Markets Focus On Big Ben And Will Be Disappointed.
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In This Issue.

* Bias to buy dollars remains but is muted.

* Greece gets $3.9 Billion in aid.

* A$ recovers a bit.

* Gold moves higher again.

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

Markets Focus On Big Ben And Will Be Disappointed.

Good day. And a Tom Terrific Tuesday to you! Boy, did I ever just want to turn the alarm off this morning and go back to sleep. I kept saying, "I'm so tired", thinking that my beautiful bride would say, "why don't you just stay here and rest today" But, those words were never heard, so I dragged myself out of bed, and came into work. So, it's needless to say that I'm draggin' the line this morning. UGH!

Not much happened in the markets yesterday after I signed off, as there was no "real data" and most traders had hangovers from the long holiday weekend to contend with. This morning, the euro is seeing some relief trading in its favor, given the news that a deal was reached with Greece regarding an aid payment, which turned out to be far less than what was expected. Yesterday morning, the talk was about $8-10 Billion in aid. But what was agreed upon was far less at $3.9 Billion (3 Billion euros). The movement in the euro is small though, so not too much euphoria is being spent on this news.

The euro's big move wasn't against the dollar though, it was reserved for a strong move VS Japanese yen. The thing I would look for with the euro, is the idea that "this is now done and we can move on" could move over the euro for the rest of the summer. Recall that a month ago, I did a video interview on the and I said then that I thought the euro would remain around 1.30 for the rest of the summer. This agreement on the Greek aid will help solidify my thoughts a month ago.

The Aussie dollar (A$), which I told you yesterday was up slightly in early trading, continued to add to gains throughout the day and in the overnight markets. The A$ is getting some of its strength from the slightly higher Chinese consumer inflation data that printed this morning (2.7% VS 2.5% forecast). The gains had a governor placed on them by some weak data though. National Australia Bank's Business Survey, showed that conditions were very weak. In fact they haven't shown this week since mid-2009..

I've spent a lot of time with different readers lately answering their questions about the A$... Here's the final line that I've come to accept for one of my fave currencies over the years. In a recent Review & Focus, I said that "the A$ has fallen down and can't seem to get up" And that about sums it up. Between a slowing Chinese economy and Reserve Bank of Australia (RBA) rate cuts, the A$ has had its legs cut off. I'm really concerned about the A$ folks. Here's my thought that I've shared with quite a few dear readers.

The A$ will depend on the Chinese economy for its strength. So, the Chinese economy is slowing, we've talked about that. But, the Chinese Gov't is attempting to leave the economy alone, and see if it can be a 'big boy economy" without help from stimulus. This could mean a very slow Chinese economy that really brings the A$ down. Or, we could see the Chinese Gov't panic and stimulate, which would put a floor under the A$... The two more rate cuts that we've talked about, that the markets are calling for before year-end, will weigh heavily on the A$... So. we could see a 10% decline should China's economy slow greatly, and the RBA carries out 2 more rate cuts. If China stimulates, then the rate cuts could be responsible for 5% decline.

I think that these bumps higher in the A$ will be used by the institutions and hedge funds as opportunities to sell, instead of holding on for further gains. I feel like I need to say this to the A$... This doesn't mean I don't love you I do, that's forever, and for always. But you've run into a bit of trouble here. remain sharp and you'll guide your way through this trouble. Let's keep things in perspective here folks. Yes, the A$ is no longer $1.05. But it's also no longer 47-cents.

Speaking of China and their economy. Chinese June Trade data will print tonight. Right now, the forecasts are for a $27.8 Billion Trade Surplus with exports up +3.7% VS last year, and imports down 6% VS last year. On the outside if the actual print is close to the forecast, the A$ could see some strength. But the markets might be concerned with that -6% decline in imports. Why? I hear you asking. Ahhh grasshopper. Remember, the Chinese are trying desperately to generate domestic demand. And a -6% drop in imports would indicate that domestic demand is failing miserably.

