Octaper Gets Added To The Dictionary.
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In This Issue.

* Dollar is softer, but just by a bit.

* Gold drifts, but could benefit from Debt Ceiling talks.

* QEnternal, as I've said for some time now.

* Feds to look into Tapering leak. yeah, right.

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

Octaper Gets Added To The Dictionary.

Good day. And A Tub Thumpin' Thursday to you! Well, I'm back! Back from Houston, and the MD Anderson Cancer Center. Just in time, it appears, as Chris was sounding as though he was really missing his morning workouts to write the Pfennig! I guess, I should not throw that at him so often, as his workouts are important to him! But, I thank him so much for taking the conn! Sans workouts.

Well. As I turned on the currency screens today, I noticed that not too much has changed since I signed off last Friday. The euro has traded back and forth around the 1.35 figure, British pound sterling is well over 1.60, and Gold is still giving back its gains from the no tapering decision. There have been quite a few Fed Heads on the speaking circuit since last week. I saw that Fed Head Lacker was quite adamant about how the markets would get used to tapering, and that St. Louis Fed Head, Bullard, threw a cat among the pigeons late last week by creating a new word, "Octaper". The markets had just digested the no Septaper, and Bullard shoved the Octaper in their collective faces.

Chris sent me a note about something that my friend John Mauldin had in his "out of the box" letter the other day regarding Tapering. Let's listen in to Ben Hunt, PhD.

"The WHY of the Fed - its meaning - changed this week. Or rather, it's been changing for a long time and now has been officially presented via a song-and-dance routine.

What Bernanke signaled this week is that QE is no longer an emergency government measure, but is now a permanent government program. In exactly the same way that retirement and poverty insurance became permanent government programs in the aftermath of the Great Depression, so now is deflation and growth insurance well on its way to becoming a permanent government program in the aftermath of the Great Recession. The rate of asset purchases may wax and wane in the years to come, and might even be negative for short periods of time, but the program itself will never be unwound."

Chuck again. Of course I agree with this, for many of you that have come to listen to me talk the past couple of years, have heard me say things like "sometime down the road, when someone else is giving you this talk, he'll be talking about QE 24" And so on. And don't forget what I've told you over and over again that this dance is gonna be a drag, no wait, over and over again that even though the Fed might end the current QE # they are on, the ending is just temporary, for they'll find out soon enough that the economy had become addicted to stimulus, and can't go on without it!

It's a tight corner the Fed Heads have painted themselves into folks. Getting out of it will be a very messy process. Speaking of a very messy process. what about the Debt Ceiling stuff? Crazy! In one corner you have the President who says he won't negotiate, but I think in the end he will have to, and in the other corner you have the House Republicans who hold the keys to the bank, and the question is whether they are willing to have tons of blame heaped on them for shutting down the Gov't should they hold the President's feet to the fire for not negotiating?

This defunding of the Affordable Healthcare Act (AHA) sounds catchy, but that dog ain't going to hunt folks. In other words, I doubt very seriously that the House gets that concession. But they might get the delay of 1 year for the individual mandate, and then they could claim a victory. But in the end no one wins, because, the Debt Ceiling just keeps getting raised.

OK. I've had tons of time in waiting rooms the past few days to read, and brother did I do some reading about this stuff. Listen I don't care about all the politicization of the process. I just care that when all the dust settles, the debt ceiling will be raised, and our elected representatives will kick the can down the road once again. And that deepens my belief that the U.S. dollar will continue to be held hostage by debt. That's how this weak dollar trend began, and why it will continue.

Well, there's a bunch of stuff going on over in Japan. There are rumors going 'round, that someone's underground, no wait! That the Japanese Finance Minister, Bank of Japan (BOJ) Gov. , and Economic Minister met in private last night to discuss further depreciation of the yen. In addition, the Japanese Public Pension Fund is meeting and their Reform Council could be announcing an allocation shift, which could mean selling yen assets, which achieve the further depreciation of the yen.

