Daily Pfennig : Australia

Japan Posts a 4.8% GDP!

Chuck Butler — Mon, 16 Nov 2009 15:19:00 GMT

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In This Issue..

* Risk Aversion goes away mad...
* China just says "no" to currency flexibility...
* Maybe a return to fundamentals?
* Gold continues to soar!

And Now... Today's Pfennig!

Japan Posts a 4.8% GDP!

Good day... And a Marvelous Monday to you! It's raining here, so it's one of those Rainy Days and Mondays... But I won't let it get me down, as opposed to the song! I got a chance to check out our new digs in the building next door to us here... Very nice! And... A long way from that small office I sat in on Olive St. a decade ago, when we started EverBank... To think back 10 years ago, and where we are today... Simply amazing!

OK... As I told you Friday, the President was in China this past weekend, trying his best to get the Chinese to agree to a greater flexibility for the renminbi... Well... There were a few stories this past weekend that hinted about the Chinese agreeing to do such... But I prefer to go with this story that appeared on Reuters last night... "The Chinese government has sought to distance itself from speculation surrounding a central bank statement earlier this week that was interpreted as a shift in currency policy towards a stronger yuan. However, a report on Saturday by Xinhua, the state-controlled Chinese news agency said that the government would not allow the currency to gain against the dollar in the short term."

Wang Qing, chief Asia economist for Morgan Stanley in Hong Kong, said in a report to clients: "I consider this article an official effort by Chinese authorities to dismiss the renewed speculation of yuan appreciation in the near term."

So much for that visit to China, eh? Put that one down next to the visit to Copenhagen earlier this year... Ahem... 3 strikes and you're out in baseball... But, getting back to the trip to China... The Asia-Pacific members were pretty tough with their questions for the U.S. President, questioning his commitment to free trade... And then let him know that China is going to fight protectionism, and keep the renminbi on a leash...

On Friday, we had the currencies add a bit to their rally on Thursday, as the Risk Aversion campers were sent home without a ball... No need to go away mad... Just go away! There was a bit of interesting data reaction that happened on Friday, which only gave me some hope of returning to fundamentals... The U. of Michigan Consumer Confidence Index fell in October, which wasn't expected one iota... And... The dollar sold off! That's exactly what should happen when a country's economic data prints badly! So Hur-ray! YAHOO! But... Just like I always say... On swallow doesn't make a summer, and one reaction to a data print doesn't make for a shift in fundamentals... But could it be a start? Yes, it could... But we'll need to see more of this type of trading after data prints to indicate that the old "trading theme" has been put in our rear view mirrors, and that fundamentals have returned... But wouldn't that be a happy day? Oh happy day... Oh happy day...

I'm going to tell you this next bit, and you're not going to believe it at first... But stay with it... There was good news in Asia overnight, as the Japanese printed a 3rd QTR GDP report that showed an annualized rate of +4.8%! That was 2.9% higher than the "experts" forecast for Japan! So... Even Japan is joining the other Asian and pan-Asian countries (Australia) in posting strong economic growth!

The Asia-Pacific leaders pledged to keep stimulus measures in place until there's a "durable growth"... Hmmm... Here's hoping that the Asia-Pacific leaders let us know when that happens, for 4.8% annualized growth for Japan, sure seems like "durable growth" to me!

And... In keeping with our hopes that fundamentals return to currencies and commodities... The strong economic data for Japan, did not quash the yen! In fact, the yen has traded stronger VS the dollar overnight!

Speaking of trading stronger VS the dollar overnight... Have you seen the price of Gold? WOW! Gold has set, yet another, all-time record high overnight of $1,133! It has since given back some of that to trade at $1,127... But still... WOW!

You know... Just about 10 days ago, the dollar was looking as if it was going to make a comeback / correction... I even saw a cute little poem a trader wrote about it being the end of euro strength... But here we are 10 days later, and the dollar is looking quite weak again... The euro is back to pushing the envelope to 1.50 VS the dollar, and I just told you about Gold's run VS the dollar...

Of course this doesn't mean that a correction couldn't take place today, tomorrow, or the next day... I'm just pointing out something that I've told you all about for years now... And that is: short term forecasting for currencies is usually wrong! So, then, people ask me... Why then do you write a daily letter about currencies, Chuck? Ahhh, grasshopper, because, someone has to make sense of this daily noise, and... You never know when a "turn" might happen in the currencies...

The Aussie dollar (A$) spent the overnight sessions trying to get past .9350, but failed to do so, especially on the back of a note from a local bank analyst who went out on a limb and said the Reserve Bank of Australia (RBA) would be on hold at their next meeting on Dec. 1st... Well, that may be... But I still believe the RBA will hike rates in December! But if they don't, then we could look for an even larger hike when they come back in January! So, this keeping the A$ below .9350 won't last long, in my humble opinion!

We could get some traction from the euro and other Euro-type currencies this week, as the Euro Finance Week in Frankfurt will take place with top leaders speaking on the financial crisis and lessons to be learned from it... German Chancellor Angela Merkel, who's always good for some interesting quotes, will speak, as will European Central Bank (ECB) President, Jean-Claude Trichet...

Speaking of Euro-type currencies... The Norwegian krone, continues to follow the Big Dog, euro... But when the Big Dog, euro gets going, the krone normally out performs the euro... So... The Big Dog, euro is the key here...