Did you see that Latvia has voted to accept the euro next year? Not exactly like adding Lou Gehrig to your lineup, more like adding Wally Pip. But, at least a country wants to adopt the euro. A couple of years ago, countries were running from the euro as fast as they could, and some country's that used the euro, were wishing they hadn't adopted it. But now, 3 years down the line, and things are a bit different. Maybe next year, the Euro-Wannabes the name I called: Poland, Hungary, and Czech Republic back in 2002, will finally line up to join.

The point I guess I'm trying to make here is that the euro has put the threat of a Sovereign default to bed. The euro has put the threat of a break-up of the Eurozone to bed, and the euro has put the calls for a collapse of the currency, and the eventual dropping of the currency union to bed. I know there are still people out there calling for the euro to collapse, and maybe it does, but for now all those people that called for these things have been proved wrong by the euro. I still believe that in 3 to 5 years, even Greece's and Portugal's problems will be a distant memory. The debt problems of the Eurozone will have been deal with, the slow economy, from austerity measures, will be allowed to wipe out the excesses and start over, and the euro will be a currency to look at admirably once again.

I think the markets are kind of bound and tied up focusing on Big Ben Bernanke's speech tomorrow and hoping that he throws the markets a bone with some policy statements. But from what I read I doubt that will happen, as Big Ben is going to speak at NBER, and from the title of the speech, "First 100 years of the Federal Reserve" I would think that he's going to show everyone how academic smart he is.. Which I'm sure he is. and that's all I'll say about that!

Yesterday, I talked about the Jobs Jamboree and made fun of the BLS in a way, so as to make certain you didn't think I was falling into the trap that the markets have already fallen into, and that is that everything in the U.S. labor market is OK, and will continue to improve. Just to make things clear. John Williams at figures that the real unemployment rate is 23.4% up from 23% in May. How does he figure that? Well, folks, he doesn't use the BLS data that's had so many trips to the oven for reheating that the data is beginning to look charred. He doesn't use hedonic adjustments. Just to keep things straight for those of you keeping score at home, in June, part time jobs soared to 360,000, and the number of full-time jobs shrank by 240,000. Oh, and the BLS's U-6, which includes part-timers who would like to work full-time and people who've given up looking for work rose in June to 14.3% from May's 13.8%... So, even the BLS knows that unemployment is not 7.6%.... That's a pipedream..

We have a economic roundtable discussion now twice a month with the folks in Jacksonville. In discussing my thoughts on the labor picture, I made the point of repeating something that I've heard the Big Boss Frank Trotter say for over a year now. And that is, "that the number one job creation machine in the U.S. for the last decade has been the military. And as we draw down the number of soldiers, they are going to be looking for jobs". I don't think that bodes well for the kind of drop that the Fed Heads are looking for in the Unemployment Rate.

How many people out there know Jim Powell? Jim is a great writer and mind. He helped me write my first white paper many years ago. Well, In Jim's April letter he starts it off with a great story. Let me share with you what Jim had to say. "When I was 11 years old I joined the Boy Scouts. During my first rainy campout, I was certain that I could get a fire going using wet wood if I poured enough kerosene on it. To my surprise, it didn't work. To make matters worse, I used all the fuel that I brought to use in my lantern. I ended up spending a cold night in the dark. Mr. Bernanke at the Fed is in a similar position with his economic stimulus program. The 65-year-old tenderfoot keeps thinking he can heat up the economy a bit more if he continues pour billions of borrowed dollars into it. The expensive plan hasn't worked so far, but hope springs eternal in the rarified air of Washington D.C."

Should you want to read more from Jim, simply go to: He's a great read folks.

And that reminds me of something that I saw yesterday. That office rents are in a downward trend, after recovering most of last year. So, let's see Capital expenditures are not the stuff that recoveries are made of, and office rents are down. Folks, these are two forward looking pieces of data that one can use to get a feeling about how the economy will fare in the coming months, and if corporations are spending on equipment or renting new space, I would say they are hunkering down. Let's hope that changes quickly, eh?

