Eurozone Inflation Falls To .3%...
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In This Issue.

* Dollar is back in charge.

* Euro gets whacked on inflation news .

* Is Commodity Bull Run over?.

* Bears Stearns revisited.

And Now. Today's A Pfennig For Your Thoughts.

Eurozone Inflation Falls To .3%...

Good Day! . And a Tom Terrific Tuesday to you! Monday was a day without baseball. UGH! Yes, I know at the end of Rocktober, baseball will be over for this year, so I had better get used to it. But I don't want to get used to it! And yes, I'm whining just like a 3-year old. I don't want to take a nap, I don't want to take a nap! Funny, how that changes as I grow older. Now, it's "I want to take a nap, I want to take a nap"! HA! The local weather-person told me last night that it's been 19 days without rain here. Of course that's small shakes compared with California and their drought. Oh well, I know we need rain, but I truly enjoy these umbrella blue skies, full of sunshine and warm temps!

The rain is falling on the euro this morning. And no, the rain isn't going to help it grow! Instead its melting the euro away, just like the Wicked Witch of the West when she met up with a bucket full of water thrown on her by Dorothy in my all-time fave movie. Yesterday, the euro was attempting to add to its value throughout the day, which seemed strange to me, given that there's all this uncertainty of what the European Central Bank (ECB) meeting this Thursday is going to bring hanging over the euro like the Sword of Damocles.

But it was what it was, I guess. However this morning, the euro is getting whacked, as the other currencies seem to be holding ground. The September estimate of Eurozone inflation printed this morning, and Consumer inflation slipped further to .3% from last month's .4%... This is going to put ECB President, Draghi in a foul mood, folks, and who knows what kind of temper tantrum he's going to throw when seeing this, but I've got a secret. Do you want to know a secret? Do you promise not to tell? Oh, that's OK, go ahead and tell whomever you care to tell. Chuck is going out on a limb here and saying this right here, right now, that this will be the cyclical low for Consumer inflation in the Eurozone. So, there's no need to go hog-wild on stimulus, Mario.

But I've come to the conclusion that he probably will go hog-wild in announcing stimulus measures to up the ante of inflation in the Eurozone. And that's what has the euro on the slippery slope this morning. Here in the U.S. we don't have that problem, yet. that is. because right now, Consumers are willing to go deeper into debt and spend, spend, spend. Yeah that's right go buy that $85,000 car and finance it out 84 months! Don't get me started on how the average monthly car payment in the U.S. is now nearly $500 which, many of us, remember when our house payments were not $500!

Geez Louise, how'd I go down that road? Oh, well, gotta backtrack now, and get back on the road that takes us to Margaritaville! HA! I know how I got there. I heard Wasted Away In Margaritaville on the radio on my way in this morning! OK. now that all that silliness is out of my system. Have you noticed the rise in the price of Oil in the currency roundup in recent days? On September 10, the price of Oil was in danger of slipping below $90. And then the bounce came, and since then it's been a steady climb to nearly $95 this morning. ($94.75) . Of course I'm talking about the WTI Oil price, West Texas Intermediate, black gold, Texas Tea. The Brent Oil price, which is used for European markets, has dropped like a rock in September, nearly falling to parity with WTI. There are calls for Brent to become the claim as the "benchmark" Oil price. But, I'll stick with good old West Texas Intermediate!

So, one of the anti-dollar assets, Oil, is holding its end of the deal. Because Gold sure isn't. And we've already talked about how the euro isn't either! Yesterday, I had a nice conversation with one of my fave Trade Desk people at a different firm. She told me that their firm had lowered their forecast price for the euro. I told her I had just told my readers that I had too. So, I beat them to the punch! But the one that makes me sad about not being able to hold up its end of the deal is Gold. The beaten and beleaguered shiny metal has been manipulated downward for over 3 years now. Will the manipulators ever get tired of this game, and go home?

The Aussie dollar (A$) has bounced off lows overnight and this morning, and kiwi is flat, so a tourniquet has been wrapped around to stop the bleeding. I'm really concerned about the whacking that these two took last week after each currency's respective Central Bank sprung the trap door under each currency. I know that in N.Z. the Reserve Bank of N.Z. (RBNZ) Gov., Wheeler, had a reason that he thought was more important than allowing inflation to enter his economy with a weaker currency. But he's wrong, dead wrong. and he'll rue the day that he did this.

The A$ being the larger of the two economies, is a different story. It should be able to weather the storm of a Central Banker going rogue on it. But there are times that the A$ & kiwi get traded as if they are one in the same. And this is one of those times. And yes, N.Z will be hiking rates in 2015, probably to the tune of 75 Basis Points, but that's not helping kiwi now.