You see, the Japanese leaders are not happy campers about how the yen was on the slippery slope, but jumped off and has remained below 100. The leaders are bound and determined to get the yen weaker, and will stop at nothing to achieve that goal. But the markets aren't playing along, and that's a sticking point to the Japanese leaders. Remember, what I've always told you, that the markets have deeper pockets that any Central Bank, and. unless the Japanese leaders want to get the U.S. and Eurozone to do some coordinated yen sales, I doubt the goal of a much weaker yen will come easy for the Japanese leaders.

I also read these past couple of days about how those "leaks" I told you about regarding the Gold futures getting bought ahead of the no tapering announcement are being investigated. Look this is all show and no-go folks. The Feds had to make this look good, but nothing will be found, and if it is, it will be swept under the rug, and all will be right on the night. Of course, I would love to see this go differently, but it is, what, it is. We should look forward to hearing how the crack was covered up and will never happen again. And yes, I'm still hopping mad about this "leak". But, if I've learned something in my 58 years, it's to not go on and on feeling resentment toward something you have no control over.

I received a note from a long time reader in New Zealand, where he tells me about a new program that the Reserve Bank of New Zealand (RBNZ) is implanting to combat the housing bubble. It's something new, and blue, but it's not something borrowed or used! I love it when a Central Banker comes up with something new, that makes sense! First, RBNZ Gov. Wheeler, of whom I am usually at odds with, but not here, is going to be the first raise rates next year. But instead of watching the higher rates slow down the economic recovery going on in New Zealand, he will introduce something called: "Limits on leveraged lending".

This would be done to contain the housing bubble without inflicting collateral damage to the rest of the economy. Says, economist Stephen Koukoulas. If this works here, look for other countries to copy the program. And then the classic way of shying away from rate hikes because it would slow the economy, would be thrown to the roadside. YAHOO!

Of course, I would love for all of this to work, but even more, I would love for New Zealand to get back to narrowing their Trade Deficit. Chris talked to you yesterday about New Zealand's Trade Deficit widening, and what that does a country's currency. But remember back a few years ago, when New Zealand had a large Trade Deficit, but they had the highest interest rates in the Industrialized World. One outweighed the other for currency strength. Until, it didn't.

The point I'm making here, is that taking care of the housing bubble without bringing the economy to its knees could be something that the markets reward the currency for. And then rates are going higher in 2014, I told you that last week, so, we could get back to the "looking past the Deficit" in New Zealand. and then maybe not.

Kiwi is up 1/2-cent this morning, and the Aussie dollar (A$) follows closely up 1/4-cent. The euro is down 1/4-cent, but still hanging around 1.35, which to me is a very lofty number at this point of the proceedings. What I'm saying here, is while I thought the euro would benefit from the relative calm over the Eurozone, I thought 1.35 was about 6 months away. So, the single unit has gained quite a bit ahead of Chuck's schedule.

And as I said at the top, Gold continues to give back the gains it made after the no tapering announcement last week. The shiny metal is flat this morning, after gaining a few shekels yesterday.. I'm of the opinion that the Debt impasse that the U.S. is heading to, will be good for Gold. Shoot Rudy, it was good for Gold in 2011, when it appeared the Gov't would be shut-down.

Speaking of Gold. The CFTC announced yesterday that they were ending their investigation of the Silver market "without finding any wrongdoing". Funny, no wait, it's not funny, but strange that they Gov't can find LIBOR wrongdoers and take them to court and fine them, etc. but can't find anything in metals. I've heard of "selective hearing", but this must be "selective seeing". there's a Big Difference between the wrongdoing in LIBOR and the metals, folks, and therein lies the answer as to why LIBOR problems get exposed, but metals problems don't. It all depends on who is the "wrongdoer". I'll just point out the Wikileaks cable that I told you all about a couple of years ago. and won't say anything other than that, to keep me in the "good light".

I think that Mexico must have gotten the memo from the U.S. last month.. Mexico was about the only country to announce a reduction of their Gold holdings. Russia and many others announced that they had expanded their Gold reserves. And in other news on Gold, China was named the number 1 buyer of Gold, taking that title away from India in 2013. And this is ahead of the Golden Week Holidays that start next week in China, where tons of Gold will be purchased. I tell you all this, so you can see that physical Gold is still in high demand.