OK. Gold is up $12 this morning. The recent recovery in Gold's price has been steady and calm, not giving way to wild upward swings that can be offset easily with wild downward swings. I would like to think that the downward pressure that has been on Gold for a few months now, could be lifted. Physical demand is responsible for the recovery, but from reports I've seen, the Physical demand is waning, after that HUGE rush to buy back in April. We can't let the paper Gold price manipulators win folks.

Another metal that has booked a strong recovery in the past 3 weeks since the FOMC grenade that was thrown on the metals is Platinum. The platinum price this morning has recovered back to the price on June 19th $1,361.43, as a platinum mining strike in S. Africa ended.

And finally. The Chinese renminbi / yuan is stronger this morning and guess what's going to happen in the next couple of days. Yes, China and the U.S. will meet. So, keeping in tradition, the Chinese allowed the renminbi / yuan to appreciate ahead of the meeting.

For What It's Worth. I found this on and once again, the Gov't is attempting to pull the wool over our eyes folks. Don't let them!

"A new report from the Congressional Budget Office (CBO) shows that the federal government's student-loan program is a "scam," a Wall Street Journal editorial states.

"If you think the federal student-loan program looks like a bad deal for taxpayers, imagine how it would look with honest accounting," Journal editors write.

"And now you don't need to imagine thanks to a new [CBO] report that's receiving far too little attention. Turns out that the official 'savings' for taxpayers of $184 billion over the next decade really add up to $95 billion in losses. The "scam" is that Congress has enabled a huge subsidy for universities while claiming that student loans create huge tax savings, the editorial says. It can make that claim because a 1990 law "requires a deliberate under-counting of the cost of defaults," the editorial says.

"To its credit, the Congressional Budget Office has noted on various occasions that while the law forces it to use this Beltway math, CBO knows it's not accurate under fair-value accounting."

The new report analyzes the costs of student loans to be issued over the next 10 years and puts the under-counting by $279 billion."

Chuck again. In addition, on Monday the interest rate for many student loans doubled. Experts say student's heavy loan burdens will hold them back as adults. And those loans will hang over these people like the Sword of Damocles, until some genius lawmaker comes up with a plan to have taxpayers pay off the loans. Think that won't happen? Hmmm. Did you ever think that taxpayers would pay for the bailouts of AIG, and others?

To recap. The bias to buy dollars remains, but is muted this morning, as focus shifts to Big Ben's speech tomorrow at the NBER (National Bureau of Economic Research), which I think is going to be a big disappointment to the markets who are looking for further hints on policy. Greece gets $3.9 Billion and life goes on in the Eurozone. The A$ has rallied the past two days, but still looks vulnerable. And Gold is up $12 this morning, is the downward pressure being lifted from the shiny metal?

Currencies today 7/9/13. American Style: A$ .9175, kiwi .7870, C$ .9485, euro 1.2870, sterling 1.4875, Swiss $1.0345, . European Style: rand 10.0305, krone 6.1325, SEK 6.7560, forint 227.60, zloty 3.3615, koruna 20.09, RUB 32.95, yen 101.10, sing 1.2775, HKD 7.7565, INR 60.14, China 6.1730, pesos 12.83, BRL 2.2625, Dollar Index 84.28, Oil $102.95, 10-year 2.66%, Silver $19.18, Platinum $ 1,361.33, Palladium $ 696.63, and Gold. $1,251.41

That's it for today. Well, I did get the letter done without the need of a quick nap. Some cold OJ got me going today. I began working on the text of my Vancouver presentation that takes place in two weeks, yesterday. I'm going to talk about the verbal beatings that a contrarian takes. I'll have to talk about being called unpatriotic because I talked about the bad stuff that caused the dollar to decline.. Being called unpatriotic used to cause me to lose my temper, but not any longer. sticks and stones may break my bones, but words can never hurt me! HA! I bet it's been years since you heard that! Try saying it, it's as fun as it was when we were kids! We're putting the final touches on a new MarketSafe CD folks. I always tell you that my dear Pfennig Readers will know first. So, watch for the announcement coming soon! And with that, I'll get out of your hair for today. I hope you have a Tom Terrific Tuesday!

Chuck Butler
EverBank World Markets

Posted 07-09-2013 12:23 PM by Chuck Butler
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