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In This Issue.

* Greek output rises first time in 4.5 years! .

* Spanish and Italian PMI's continue to be strong.

* The Big Dog gets off the porch .

* Japanese inflation rises!

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

Only 4 Days Left.

Good Day! And a Marvelous Monday to you! Yes, it's me. Back from a week of rest, and a trip to Orlando to talk to the crowds there about stuff that they won't see or hear from the major media outlets. You know, the stuff I talk to you, dear reader, about every day! I have to say that I was very pleased with the sizes of the audiences to hear my two presentations. In Las Vegas and San Francisco last year, the crowds had dwindled to thinly attended presentations, and I was ready to raise the white flag, thinking that no one wanted to hear about what debt was doing to our currency. So, it was good to see the rooms filled to the brim once again, with people sitting on the floor, and standing room only. And the rooms were filled with tons of people that were NOT Pfennig Readers, which meant this was the first time they would hear me. Now, that's pressure! HA!

Tyrone Davis is singing about starting all over again this morning, and I guess that's what I should do, given I've been gone for what feels like a long time! And while I sent some stories that I read to Chris, and he didn't use them, I really haven't kept up on everything while I was gone. I was in a paradise, and I couldn't get my head around thinking about anything other than how beautiful everything was!

But, while I was in Orlando this past week, I met up with a good friend of mine, who is also a newsletter writer. Dennis Miller. who writes a wonderful letter that's directed to investors that are either retired or nearing retirement. Dennis brought me up to date on a lot of things, including the President's proposal for myRA's. Oh brother, I am loaded for bear on this one folks, but I'll have to keep that discussion to the Butler patio, which with temps outside at 10 degrees (like this morning) I doubt anyone wants to spend any time out there!

OK. So, this morning, it appears that the euro is getting to recover a bit, along with the Aussie dollar (A$), and the rest of the currencies have small gains VS the dollar. The euro is important folks, as I've explained for many years now, the euro is the offset currency to the dollar, and that makes it the Big Dog. All the other currencies or little dogs if you will, can't get to chasing the dollar down the street, unless the Big Dog gets off the porch first. Well, this morning, the Eurozone received some good news from Greece for once in Blue Moon, when the Greeks reported an increase in their manufacturing index for the first time in 4.5 years! WOW!

So, with this news, the euro was able to pick itself up by the bootstraps and gain back the 1.35 level, which it lost late last week. In addition to Greece's good news, Spanish and Italian PMI's, (manufacturing indexes) both continued to show expansion in output through January. For those of you keeping score at home, Spain's index was 52.2, and Italy's index was 53.1

Later this week, we'll get Eurozone Retail Sales for last month. And Inflation in the Eurozone continues to weaken, this is not a good thing for interest rates in the Eurozone. But the stronger PMI's could begin to get things rolling in the right direction, and that's the road I think European Central Bank (ECB) President, Mario Draghi, will take, opting to wait-n-see if the increased output can spur the economy and inflation before taking another drastic measure with rate cuts.

This past weekend, the Chinese printed their manufacturing index which was just about the line in the sand figure of 50 at 50.5. China is closed for the lunar new year holidays, so there won't be any movement in the currency for a couple of days. China is such an important piece for the Emerging Markets, and Australia, and their slowdown which is going on right now, is having negative effects on those markets. But as I told the audience in my second presentation on Friday, China is becoming more capitalistic than we are, and therefore they will begin to go through economic and business cycles, which means they'll see slowdowns. And it would behoove the markets to not go ballistic over a Chinese slowdown. It's what will happen as a economy matures, and comes out of the Wild West, into the real world.

I was asked a lot about Gold by conference attendees last week. I told people that it appears that a bottom may have been seen, as Gold has inched higher so far this year. There's bullishness in the air, you might say, and that's something we haven't seen in the Gold market for a couple of years. Big time players are coming out and making bets that the bottom for Gold has been seen. Now, if we can just get the boys and girls at Goldman to talk glowingly about Gold once again, we might have something. But for now, they have a call on record that they see Gold falling to $1,000.

As I pointed out to many listeners that gathered around me in the hallway. The Fed keeps telling us that they will keep interest rates at or near zero for some time to come. And as long as Gold doesn't have to fight with deposit rates, it should be remain a strong alternative to people keeping money in accounts that don't pay them for doing so. And now that the stock market is showing some dents in its armor, Gold is even more appealing once again.

Hey! Do you know what expires in 4 days? No, not my employment contract! HA! I'm sure there are some that wish that to be true, but. they'll have to wait! HA! But seriously, in 4 days on Feb 7, the Debt Ceiling limit expires. Yes, here we are again, talking about the Debt Ceiling. But you know what I think will happen here? That the lawmakers will simply extend the time for it to be due. They've done that two times already, and I think this is a ploy by the lawmakers to get everyone out here to forget about the Debt Ceiling, and if they just keep pushing the deadline down the road, eventually people will forget about it. Remember when the first time came that they pushed it down the road? The said it was "temporary". Of course they said that in 1971, about removing Gold as the dollar's backing. We've now had 43 years of "temporary".

And the Debt Ceiling isn't that big of a deal, but the thing I liked about it was that whenever it came up, the country had to stop and think about the size of the debt. But if it can be pushed down the road, without dealing with it, what difference does it make any longer? Shame on the lawmakers, folks.

