Did Chuck Call A Truce?.
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In This Issue.

* Currencies & metals try to find terra firma.

* Gold's death cross a buy signal for China.

* 2nd round of LTRO repayments are paltry.

* Stevens Ok with current rate levels.

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

Did Chuck Call A Truce?.

Good day. And a Happy Friday to one and all! And a Happy Birthday to George Washington! Yes, today is actually the birth date of the father of our country, but with the Monday Holiday Act signed years ago, we now celebrate his birthday some other day. Today, is also, National Margarita Day. Did you know that? I think I'll put Jimmy Buffett radio on the IPod this morning, to get in the mood for National Margarita Day!

Well, We're one day closer to March 1st, and still all we get out of Washington D.C. is pointing of the blame finger. But Like I said the other day, I personally would prefer for the betterment of our country to not have an agreement to kick the can down the road on this, and that the cuts would actually happen. I did an interview with CNBC (website not TV) yesterday, and I explained my opinion and position on these cuts to the interviewer. I think he was surprised to hear me talk about it like I did. But those of you who missed class the other day, my thought is simply, that the lawmakers will find a way to kick the can further down the road, and when they do, the markets will take it out on the dollar, just like they did to start the year, when the can was kicked then.

For long time readers, they know the ambush that CNBC TV played on Chuck a few years ago, and so this is my first dealings with them again. Did I call a truce? I don't think so, I hold a grudge a long time!

Yesterday, saw some range trading, after the mess of all messes the day before. One of the things I pointed out to the interviewer at CNBC was that Gold seems to be getting bought by the Asians, and sold here in the U.S. So, the Asians don't seem to think the bull market for Gold is over. For instance, yesterday morning before the NY traders showed up, the Asians had rallied Gold by $15, but by the end of the day it was down $3. And this morning, the Asians have taken Gold higher by $5, but I'm sure that will change come NY trading time.

This morning, the euro is attempting to get to terra firma, but keeps getting dragged back into the muck of Wednesday. This morning, it's the European Commission doing the dragging, as they issued a statement that called for the Eurozone economy to contract for a 2nd consecutive year. It's all about the labor situation in the Eurozone, with Eurozone unemployment running about 12%, which is awful, and is a Huge weight for the economy to overcome. But. none of this is a surprise to me. austerity, and prudence after years of the wild west budgets and spending, will do that to an economy. But, as I tell audiences all the time, if the Eurozone sticks to their austerity and prudence plans, then in 3-5 years they could be looking pretty healthy again, and the euro will benefit from that. between now and 3-5 years? That's full of bumps and nasty pot holes in the road, which is why I say the Eurozone and the euro isn't out of the woods.

The other thing weighing on the euro this morning is news that just 61 Billion euros of the 2nd LTRO is being repaid. Recall a couple of weeks ago, that more than that was expected was paid back, but this time the amount is paltry. Expectations were for 120-130 Billion euros would be repaid. I'm not going to get all caught up in this, folks. I think that if the institution needed the money in the first place that it wouldn't be a drop in the bucket to repay it. And the 2nd round of LTRO was used by a wider range of institutions. So, to me, this is no great shakes, but the markets are so sensitive to any news that might tip the Eurozone back into a problem child. But this isn't it. so move along, these are not the droids we're looking for.

The Aussie dollar (A$) and New Zealand dollar / kiwi, are both rallying this morning. Those are nice rallies too! The A$ is up nearly $1, and kiwi is up 50-cents. Remember earlier in the week when kiwi got taken to the woodshed for having a Central Bank that was willing to join the currency wars and A$'s sold off in sympathy? Well, we have the opposite going today. Reserve Bank of Australia Gov. Stevens, made some strong comments for A$'s. Let's listen in. Stevens endorsed the current level of borrowing costs and signaled that the bar is high for currency intervention. "There is a good deal of interest rate stimulus in the pipeline" were his exact words. and that's good enough for me!

So, the A$ rallies strongly, and kiwi comes along for the ride. I've been saying all along that I didn't believe the Aussie economy was in need of further rate cuts, that they needed to see what their 175 Basis Points of cuts last year would do for the economy first. Recall, that the markets believe that there will be at least one more rate cut this year, and maybe 2, which has been one of the reasons for the A$ weakness. I say that, (weakness) but we all know that this means the A$ is just "weaker" than it was. It certainly isn't "weak". In Feb 2002, the A$ was around 50-cents. I call THAT weak!

The country that gets blamed for being the first to enter the fray of the currency wars, China, (the U.S. is truly the first!) has allowed their currency , the renminbi / yuan, weaken for 4 consecutive weeks now. Last night it was reported that China's home prices were on the rise again, which could fan the embers of the inflation fire that was put out last year, and it is my belief that the Chinese will then allow the currency to appreciate again, to help combat the inflation pressures. Inflation is like the wolf that's always at the door, and it will show up at any country's door, just when you think you have inflation licked.

After one day of getting traded in the spotlight along with the dollar, Japanese yen is back to getting sold . But it's showing some life as I type my fat fingers to the bone. The U.S. President and Japanese PM, Abe, will meet today. This meeting could be BIG for the currencies folks. Watch for the words used by the U.S. President, for if he just repeats the G-20 line, then nothing will happen, but should he say anything about agreeing with Japan's position, then, watch out! That would be the green light for markets to sell dollars and yen! But, I don't think he'll go there.