OK... For some time now, I've been trying to point out to you that monetary inflation is going to sneak up on us and rip apart our investments... My good friend, David Galland, had this to say in his Friday letter... Here's David!

"Just because it's not readily apparent doesn't mean it's not there. Of course, I'm referring to the government's monetary inflation, which, thanks to a combination of factors, still hasn't jumped out of the closet to scare bond markets into cardiac arrest."

David then goes on to show his readers a table that had useful details on the progression from normal to very much not normal, leading up to the German Hyperinflation of the early 1900's... David then says, "As you can see, the situation in Germany was not so bad - until it was."

If you would like to see the "table" David refers to... Or read his excellent letter... Click here... http://www.caseyresearch.com/quick-guide/free-publications/

OK... You know, the soaring Gold price has been mostly tied to the weak dollar... But, you would have to think that "smart investors" with an eye on this monetary inflation is having some push to the price of Gold too... I know that's why I own Gold... The weak dollar thing is just icing on Gold's value in my opinion... The inflation hedge... The Deflation hedge... Or... As I call it... The "uncertainty hedge"...

And then there was this... The other night I was discussing the Health Care stuff, and told the person I was talking to that the stimulus bill, you know the one that was pushed through so fast last winter because we as a country were "near total collapse"? Well, the stimulus bill had hidden in it, part one of the Obama Health Care Plan... Hmmm didn't know that? Well, yes, grasshopper... It's the "death panels" that Sarah Palin coined them... They are called the rationing and enforcement board. And... The President has already funded them with $20.6 Billion of our taxpayer dollars!

Now... I'm not going to get into a discussion of the Health Care here... My point was simply to show that when bills are passed, it is important that they are read aloud to the people, to keep from "hiding" things in the bills... $20.6 Billion of money that the Gov't did not have!

Ok... Enough of that... My good friend, Dr. Dave Janda, was the first to expose this "hidden gem" And he's been on the speaking circuit trying to get anyone that will listen to him, and they should, to understand what's going on...

Currencies today 11/16/09: American Style: A$ .9340, kiwi .7445, C$ .9555, euro 1.4970, Sterling 1.6720, Swiss .9920, European Style: rand 7.3910, krone 5.5730, SEK 6.8060, forint 178.90, zloty 2.7375, koruna 17.0530, RUB 28.68, yen 89.50, sing 1.3850, HKD 7.75, INR 46.22, China 6.8269, pesos 13.01, BRL 1.7125, dollar index 75.03, Oil $77.19, 10-year 3.40%, Silver $17.85, and Gold... $1,130.30

That's it for today... Our resident TV personality, Ty Keough, was announcing the Missouri Valley Conference Soccer match yesterday on Fox Sports Midwest... Ty had a great line during the match, referring to one shot by a player as being a "venomous shot!" I made a drive to the country yesterday to visit my graves of my parents and oldest sister... It had been a couple of years since I made that drive, my bad... The little country town that our family farm sat outside of, hasn't changed... It's still the same quiet little country town in mid-Missouri... Went to dinner with good friends, Lisa and Kevin on Saturday night, they used to be our neighbors, and now we rarely see them... UGH! OK... Mike's here, so that means it's time to hit "send"! I hope you have a Marvelous Monday!

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

Risk Aversion Creeps Back Into The Currencies...

Chuck Butler — Thu, 12 Nov 2009 15:32:59 GMT

..But First, A Word From Our Sponsor..
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* High upside potential
* No market risk to deposited principal
* Low $1,500 minimum deposit

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In This Issue..

* Comments spook currency traders...
* A$ hits 15-month high, this time going up!
* Geithner as the "joker"?
* China changes statement about the renminbi...

And Now... Today's Pfennig!

Risk Aversion Creeps Back Into The Currencies...

Good day... And a Tub Thumpin' Thursday to you! It's a Thursday, and it's not raining here! YAHOO! After a week of Indian Summer weather, we're slowly creeping back to the colder weather, but still, better than most Novembers of the past, so far!

That was a strange feeling yesterday, having a holiday in the middle of the week, but the day was nice, and I got to spend the day with my granddaughter, Delaney Grace, who sang me songs all day long!

So... Last night, I'm doing some writing, and before I put the laptop to bed for the night, I checked the currencies, and while they had drifted in the early Asian session, the Big Dog, euro was still trading above 1.50, and the Aussie dollar (A$) had set a 15 month high of .9368... But when I turned the currency screens on this morning after arriving to a pitch black office, which is the way I like it this early in the morning, the euro had given back about 1/2 cent, and so had the A$... So, it was my mission to find out what caused this slippage...

The only thing I could find was a comment by the Chinese Premier, Wen Jiabao, who said that "the world faces an uneven recovery"... This made traders think twice about leaving me behind, no wait... I mean they thought twice about the green light they thought they were under to have carte blanche with the dollar...

The dollar also received a bit of love from the comments by U.S. Treasury Sec. Geithner, a.k.a. the Cheater... Geithner was doing his best Robert Rubin, circa 1995, saying that he believes strongly in the need to maintain a strong dollar and said the United States was determined to get its budget deficit down. HAHAHAHAHAHAHAHAHAHA! That's a joke, right? OH! He wasn't joking? Are you sure? Because for a minute there, I really thought he was joking, for what, in the past, has he or this administration done to back up those words? But he wasn't joking... Hmmm... And I was all ready to give him a new nickname... The Joker...