Well, the Fed cut back another $10 Billion of bond purchases while I was gone, and they're down to $65 Billion per month. That's still $65 Billion that's added to the monetary base this month, but don't let that get in the way of a feel good story for the Fed. I still believe that this tapering will be stopped before reaching the finish line. I think the bond markets are coming around to that thought too, given the mini-rally in Treasuries. The 10-year Treasury yield is 2.65% this morning, that's fallen from 3.03% not that long ago. If the bond markets thought that the Fed was going to keep tapering, and thus taking away the Fed's ability to keep rates in check, the yield on the bond would be going higher, not dropping.

And. I still think that should the Fed stop their tapering ahead of the finish line, that their credibility will end up in the garbage, not that it's that great with me now, but the markets still think they are the greatest! Now, I might end up completely wrong about all this, and everything will just turn out peachy for the economy and inflation, etc. And if, that happens, I'll take my ball and go home. I won't go away mad, I'll just go away!

Did you see that Japan's inflation is rising? Yes, up 1.3% VS a year ago. That's the best it's been in a long time, but. remember this before you think Japanese interest rates are going up. We've seen these increases in Japanese inflation before, while the nearly 2 decade economic funk was in place. So, I guess I'll have to see more of the same in coming months to be interested. Right now, it could very well be a rouge report.

But the yen is being rewarded for this report, and once again pushes the envelope of currency appreciation. I won't argue with the traders that keep pushing this envelope, because they have deeper pockets than I. But, I think they are a little ahead of themselves here, and wouldn't be surprised to see the yen rock backwards again.

Well, the traders finally got the Canadian dollar / loonie to 1.10 or around 91-cents while I was gone, and it has slipped even weaker. I was asked about the loonie quite a bit last week, and I reminded everyone that I talked to that several months ago, I wrote about Canada's new Central Banker, and how he came from the "Trade" side, and pointed out that those guys on the trade side always complain about a strong currency, and thought then that the loonie had seen its best days, given the new Central Banker. It's all coming together for Bank of Canada's Poloz. A weaker currency, and increased exports. But here's a memo to Mr. Poloz. Be careful what you wish for, the markets tend to take things further than Central Bankers think they will.

The U.S. data cupboard has our PMI's (manufacturing index) for Jan this morning, and the total vehicle sales, which should remain strong. As a guy that is in the car business reminded me the other day.. "It's all about financing". zero down, zero interest, and so on, is out there again, and it makes car buying much easier, even if the prices have gone sky high!

OK. I've got a good piece for you in today's FWIW section. So with no further adieu.

For What It's Worth. I found this reading articles on Google+, and it talks about the second and undesirable and unjustified source of income inequalities. It's also found on Zerohedge.com if you want to read the whole article, (The dark side of income inequalities) I'm just going to give you a snippet here.

"The Central Bank does not create anything real: neither resources nor goods and services. When it creates money it causes the price of transactions to increase. The original quantity theory of money clearly related money to the price of anything money can buy, including assets. When the Central Bank creates money, traders, hedge funds and banks -being first in line - benefit from the increase variability and the upward trend in asset prices. Also, future contracts and other derivative products on exchange rates or interest rates were unnecessary prior to 1971. Since hedge activity was mostly unnecessary. The Central Bank is responsible for this added risk, variability, and surge in asset prices unjustified by fundamentals.

One need not be a socialist, or oppose capitalism, to oppose the income equality that is the result of theft. Everything that has been done in the past 5 years has been done in order to postpone a major reckoning that is now overdue. And yet, a reckoning is coming nevertheless because that which cannot continue will not continue."

Chuck again. Yes. this would be the back half of the storm that I've been talking about. We've enjoyed a couple of years in the eye of the storm, you know calm, and illusions of grandeur, but the back side of the storm is coming.

To recap. The Big Dog is off the porch this morning, but barely! The Spanish and Italian PMI's continued to show expansion, and the Greek PMI was up for the first time in 4.5 years! The U.S. PMI will print today. China continues to be on the right side of the 50 in their PMI, but the signs of a slowdown are there, and that won't play well with the Emerging Markets and Australia. Japanese inflation is rising, but is it sustainable? And Gold begins to gets some bullish talk about it.

Currencies today 2/3/14. American Style: A$ .8795, kiwi .8120, C$ .9030, euro 1.3505, sterling 1.6340, Swiss $1.1055, . European Style: rand 11.1255, krone 6.2630, SEK 6.5395, forint 231.20, zloty 3.1365, koruna 20.3740, RUB 35.14, yen 101.90, sing 1.2750, HKD 7.7635, INR 62.57, China 6.1050, pesos 13.32, BRL 2.4030, Dollar Index 81.18, Oil $96.91, 10-year 2.65%, Silver $19.28, Platinum $1,391.63, Palladium $712.34, and Gold. $1,246.38

That's it for today. Well. Congrats to the Seahawks, SuperBowl Champions. What a dud of a game. And the commercials weren't anything great as a whole. I liked the Muppets, and the Budweiser commercials, and the dedications at halftime were touching. Our tour bus driver told us that Bruno Mars was an Elvis Impersonator, as a young boy. He had the Elvis thing going last night, eh? I want to say Thanks to the group of EverBankers that were with me in Orlando last week, they did a fantastic job! Diane Bloodsworth, Chris Newsome, Lauren Conover, and Lara Mayhew. The traveling I've done has done a number on me, with the infection in my legs coming back, so it's good to be back home, even it was only 10 degrees outside this morning! Just a couple more weeks till pitchers and catchers report to spring training, I've got that going for me! The Guess Who's great song, These Eyes, is playing right now, I have to stop to sing along, so I'll just end this for today, and say, I hope you have a Marvelous Monday!

Chuck Butler
President
EverBank World Markets
1-800-926-4922
1-314-647-3837





Posted 02-03-2014 11:46 AM by Chuck Butler
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