In Canada today, their consumer inflation (CPI) for January will print. You may recall that the December inflation was a shocker at -.6%... So, I would be surprised to see another contraction, and the experts think +.2% will be the number. I have to say I don't get all caught up in these numbers, but I would agree that I think the number will be much stronger than the previous month's number. And if it is, I think the Canadian dollar / loonie could finally see some love. The poor loonie has been taken to the woodshed too many times lately. So, a brief bounce could be in the cards today.

Well. I guess by now you've heard all you care to hear about the Sequester. And judging by the latest poll taken by Bloomberg, Americans want Congress to kick the can down the road, to give the so-called recovery more time to take hold. So, that's opposite from what I would like to see, but then, I was not surprised to see this poll outcome, as we've grown ever-so-close to having nearly 1/2 the people in this country receiving something from the Gov't. You don't think they was to see Gov't cuts to spending do you? Of course not!

Well. like I said above, Gold is up $5 this morning. I told the CNBC interviewer yesterday that I thought the $100 drop in Gold in the past ten days was a "correction" and not an end to the Gold bull market. I went back to our long time friend, Jim Rogers, who said in his book Hot Commodities, that in history commodity bull markets last from 17 to 22 years. And this currency bull market is only in its 11 or 12 years depending on when you mark the starting point. The "Death Cross" was met in April of 2012, and Gold bounced much higher after hitting that technical mark, and I expected another bounce. Then I read Ambrose Evans-Pritchard say that the "Death Cross" level was signal to the Chinese to buy. I agree with that wholeheartedly!

Today's U.S. data cupboard is as empty as this country's claim that they believe in a strong dollar. But yesterday, the stupid CPI printed and showed that VS a year ago, consumer inflation is up 1.6%... See what a crock that data is? Shadow Stats shows CPI around 5.5%... And my own inflation gauge has inflation around 10%... For years, I've told you all that inflation is a personal thing, it's how it affects your wallet or pocket book. For instance if you send a kid to a school that you have to pay for (college or private) your tuition increases have been high, but your neighbor may have already sent their kids through college, and no longer have tuition expenses, therefore your neighbor doesn't experience the same inflation as you with regards to tuition.

So, don't get hung up on what the Gov't says. what does your wallet or pocket book say? Ok. the other data yesterday saw Weekly Initial Jobless Claims increase by 20,000 to 362,000, and Existing Home Sales fall -.8% in January. And once again a regional manufacturing index printed weak. This time it was the Philly Fed Index which fell to -12.5 this month. But not to worry, this won't show up on the National Manufacturing report (ISM) that one always seems to find quarters in the cushions, and come out ahead. pretty strange, but, that's the game they play.

Then There Was This. I saw this on the Bloomberg this morning, and boy did it get my blood boiling. "Federal Reserve Chairman Ben S. Bernanke minimized concerns that the central bank's easy monetary policy has spawned economically-risky asset bubbles in comments at a meeting with dealers and investors this month. The Fed Chairman brushed off the risks of asset bubbles.

Chuck again. OK. so Big Ben is so sure on this, right? Well, he might want to explain then why, as long as the markets felt Quantitative Easing (QE) was in place the stock market rallied, but given the first thought that QE might end this week, we've seen two consecutive days of selling? And doesn't this remind you a bit of all the talk years ago about the housing bubble, and how Big Ben didn't see that one coming. Here's a quote from him on that, that might make one wonder about his comments now.

"3/28/07 - Testimony before the Joint Economic Committee, Congress Although the turmoil in the subprime mortgage market has created severe financial problems for many individuals and families, the implications of these developments for the housing market as a whole are less clear.At this juncture, however, the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained."

Oh, the hits just keep coming. if you ever have the free time to do this, just go to Google and put in Ben Bernanke quotes, and you'll get so many responses that you can just begin to pick and read. Hey. not all of them are bad!

To recap. The currencies and metals tried to find terra firma yesterday, and range traded, but at least recovered a bit from Wednesday's mess. Aussie and kiwi are the winners overnight, as RBA Gov. Stevens set the bar high for currency intervention, and made a strong statement about current interest rate levels being good for now. The euro tried to rally overnight but was dragged back to the muck by a paltry repayment in the LTRO 2nd round, and the European Commission downgrading its economic outlook.

Currencies today 2/22/13. American Style: A$ $1.0330, kiwi .8380, C$ .9810, euro 1.3180, sterling 1.53, Swiss $1.0740, . European Style: rand 8.8685, krone 5.6695, SEK 6.4160, forint 221.85, zloty 3.1515, koruna 19.33, RUB 30.39, yen 93.25, sing 1.2375, HKD 7.7565, INR 54.18, China 6.2382, pesos 12.71, BRL 1.9660, Dollar Index 81.40, Oil $92.92, 10-year 1.98%, Silver $30.40, and Gold. $1,579.71. and it's Friday, so here's your opportunity to take a peek at the U.S. Debt Clock by clicking here: http://www.usdebtclock.org/index.html

That's it for today. Well, I was pretty ticked off yesterday morning, as I was ready to go to the doctor when I received a call saying they had closed the doctor's office for the day, due to the snow. It wasn't even snowing yet! Doesn't anyone want to work anymore? The street crews did a great job getting the roads ready for rush hour this morning. The worst encounter I had was in my driveway, getting over the "hump" left by the snow plows! I'm really running behind this morning, so I'll end this by saying good luck this weekend to The Blues, Tigers and Billikens this weekend. I hope everyone in the Midwest is safe from that winter storm that came through, that was a nasty one! Thanks for reading the Pfennig and I hope you have a Fantastico Friday!

Chuck Butler
EverBank World Markets

Posted 02-22-2013 11:04 AM by Chuck Butler
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