Geithner did say that the U.S. was well aware it must work to keep investors' confidence in U.S. economic policymaking... Yeah, and that's exactly what you've done, right? NOT! Hey Timothy, you might want to check the scorecard on your performance so far... The dollar index has fallen 7.6% this year, and hit a 15-month low of 74.89 yesterday...

OK... I've got to go on to something else, otherwise I'll say something that will cause people to fill my email box with nasty emails! But... It sure looks like Risk Aversion has crept back into the currencies after all these statements... We seem to run into these Risk Aversion stints about every week... They come, they take away gains, and they go away, thus allowing the gains to be reinstated...

How about that 15-month high for the A$ yesterday of .9368? At least this time the currency is on the way up when it hit that 15-month figure... 15 months ago, it was on the way down! So, here's the skinny on this move by the A$... Australian employers added jobs in October... This was unexpected... But... Caused the immediate response of speculating that the Reserve Bank of Australia (RBA) would indeedly do, raise rates at their next meeting on Dec. 1st...

There was another "push" to the A$ yesterday... And it came from Gold! The shiny metal pushed to yet another new all-time high record level of $1,117 during the day... I might remind you here that Gold is Australia's third most-valuable raw material export... Oh! By the way, Australia's unemployment rate is now 6.5%, which is still too high, but falling... And doesn't that have a nice ring to it, versus saying an unemployment rate is rising past 10%?

The A$ pulled its kissin' cousin from across the Tasman, New Zealand dollar / kiwi along for the rally yesterday... Kiwi continues to be haunted by the ghost of deficits past... But, hiding in Australia's shadow suits kiwi just fine... And New Zealand Retail Sales just posted a nice, surprise, uptick... There are all kinds of reports going around that say the New Zealand 3rd QTR GDP will be strong... I'm from Missouri, so they'll have to show me!

There was further news out of China yesterday, from the People's Bank of China (PBOC)... The PBOC stated that "the exchange rate will be guided in a proactive, controlled and gradual manner and based on international capital flows and movements in major currencies." What's the news of this you might be asking? Ahhh grasshopper, sit... Here is the news... That statement is completely different toward the Chinese currency than previous statements that said that the PBOC would keep the currency "basically stable"...

This is Central Bank parlance folks, to say that the PBOC will continue to "gradually" move the renminbi... As previously they basically said they would keep it at current levels... The foreign newspapers are all over this statement like a cheap suit, folks... But I think they're going in the wrong direction... The foreign newspapers are thinking that the PBOC has given the "high sign" that they are ready to allow the renminbi to float... Buzzzzzzzzzz! I'm sorry, that's the wrong answer... We hate to see you leave, but Johnny, tell our contestant what they've won!

I just don't see it as that... The Chinese like to play these games with words, to get everyone all lathered up... And then pull the rug out from under them... No rug pulling from under me!

The Wall Street Journal (WSJ) is reporting this morning that Central Banks around the world, like the Russian Central Bank, are buying dollars to underpin the currency from a free fall... The WSJ also said the Asian Central Banks have all been buying dollars to keep their currencies from getting too strong... Hmmm... I wonder how that's been working out for them? Oh... Here's the skinny on that... "Quite clearly, all Asian central banks have found it necessary to intervene, and it's costing us," said Korn Chatikavanij, Thailand's finance minister.

So, it's kind of nice to see other Central Banks around the world throwing good money at bad money, like the Fed Reserve has done for 15 months now... At least they're not throwing money down the toilet, nononononononono! YES THEY ARE! They're buying dollars! What dolts!

OK... While I was browsing through the WSJ, I saw another story that caught my attention... Here was the headline... "Fannie Mae, Freddie Mac say more losses are possible"... According to the WSJ, the U.S. Treasury has already injected $112 Billion into Fannie Mae and Freddie Mac since the government took them over last year... And now, more losses are possible?

Let's see... The Government took them over, and more losses are possible? Sounds like the Post Office... Sounds like Amtrak... What else has the Government taken over, and the bleeding continues? I know, and you know where I'm going with this, so I'll stop there!

What some more depressing data? October saw 332,292 U.S. homes seized by lenders or listed in default or auction documents according to RealtyTrac... October was the 8th consecutive month of 300,000 or more.... There was a 3% decline in October from September, but I wouldn't get too lathered up about that, given the chart I saw and shared with the desk the other day regarding residential loan resets that are coming due in the next two years, with peaks in Sept of 2010, and Sept 2011...

Looking at this chart tells me that the cartel, I mean the Fed will have no other choice but to keep rates low, and to keep buying Treasuries to keep the yield from getting too high... Haven't we learned anything the past 10-years? You have to learn from previous mistakes or you'll make them all over again... And that, is what, I, believe, the Fed is doing! The tried like heck to keep the Tech Bubble from bursting, by keeping rates artificially low, and credit loose as a goose... What were the unintended consequences of those actions? And what will be the unintended consequences of these actions by the Fed? I don't have an answer to that, but I don't see how this works out nice for the U.S. economy and taxpayers...

Before I go on... A reader sent me a note that made me laugh... He said, "Hey Chuck, since you can't decide on whether or not call the Fed the Fed or the cartel... Why don't you just put them together and call them the Fartel"? HAHAHA HAHAHAHAHAHA!