Before I head to the Big Finish, I wanted to point out something in the currency roundup this morning. The 10-year Treasury yield has fallen back to 2.63%... So the Treasury Bubble has avoided meeting up with the pin in the room that would have popped that bubble. That is for now. It will meet up with that pin one day, and when it does, I doubt there will be enough tissues to dry the tears.

For What It's Worth. Since we spent some time on the Debt Ceiling and other related things this morning, I thought this played well. My friend at the Sov. Society, Jeff Opdyke, writes a couple of times a week for the Sov. Society, and last week he penned an article about what the Fed's Announcement really means. Since I write about our Inconvenient Debt all the time, I thought I would let you read someone else's take on it. Here's Jeff.

"Few people accept the fact that America is a bankrupt nation; they still buy into the nostalgic and tattered belief that America is a financial powerhouse, the richest nation on the planet. But just because some children think Scooby Doo is real doesn't magically make that so.

A few numbers to cement the point: D.C. has accumulated in our name roughly $17 trillion in debt. That's huge. But it's not the real debt. Throw in all the off-balance-sheet promises politicians have made in pursuing their re-election dreams - all the money due to retirees in the Social Security system and all the debts wrapped up in Medicare/Medicaid/prescription drug-plan liabilities - and you get to a number that exceeds $125 trillion.

Our tax revenues - basically America's paycheck - are about $2.7 trillion annually. So, our debt-to-income ratio is 4,660%. Tell me: If you're earning the median income in America of $52,100, and your household debts exceed $242.6 million (a debt-to-income ratio of 4,660%) are you bankrupt? Or is everything at home going swimmingly well?"

Chuck again. Thanks Jeff. and our friends over at the Sov. Society. You should check them out at: www.sovereignsociety.com I've known Jeff for about a decade now. He used to write for the WSJ, and one time about 10 years ago, he wrote an article about the falling dollar, but didn't give anyone an idea as to how to take advantage of it, so I contacted him, told him about EverBank WorldCurrency CD's and from there a friendship grew! I was the one that introduced him to the Sov. Society. So. it's all a tangled web we weave, eh? HA!

To recap. The U.S. dollar is softer this morning, especially against the dollars of Australia and New Zealand. The euro is down a bit, but around 1.35, and Gold is flat. Ben Hunt, PhD, talks to us about what the no tapering decision really meant last week, and the CFTC announces no wrongdoing found in Silver. (just typing that makes me go to the wall and yell!)

Currencies today 9/26/13. American Style: A$ .9395, kiwi .8295, C$ .9710, euro 1.3505, sterling 1.6060, Swiss $1.0990, . European Style: rand 10.0120, krone 5.9805, SEK 6.4150, forint 222.05, zloty 3.1305, koruna 19.1150, RUB 32.18, yen 98.65, sing 1.2550, HKD 7.7540, INR 62.04, China 6.1477, pesos 13.01, BRL 2.2305, Dollar Index 80.40, Oil $102.75, 10-year 2.63%, Silver $21.99, Platinum $1.430.84, Palladium $725.70, and Gold. $1,336.27

That's it for today. Well.. no changes. The doctor says I'm "stable". I told him that I doubt that many of my readers would agree with that! HA! Seriously, I told him that I didn't feel that way every day, and told me to think about a year ago, and what kind of shape I was in when I first saw him. I guess he's right. My beloved Cardinals will be in the playoffs again this year, their magic # to win the division is 1 with 3 to play. The Cubs come to town for the final 3, it will be like their World Series, so this will go down to the wire. The EverBank St. Louis Art Show is this evening, while our Rams get ready to play our rival S.F. 49ers on Thursday Night Football. The Art Show is always a good time to meet up with St. Louis clients, and old Mark Twain Bankers! Eddie Floyd is knocking on wood as get ready to sign off today. I hope you have a Tub Thumpin' Thursday!

Chuck Butler
EverBank World Markets

Posted 09-26-2013 2:39 PM by Chuck Butler
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