The protesters in Hong Kong have continued to cause disruptions to the Hong Kong economy and put pressure to weaken further on the Hong Kong dollar / honker. I don't think that the Hong Kong Leader, Leung, gets it. You have protesters screaming for him to resign, and he comes out and says the street demonstrations should be called off because they have gotten out of hand. Oh, now that's going to calm everybody down, now isn't it? YIKES! Look for the protests and disruptions to continue here.

The Chinese renminbi was allowed to appreciate overnight. The Chinese don't get to wash their hands of this mess in Hong Kong, as the Leung is "their man". Which is why I don't see the protesters claiming victory any time soon. But China is watching this going on. And I think they don't like it one iota. China doesn't like these kinds of things and the Tiananmen Square public relations nightmare is still fresh on their minds.

The Canadian dollar / loonie, which had been quite resilient in holding on to 90-cents finally gave in and dropped below the figure yesterday, and even further in the overnight and morning sessions. With Commodity prices falling, the appeal of a Commodity Currency sure has slipped into the background. The A$ and kiwi, along with the S. African rand had already given blood, but the loonie resisted. But now the loonie has joined its Commodity Currency brothers. The fundamentals, other than commodity prices, are not that ugly in Canada, in fact they look better than most places, but the draw of the commodity prices is too great right now to overcome.

That brings us to the important question of the day. Is the Commodities Bull Market run over? I guess if our old friend Jim Rogers were here to ask that question, he would have our answer! We began our 14th year in 2014 of the Bull Run in Commodities. Jim told us quite a few years ago in his book: Hot Commodities, that in the history of Commodities, their bull market trends average 17-22 years in length. But something has to give here, eh?

So, have you seen the footage of how far the fence jumper at the White House made it into the building? That's crazy! I would have to think that there's a whole secret service detail that's being shown the door, for that's what I would do if I were the President, and some wacko got into my house!

OK. Well, meanwhile, back at the ranch. Here in the U.S. we continue to experience a very uneven recovery. That's why I still refer to this economy as being in a depression that began with the financial meltdown in 2008. You know, speaking of that, a lot of people think that the meltdown began with the collapse of Lehman Brothers. But I say it happened earlier, and the pot was just beginning to boil when Bear Stearns had to put themselves up for sale and be rescued from collapsing. Here's a little known fact about this whole mess. Did you know that Bear Stearns was sold to JP Morgan Chase for $10 a share, far below the $133 a share price it held before the crisis began to unfold. But the $10 a share was far better than the originally agreed upon price of $2 a share. That was March 2008. I was in Jupiter Florida, and said to my spring training buddies at the time, borrowing a phrase from my friend the Mogambo Guru, "We're all freakin' doomed"!

We got home from Spring Training that year, and my buddies were chiding me for being so paranoid about the Bear Stearns announcement, but in a couple of months they wouldn't be chiding me any longer. And as far as the depression name for the rot on the U.S. economy's vine goes. Think about it. What vision comes to your mind when you think of the Great Depression. Soup lines, right? Well, change the Soup lines with the rise in Food Stamps. Instead of standing in line for food now, people get a check, credit card, or probably even direct deposit into their checking account to go to the grocery store with. How can an economy be any more than uneven in recovery with that going on?

The U.S. Data Cupboard printed Personal Income and Spending yesterday, and Spending rebounded in August from July's revised -.1% print. August Spending increased .5%, which beat expectations, and the Spin Doctors would tell you that that's good for the economy, you know, spend, spend, and spend some more, or as my grandmother used to say, "forever and a day". Unfortunately, Personal Income only increase .3%... I'm not one to allow the Spin Doctors to dictate how I feel about stuff. So, I'll continue to think that when we spend more than we make, it's not a good thing. Short-term you get all the giggles from spending, long term you have to figure out how to pay for it!

The Data Cupboard today, has the S&P/CaseShiller Home Price Index for us to view, and it should show drop in the index. The data is for July, so it's almost like, who cares? The markets do, so we have to! The Consumer Confidence index will also print, and probably show that those surveyed think it's all sunshine, lollipops and rainbows out there.

Before I head to the Big Finish today I wanted to mention that yesterday I talked a bit about the whistle blower that recorded the meetings between the NY Fed and Goldman Sachs, and she was now releasing those audio tapes, that basically tell the story of regulators being told to look the other way. Well, now, the U.S. Banking Committee is calling for a full investigation and hearing on all of this. Sure, when the whistle blower tried to tell everyone what was going on, it was shrugged off, but now that there's audio tapes. showing unwillingness by some Fed supervisors to both demand information from Goldman and criticize its conflict-of-interest policy, there's going to be hearings. I bet the whistle blower is sure glad they hit "record" when they did!