The data cupboard finally gets restocked today, and we'll see the usual Thursday fare of Initial Weekly Jobless Claims, which remains above 500,000 every week, and something that Tim Geithner might want to pay attention to... The U.S. Monthly Budget Statement, which will be somewhere around $160 Billion for October... Annualized, that's almost a $2 Trillion deficit in the Budget! OUCH! Say it ain't so, Joe!

To recap... The non-dollar currencies rallied all day yesterday, but have given back those gains in the overnight sessions. Most of the slippage has been from words, not actions. The Chinese premier, and the U.S. Treasury Sec. So... Don't look for this to be any reversal of the weak dollar trend... The Aussie dollar hit a 15-month high last night on a strong employment data report, which has traders thinking another rate hike on Dec. 1st is coming, and the Asian countries have been buying dollars to keep their currencies weak, and according to them they are "paying the cost"!

Currencies today 11/12/09: American Style: A$ .9315, kiwi .7370, C$ .9315, euro 1.4950, sterling 1.6580, Swiss .99, European Style: rand 7.4380, krone 5.6050, SEK 6.8550, forint 180.50, zloty 2.7645, koruna 17.0490, RUB 28.79, yen 89.80, sing 1.3870, HKD 7.75, INR 46.65, China 6.8267, pesos 13.17, BRL 1.7150, dollar index 75.25, Oil $78.67, 10-year 3.44%, Silver $17.57, and Gold... $1,116

That's it for today... Isn't that something, the Gold move? My good friend, David Galland, said that Gold is "blowing a raspberry"! HA! Well... Now that my blood has been thinned out, and had the consistency of water, the swelling in my left leg has backed off just a bit... At least I don't have to continue with the shots! Next week I go back to the cancer doctor that has been treating my left eye that was taken over by cancer... I really don't know why I have to go back, he told me last time there "was nothing else he could do"... All these things, and still life goes on, right? Yep! Little Delaney Grace was really cute the other day, trying to pawn off her carrots to me, she kept telling us that the carrots were mine to eat, not hers! Well... I'm locked down in St. Louis until late January... But my annual Christmas vacation will break things up... I know, it's a month away, but I can't help starting to get geeked about it! OK... A little long here with the Big Finish, I had better get going on this Tub Thumpin Thursday!

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

German Business Confidence Slides...

Chuck Butler — Tue, 10 Nov 2009 15:18:01 GMT

..But First, A Word From Our Sponsor..
Gain exposure to currencies of emerging BRIC countries-and don't lose a dime on market risk

* 4 BRIC currencies: Brazilian real, Russian ruble, Indian rupee, Chinese renminbi
* High upside potential
* No market risk to deposited principal
* Low $1,500 minimum deposit

Don't miss this unique opportunity. Deadline to buy the BRIC MarketSafe CD is Dec. 3rd, 2009. Apply today or learn more at http://www.everbank.com/001CertificatesMSBRIC.aspx?referId=11808
.

In This Issue..

* Currencies trade in a tight range...
* $81 Billion in Treasury auctions this week!
* Fitch fans the flames of a fire in the U.K....
* Aussie Business Confidence rises...

And Now... Today's Pfennig!

German Business Confidence Slides...

Good day... And a Terrific Tuesday to you! I didn't start out this Tuesday on the right foot, and now I'm really running late! Oh well...

The non-dollar currencies didn't move much yesterday, the euro bumped up and down against the 1.50 figure, while the A$ did the same against 93-cents, and Swiss against parity... So the currencies are trading in the same clothes they went to bed in last night!

The Big Dog, euro, did attempt to move stronger into the 1.50 level, but that move was thwarted by a poor reading of German Investor Confidence this morning. German Investor Confidence as measured by the think tank ZEW, reported that their index had fallen to 51.1 this month VS the 56 in October. Most of those Germans surveyed said that they expect the economic recovery to be slow once the Gov't removes the stimulus in the economy. So... Previous euphoria is being replaced by realism... But that's OK... Better to have a reality grip on things than to go around thinking that everything is seashells and balloons...

But, the ZEW report hasn't dampened the euro's spirit too much, as the single unit has remained above 1.50 even after digesting the ZEW... But looks vulnerable...

The ZEW report gets all the ink... But on the back page we can find that German industrial production increased 2.7% in September compared with August, which saw a 1.8% rise.

Hey did you know that the U.S. is auctioning off another $81 Billion in Treasuries this week? Yes, this total is lower than the recent auctions the U.S. has held... But still... $81 Billion isn't anything to ignore! However, with the nutcases in the world, shooting off missiles, and ramping up nuclear capabilities, there's still some people that believe U.S. Treasuries are a "safe haven"... Of course I've proven that those that believed that and bought during the financial meltdown, lost tons of money... But don't let that get in they way of a "good story"... And so it will be, that this auction will not be the "one that fails"... But, in my opinion, we will experience that at some time in the next year, especially given the Gov't deficit spending!

And... If an auction of U.S. Treasuries fails... Well... Being long Treasuries isn't going to look too much like a "safe haven" position!

I was supposed to give a presentation last week in Los Cabos on the Treasury Bubble... Of course, we all know that I was not there, so I didn't give the presentation... UGH!

