in commodity prices are going to rule the roost. This run will be short-lived. of course that's my opinion, and I could be wrong!

I read a very good article the other day on Brazil. and the Brazilian real. The writer / analysts believes the rate cuts in Brazil have pretty much come to an end, and with inflation beginning to really take grips on the Brazilian economy, we could see the Brazilian Central Bank (BCB) and Brazilian Gov't take the governor off the real in the near future. Well. that may be the case, but haven't we heard these calls before? I'm from Missouri, and I'll have to be shown first. Until then if you have the stomach for volatility, and the intestinal fortitude, an entry into the real with the speculative portion of your investment portfolio, might just turn out to be a good decision. But then it could also be disastrous should the BCB and the Brazilian Gov't decide to get back into the currency manipulation game, and say to hell with fighting inflation!

The worst performing currency overnight belongs to Sweden. the krona really felt the effects of a slump in their manufacturing as reported by their version of the PMI. October's index number printed at a 43.1, falling further from September's number of 44.7. I have told people for over 11 years now, that 3 consecutive months of a manufacturing index number below 45 means the economy is in recession. And, that means we could very well see a rate cut next month when the Riksbank meets. And so, that's why the krona has performed so bad overnight.

But. all will be forgotten until December if things continue to settle down/ calm down in the Eurozone and the euro pushes higher VS the dollar. The chances of the calm down continuing are about 50/50. Right now, there's a bunch of saber rattling going on regarding the Greek Budget and the labor reforms that are in the budget. Can't we all just play nicely together?

Well, a piece of data the printed here in the U.S. yesterday, that I'm sure you didn't hear any of your news stations talk about. The Chicago PMI (manufacturing for that region). you may recall that previously we saw the Philly PMI print very weakly. Chicago PMI missed, coming at 49.9, or well below expectations of a 51.0 print. missing expectations for the third month in a row. And once again the headline belied how ugly the underlying data was, which I saw and will point out, which is something you won't see anywhere else, the employment index fell to 50.3 from 52.0, and just barely above contraction. Either way, this was the lowest print in 33 months.

That makes two very large regions that printed ugly employment components of their reports. Does that mean we could see a very ugly BLS Jobs Jamboree on Friday? Well, if we only counted apples, and didn't mix in the oranges, it probably would. But, we have the BLS "adjustments" / oranges to deal with. And like I told you a couple of weeks ago, I'm not giving any credence to data prints until after the election. Speaking of such, a few of you accused me of being political yesterday when I talked about basing one's vote on the Jobs numbers that are so distorted. Look it goes both ways, folks. I simply was saying there's more to selecting a candidate than allowing some back room BLS accountant dictate that.

Then There Was This. from the Washington Post yesterday. "Battery maker A123 Systems vowed thousands of new jobs when it received a nearly quarter-billion-dollar stimulus grant in late 2009, but federal job-tracking figures show only a few hundred positions were created before the company joined a growing list of federally backed energy businesses that ended in bankruptcy.

The latest quarterly report on file with a federal stimulus tracking database shows just seven positions created through the grant from April to June this year. Previous quarters' job reports contained anywhere from a handful of positions created to more than 100 new jobs.

But even when the quarterly reports are combined, a total of 408 new positions were reported under the stimulus program since 2009, amounting to more than $300,000 spent for each new job reported."

Chuck again. see what happens when the Gov't decides it knows how to do something better than businesses? President Ronald Reagan used to say that "the nine most terrifying words in the English language are: I'm from the Government, and I'm here to help"

To recap. the two-day currency rally ended abruptly when the NY traders returned to their desks after being away since last Friday. China printed a 50.2 index number for manufacturing, indicating their economic recovery is moving in the right direction. Australia received some mixed data, and it kept the A$ from moving higher. Canada saw its economy shrink in August, and Sweden had the worst performing currency last night.

Currencies today 11/1/12. American Style: A$ $1.0380, kiwi .8240, C$ $1.00, euro 1.2960, sterling 1.6165, Swiss $1.0735, . European Style: rand 8.6680, krone 5.5880, SEK 6.6555, forint 217.95, zloty 3.1860, koruna 19.3780, RUB 31.36, yen 80, sing 1.22, HKD 7.75, INR 53.70, China 6.2392, pesos 13.09, BRL 2.03, Dollar Index 79.97, Oil $86.38, 10-year 1.71%, Silver $32.60, and Gold. $1,727.20

That's it for today. This is the day, when I was a kid, that I used to ask my mom why I couldn't go to Catholic school like the kids next door. You see they would get today off as a holiday, and that really burned me as a kid! I forgot to say congrats to son Alex, who made the finals in the backstroke at the conference meet on Tuesday night. He'll swim in the finals tonight. I don't believe he has the time to get higher than 8th place, but, given 2 years ago, he was playing football instead of swimming, I give him a lot of kudos for this accomplishment. Older son, Andrew, who is Alex's coach, was quite the decorated swimmer at Alex's age, so Alex had some big flippers to fill when he decided to switch sports. So. the best joke I heard yesterday, actually came from a wiley old veteran, and friend, Jack. So, why did the seagull fly over the sea? If he flown over the bay, he would be a. bagel! HA! OK. I hope you have a Tub Thumpin Thursday! Thanks for reading the Pfennig!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837





Posted 11-01-2012 10:43 AM by Chuck Butler
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