For What It's Worth. A dear reader (thanks Bob!) that sends me stuff worth reading all the time, sent me this last week, and I read it, thought to myself it would make great FWIW stuff, and then forgot it was in my email box. UGH! So, with no further ado here's an article that talks about the U.S. credit rating.

"Standard & Poor's found out when it stripped the US off its AAA rating in 2011 over the debt-ceiling charade. The Department of Justice then sued S&P over its role in the financial crisis, that is, for slapping AAA-ratings on toxic securities to pocket fatter fees from issuers. But the other ratings agencies did the same thing and have not been hounded. So S&P claimed that the "impermissibly selective, punitive and meritless" lawsuit was "in retaliation" for the downgrade.

Though the Government denied the retaliation angle, it was a lesson no credit ratings agency within the long and sinewy arm of the Government would ever forget. But now Fitch is inching gingerly toward that abyss. While it affirmed {1} the US at AAA, Outlook Stable, it threw in some potentially devastating caveats.

What drives America's dubious AAA-rating? "Unparalleled financing flexibility as the issuer of the world's pre-eminent reserve currency ."

So endowed, "the US rating can tolerate a higher level of public debt than other AAA sovereigns". The "threshold" for the US is a gross national debt of 110% of GDP, the highest threshold of any country "owing to its exceptional financing flexibility". But if the US hits that 110%, it would be "incompatible with AAA".

Other factors also contribute to that "exceptional financing flexibility", including America's vast and liquid capital markets, its "large, rich, and diverse" economy, "one of the most productive, dynamic, and technologically advanced in the world". Nevertheless, growth in that miracle economy in 2014 is going to be a "sluggish" two percent, just above stall speed. And Fitch sees the medium-term growth potential at a languid 2.2%.

So Fitch estimates that the gross national debt - "excluding trade payables and unfunded pension liabilities, consistent with EU countries" - would hit 100% of GDP at the end of 2014. It sees a "debt peak" of 104% of GDP in 2024, based on this way of counting, which excludes any kind of recession or a market swoon. Since this 104% is "below the threshold of 110%", Fitch does not "anticipate" a downgrade."

Chuck again. Interesting way of looking at this process, eh? Fitch says if the U.S. national debt hits 110% of GDP then the credit rating of AAA would be incompatible. Of course this ratio gets calculated seven ways from Sunday, so, it all depends on who's counting the beans! And of course you can read it all here: http://www.reuters.com/article/2013/10/16/us-usa-fitch-idUSBRE99E12H20131016

To recap. The dollar is still in charge. I think I'll be saying that for a couple of months, so get used to it. The euro, which tried to rally yesterday, is getting sold big time this morning, as we draw closer to the ECB meeting on Thursday. Inflation in the Eurozone also inched downward again to .3%, which is not going to put ECB President Draghi in a good mood. The Commodity Currencies are getting sold on the drop of Commodity prices. Is the Commodity Bull market over? And the Hong Kong protesters are still at it causing disruptions in the Hong Kong economy and with the honker.

Currencies today 9/30/14. American Style: A$ .8710, kiwi .7755, C$ .8945, euro 1.2585, sterling 1.6185, Swiss $1.0435, . European Style: rand 11.2695, krone 6.4550, SEK 7.7675, forint 246.60, zloty 3.3180, koruna 21.8480, RUB 39.48, yen 109.80, sing 1.2765, HKD 7.7675, INR 61.75, China 6.1525, pesos 13.32, BRL 2.4470, Dollar Index 86.19, Oil $94.75, 10-year 2.51%, Silver $17.24, Platinum $1,301.50, Palladium $778.00, and Gold. $1,206.38

That's it for today. Well, the first Wild Card playoff game is tonight and features the other MLB team from Missouri. The Kansas City Royals. Every time I say K.C. Royals, I think of Don Denkinger, and his blown call in the 1985 World Series that cost the Cardinals the Series. My beloved Cardinals will begin on Friday night in L.A. against the all-mighty Clayton Kershaw! Just because we got to him in last year's NLCS, doesn't mean we'll do it again this year. He's one tough hombre when it comes to pitching! Little Everett was at the house last night, and he came in so proud that he had money (a quarter and a nickel). And he gave the coins to me and said there go you, General. Then Kathy came in the room and he asked for the coins back and gave them to her! I said, Oh, no! He's already trained! HAHAHAHAHA! Yahoo! My fantasy football team finally put 100 points on the board and won! Just shows to go ya, that even a blind squirrel can find an acorn! And single ladies, I'm afraid that you'll have to dream about marrying someone else, George Clooney is taken. HA! Alrighty then. I'm going to get out of your hair for today. I hope you have a Tom Terrific Tuesday!

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





Posted 09-30-2014 12:59 PM by Chuck Butler
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