OK... There was all kinds of rumbling, stumbling, bumbling going on in the U.K. overnight, as the rumors were flying that the ratings agency, Fitch, said it would lower the U.K.'s AAA rating... Finally it was confirmed that this was stated in an interview with Reuters, and not an official communiqué' by Fitch... But, dear reader, when there's smoke like this, you can bet there's fire! The pound sterling has taken this news like a blow to the mid-section...

In Australia overnight... Australian Business Confidence rose to near 6 year highs for the index... October's index reading was 16, which was plus 2 from September's index reading. The businesses surveyed strongly believe that the Reserve Bank of Australia will once again raise rates in December... I loved this quote from the Australian Trade Minister, who said, "Despite the A$ going up, manufacturing has improved, and manufacturers just have to learn to accommodate this sort of thing going forward using hedging."

That's right! Tell 'em! Deal with this A$ strength and quite your whining! I love it!

The Canadian dollar / loonie continues to push higher VS the green/peachback dollar... This is all commodity related, as the data in Canada continues to be mixed, with the Bank of Canada (BOC) keeping rates in line with the U.S. thus, keeping the loonie from looking attractive... But, that's OK... With Gold inching higher and higher, Oil hovering around $80, and other commodities moving higher in price, the Loonie can get its lipstick from commodities to look attractive!

Speaking of Gold... I saw this quote and thought it hit the nail on the head... "It's not that gold has changed, but gold buyers have changed," said Suki Cooper, a precious-metals strategist for Barclays Capital. "It's a structural shift we're seeing on the investing side, from Asian central banks right down to individual investors buying ingots and coins."

That's right! Gold hasn't changed... It's still has to be mined out of the ground, it can't be made by any alchemist, it has to be mined... And the demand in Gold has skyrocketed in the past couple of years, thus pushing people to send in their gold bracelets, necklaces, and rings to cash in the Gold price surge... So... This group of people over here are selling any and all Gold they can get their hands on, and this group over there are buying it, for a rainy day...

Gold's recent rise has been spectacular to say the least, moving through the $1,000's to $1,100 very quickly... I think there are two things in play here... 1. the demand for Gold driving the price higher, and 2. the dollar's weakness. I heard a guy say the other day that "Gold hasn't gained... The dollar has gotten weaker"... What? Nothing about the demand?

We don't have any "real data" today to speak of in the U.S. but we've got a truckload of Fed Heads out on the speaking circuit... Lockhart, Yellen, Rosengren, Tarullo, and Fisher all will be speaking about something today... Shoot Rudy, even former Fed Chairman, Big Al Greenspan is going to speak today... No telling what he might say! Of course, if the subject comes up regarding the financial meltdown, he'll say that he had nothing to do with it! HOGWASH! And we all know it! So, it doesn't matter how many times he tries to absolve himself from any responsibility for the financial meltdown, we all know that at the root of it all... Sits Big Al Greenspan...

And then there was this... The folks over at Barclays say that they have recalculated the dollar's share of global currency reserves... The dollar, which once stood at 80% of global reserves, and right before the current weak dollar trend began in 2002, it stood at 73% of global reserves, has fallen to 62.8%... But... Says Barclays... This is almost entirely a result of weaker valuation rather than attempts by central banks to diversify holdings away from the dollar... Hmmmm... Now... I do agree that the euro's gains VS the dollar in the past 7 years would cause quite a bit of slippage in the dollar's value in terms of reserves held by central banks... But "almost entirely"? I doubt it... One could point at the Reserve Bank of India's purchase of Gold last week... They bought $6.7 Billion "worth" of Gold... You can't tell me that wasn't to diversify their reserves!

OK, to recap... Chuck's running late today... The non-dollar currencies are trading in the same clothes as yesterday. The ZEW German Business Confidence slipped this month, although Industrial Output rose. The U.S. is auctioning $81 Billion worth of Treasuries this week, and the demand for Gold is really pushing the envelope in terms of Gold's price!

Currencies today 11/10/09: American Style: A$ .9280, kiwi .7415, C$ .9455, euro 1.4990, sterling 1.6670, Swiss .9915, European Style: rand 7.44, krone 5.5960, SEK 6.8580, forint 181.50, zloty 2.81, koruna 17.0420, RUB 28.71, yen 90.10, sing 1.3880, HKD 7.75, INR 46.48, China 6.8267, pesos 13.30, BRL 1.71, dollar index 75.10, Oil $79.54, 10-year 3.36% (notice how, whenever the 10-year yield gets to 3.60%, it comes back down?) Silver $17.25, and Gold... $1,100

That' it for today... HEY! Tomorrow is a holiday! So, no Pfennig tomorrow! It's Veteran's Day tomorrow... My dad was a Veteran... And each year, I go back to a story that my darling daughter, Dawn told me... A few years ago, at Dawn's school, they had a Veteran's Day celebration, and had everyone bring in pictures of relatives in their military uniforms... When the picture of my dad, (Dawn's grandpa) came up on the screen, she was amazed, and sent me a note saying she had never seen how much I look like her grandpa (my dad)... So... Let's not just take the day off tomorrow... Let's stop to think about why the day is a holiday! And thank a Veteran... That's all... I hope you have a Terrific Tuesday, and I'll talk to you on Thursday!

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

Dollar drifts lower....

Chuck Butler — Fri, 06 Nov 2009 15:30:36 GMT

..But First, A Word From Our Sponsor..
Gain exposure to currencies of emerging BRIC countries-and don't lose a dime on market risk

* 4 BRIC currencies: Brazilian real, Russian ruble, Indian rupee, Chinese renminbi
* High upside potential
* No market risk to deposited principal
* Low $1,500 minimum deposit

Don't miss this unique opportunity. Deadline to buy the BRIC MarketSafe CD is Dec. 3rd, 2009. Apply today or learn more at http://www.everbank.com/001CertificatesMSBRIC.aspx?referId=11808
.
In This Issue.

* Dollar drifts lower...
* Looking for silver linings...
* NOK to increase rates...
* Aussie dollar continues to move up...

Dollar drifts lower....

Good day... And good morning to everyone. I wanted to start out this morning's Pfennig by saying my thoughts and prayers go out to all of the families of the fallen soldiers and civilian at the tragedy down at Ft. Hood. It is tough enough when we here about losses of our soldiers overseas in the 'combat zones'; but such a large loss of life right here in the US is deeply saddening.

The dollar moved lower throughout the trading day on Thursday as investors felt more confident with the global recovery and the US stock market climbed back above 10,000. Yesterday's weekly jobs numbers were slightly better than expected, and set the market up for this mornings monthly jobs report which will probably show fewer job losses in October compared to September. But there will still be job losses, not gains; and the 'official' unemployment number will inch closer to double digits. We all know if you count those individuals who are underemployed (part time workers who would like full time jobs) and those that have given up on their job search, the actual unemployment number is more like 16%.

Another number which was encouraging for economists was the large jump in non-farm productivity. US worker productivity spiked up an annualized 9.5% in October as employers found ways to squeeze more work out of existing employees instead of hiring new ones. This jump demonstrates one of the positive aspects of a severe economic slowdown. Contrary to what some reader's of the Pfennig seem to believe, neither Chuck nor I are happy that the US continues to be mired in this economic recession. But business cycles are inevitable, and the more we 'spend to extend' the longer it will take for the recovery to take hold. The jump in productivity is one positive which comes out of an economic downturn. In the good times, companies become fat and happy, with many companies becoming very in-efficient. The severe slowdown causes companies to rethink all of the processes, and worker productivity increases. This need for higher efficiency also encourages innovations to the manufacturing and service sectors.

Another piece of data due out this morning will illustrate another positive aspect of the economic slowdown. US Consumer credit is expected to show another $10 billion drop. The highly leveraged US consumer is continuing to draw in their purse strings, ignoring calls from the administration to resume their old borrow and spend attitudes. While some of this belt tightening has been forced on consumers by the credit crunch, hopefully we will see this adjustment continue. This isn't good news for retailers as we approach the holiday season, but if the global imbalances are to be corrected, US consumers are going to have to continue to increase their savings rate and decrease debt.

So there are a few silver linings to the economic cloud hanging over the US. The United States will eventually emerge from this economic storm with a leaner and meaner manufacturing sector and a much weaker dollar enabling it better compete in the global arena.

Both the ECB and BOE kept rates unchanged, just as Chuck had predicted. Officials at the Bank of England slowed the pace of bond purchases, but still approved the additional purchase of 200 billion pounds. A rebound in factory output, which rose 1.7% (the largest gain in 7 years) combined with a .2% increase in UK producer prices caused the change of direction by the BOE.

ECB President Jean-Claude Trichet signaled the beginning of the end of emergency stimulus measures in Europe. Trichet said next month's offer of 12 month loans would be the last. Data released yesterday was unable to paint a clear picture of the economic recovery in the Euro-area. German factory orders rose for a seventh month in September, as exports helped the recovery. But another report showed European retail sales fell for a 16th month, declining more than economists had predicted.

The Euro rallied a bit after the ECB decision, but Citigroup is predicting an even larger rally. A report by Citigroup stated that the technical trading patterns predict the Euro will climb to $1.5064 short term, and move up to $1.5285 over time. It continues to look like Europe will recover, and the euro will move higher vs. the US$.

The Norwegian krone also moved higher as Norway's central bank Deputy Governor Jan Qvigstad said it is 'most probable' the deposit rate will be moved another quarte point higher by the beginning of 2010. Officials of the Norges Bank are attempting to hold down some of the appreciation of the krone as Norway continues to increase interest rates to combat rising inflation. Norway's oil rich economy was one of the first to emerge from recession, so the central bank is also taking the lead on increasing interest rates. Yield differentials, along with a strong economy should keep the NOK among the world's top performing currencies.

Speaking of the top performers, I was updating the return charts for the currencies yesterday and was amazed at the returns on the Brazilian real and Australian dollars YTD. Brazil is up 31.42%, and the Australian dollar has increased 28.05% during 2009. The Australian dollar continued to strengthen yesterday as the central bank signaled it will continue to increase interest rates in the coming months. "A further gradual lessening of monetary stimulus is likely to be required over time," the Reserve Bank said in Sydney today. A rally in commodity prices, along with increasing interest rates will push the AUD toward parity with the greenback.

Yesterday was Chuck's Friday, as he took today off to spend some time with Alex who was off school. But before heading home, he asked me to include the following in today's Pfennig:

And then there was this... Yesterday, I totally forgot to mention my complete distaste for naming a designated hitter (DH) the MVP of the World Series... He doesn't play the field... And only batted 13 times during the Series... Baseball people like myself, just cringe when the DH is in play... Giving the MVP to a DH goes along with the thought that is prevalent in sports today... To give every kid a trophy... Oh well... Let's move on to other things because it's YOUR Friday!

I am a little late in getting this out, so I am able to tell you the official US Unemployment rate rose into double digits during the month of October, hitting 10.2%. This will probably give some life to the US$, as investors run away from risk and move back into US treasuries for temporary safe haven.

To recap... Silver linings of the current economic storm cloud: increased worker productivity and decreased consumer credit. The ECB and BOE kept rates unchanged. Aussie dollars continue to move closer to $1, and Chuck really doesn't like the DH!

Currencies today 11/5/09: American Style: A$ .9161, kiwi .7247, C$ .9342, euro 1.4881, Sterling 1.6587, Swiss .9848, European Style: rand 7.5482, krone 5.6747, SEK 6.9866, forint 184.70, zloty 2.8567, koruna 17.27, RUB 28.96, yen 90.60, sing 1.3925, HKD 7.75, INR 46.815, China 6.8274, pesos 13.29, BRL 1.719, dollar index 75.71, Oil $79.60, 10-year 3.5%, Silver $17.50, and Gold... $1,093.55

That's it for today... The Blues finally scored a goal at home, but lost to Calgary last night in overtime. The sun is shining again today, and apparently we are supposed to have a rain-free weekend!! The big EverBank sign went up on the new office building next door, we will be moving into our new digs in less than a month. Hope everyone has a Fantastic Friday and a Wonderful Weekend!!

Chris Gaffney, CFA
Vice President
EverBank World Markets
1-800-926-4922
1-314-647-3837

Rates To Remain Near Zero...

Chuck Butler — Thu, 05 Nov 2009 15:19:00 GMT

..But First, A Word From Our Sponsor..
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* 4 BRIC currencies: Brazilian real, Russian ruble, Indian rupee, Chinese renminbi
* High upside potential
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* Low $1,500 minimum deposit

Don't miss this unique opportunity. Deadline to buy the BRIC MarketSafe CD is Dec. 3rd, 2009. Apply today or learn more at http://www.everbank.com/001CertificatesMSBRIC.aspx?referId=11808
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In This Issue..

* Dollar reverses sell-off...
* BOE & ECB meet today...
* New Zealand is not Australia...
* Funny accounting...

And Now... Today's Pfennig!

Rates To Remain Near Zero...

Good day... And a Tub Thumpin' Thursday to you! It's Tub Thumpin' because it's a Thursday and it's not raining! Yay for us! Well... Not only was I wrong, but the Bloomberg Economic Calendar was wrong too... The FOMC was not a 2-day meeting after all! Just one day, so no time to pull out the board games and cards...

I nailed that FOMC statement yesterday... WOW! You might begin to think that I have some inside info on the Fed Heads, the way I've been able to basically call every move they've made since the beginning of this whole meltdown in August of 2007! But that's not important here... The important thing is that the Fed said that "economic growth is not enough to hike rates, and therefore they will keep interest rates at near zero for an "extended period"...

Hmmm... Where have I heard that before? Any way, I thought that by continuing to use the words "extended period" that the dollar would get pummeled... And momentarily, it looked as though it might, as the offset currency to the dollar, the Big Dog, euro, raced to trade above 1.49... But a funny thing happened on the way to the forum, and the invisible hand reached down and reversed this move in a NY Minute! The work of the PPT? Probably... The Plunge Protection Team, probably stepped in to keep the dollar from a free-fall... That's my take on it any way!

Any way... With interest rates remaining at near zero levels here in the U.S. I thought it to be appropriate to pull out this new nickname for Big Ben... "Zimbabwe Ben"... (Thank's Ty!)

The rate hike decision ball gets thrown over to the "pond" to the Bank of England (BOE) and the European Central Bank (ECB) this morning for their versions of: Leave rates at present levels, but try to sound upbeat... I think you'll have the "tale of two Central Banks" here this morning. While both will keep rates unchanged, I think you'll see the BOE opt for more bond purchases in an attempt to shore up Britain's banking system... The ECB will NOT be making any such announcement.

In fact, I believe we'll hear ECB President, Trichet, announce that the ECB is moving closer to withdrawing stimulus from the economy! So, those of you who have the ability to go long euros VS sterling, this would seem to me to be the "trade o' the day"... What do I know, I'm not a short term "cross trader"!

So... With the FOMC finished... And the two European Central Banks on the docket today, somehow the Risk Aversion has crept back into the markets...

I received an email from a reader the other day, asking me why I prefer Australia to New Zealand, as the kiwi had outperformed its kissin cousin across the Tasman from 2002 to 2008.... Well... New Zealand enjoyed a wider yield differential than Australia during that time period, as it posted the highest interest rates in the industrialized world... Now that's saying something right there, and a good reason kiwi outperformed the A$...

But times have changed... And a very timely talk by Reserve Bank of New Zealand Gov. Bollard yesterday, helps explain why A$'s now over kiwi... Here's Gov. Bollard...

"Both countries have survived the crisis well, due to a mix of strong institutions and stimulative policies. However, their immediate prospects are different. Australia has avoided negative growth, and its prospects are driven by strong terms of trade, vast mineral deposits, the Chinese market, and rapid population growth.

New Zealand has had a recession, and the pick-up is slower and more vulnerable - a difference financial markets do not appear to appreciate.

Australia is a lucky country, but we could be a lucky neighbor.

Australia is entering a new minerals boom, investing heavily and encouraged by new finds, re-opening markets, bottlenecks and strong prices. Strong investment and export growth would mean big challenges for Australian policy. This all means an economy that looks less like New Zealand.

However, Australia's potential raised the prospects for New Zealand's manufacturers and services, which have a bigger share of exports than the same sectors in Australia."

OK... Back to me... So... Australia is a "lucky country" but New Zealand could be the "lucky neighbor"... Makes sense to me!

The Brazilian real rally took a walk on the wild side yesterday, gaining 2.5% VS the dollar in one day! But, that's relatively tame for some of the wild moves we've seen in recent times with the real... As long as you are not watching the currency like a hawk, and sweating out each pip move, this is no biggie... Keep your eyes on the horizon...

I find it somewhat humorous that the Brazilian Gov't officials have tried and tried to throw down road blocks for the real, and the investors just keep coming in droves... The 2% tax on Capital inflows did nothing to slow down the real's move VS the dollar, except for the day it was announced... After that, it was Wayne and Garth playing street hockey once more... "Game On!"

OK... I had a few callers and emails yesterday telling me that I was wrong about the Gold sales to the Reserve Bank of India (RBI), saying that it was done in SDR's... I think the confusion exits in the fact that the Gold sale kept getting reported as $6.7 Billion worth of Gold... But to put these questions to rest... Here is a report from the Economic Times of India (leading financial newspaper)
http://economictimes.indiatimes.com/markets/bullion/RBI-buys-200-mt-gold-from-IMF-to-pump-up-reserves-value/articleshow/5194492.cms
The purchase was in SDR 4.8 Billion worth.

Today in the U.S. we'll see the Weekly Initial Jobless Claims data, which will remain above 500,000 per week... And the ICSC Chain Store sales figures, which if consumer spending has gone back to pre Cash for Clunkers levels, would mean these figures would be soft... But I don't think this data gets much playing time with traders, so we'll just carry on...

And then there was this... OK... So... Some people chastised me yesterday for saying that the Gov't can't prove the 650,000 jobs they claim they "saved"... Well... Here's a ditty for you! Did you know that the Gov't is claiming that by giving a person that already has a job, a raise, it constitutes as "saving" that job? Want more funny accounting? Stay tuned, same bat time, same bat channel!

To recap... The FOMC left rates unchanged and said they would remain there for an "extended period of time" this sent the dollar to the woodshed, but reversed on a dime... PPT at work? The BOE and ECB meet this morning to discuss monetary policy. Expect the BOE to announce more bond purchases, and expect the ECB to announce a move to withdraw stimulus.. We learned that New Zealand is not Australia, but lucky to be Australia's neighbor! And try as they might to keep the real from gaining VS the dollar, the Brazilian Gov't's moves have not worked...

Currencies today 11/5/09: American Style: A$ .9085, kiwi .7190, C$ .94, euro 1.4850, Sterling 1.6530, Swiss .9825, European Style: rand 7.6360, krone 5.6975, SEK 7.0540, forint 186.37, zloty 2.8745, koruna 17.55, RUB 29.15, yen 90.32, sing 1.3955, HKD 7.75, INR 47.02, China 6.8276, pesos 13.28, BRL 1.7255, dollar index 75.81, Oil $79.91, 10-year 3.62%, Silver $17.40, and Gold... $1,088.80

That's it for today... Writing from home again, as I have yet, another appointment with a doctor this morning. When you have a blood clot, they monitor the thinness of your blood, and it has to be checked every 3 days... So, I have that going for me! I'm taking tomorrow off, so Chris will have the conn on the Pfennig tomorrow... So, as our little Christine would say... This is my Friday! YAY FOR ME! So with that on my mind... Good luck to my beloved Missouri Tigers as they take on Baylor this weekend, and my little Buddy Alex has his last game on Saturday. Congratulations to the Yankees on their World Series Championship... So... I'm off to see the Wizard... Talk to you again next Monday, and try to have a Tub Thumpin Thursday!

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

Another New Record Level For Gold!

Chuck Butler — Wed, 04 Nov 2009 15:19:53 GMT

..But First, A Word From Our Sponsor..
Gain exposure to currencies of emerging BRIC countries-and don't lose a dime on market risk

* 4 BRIC currencies: Brazilian real, Russian ruble, Indian rupee, Chinese renminbi
* High upside potential
* No market risk to deposited principal
* Low $1,500 minimum deposit

Don't miss this unique opportunity. Deadline to buy the BRIC MarketSafe CD is Dec. 3rd, 2009. Apply today or learn more at http://www.everbank.com/001CertificatesMSBRIC.aspx?referId=11808
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In This Issue..

* Risk players come back out to play...
* Waiting on the Fed's statement...
* Yield differentials come into focus...
* Lisbon Treaty gets signed / ratified...

And Now... Today's Pfennig!

Another New Record Level For Gold!

Good day... And a Wonderful Wednesday to you! Well... Did you see the strong performance that Gold put in yesterday? And it didn't stop yesterday, overnight Gold is up another $7 on top of the +$20 gain it had yesterday... I've got some info on that, we can talk about later...

Oh Shoot Rudy! Let's talk about it right here, right now! It's not every day that Gold not only goes past its previous all-time record high, but obliterates the previous figure! I know you're wanting to take a peek at the price of Gold in the currency round-up portion of the Big Finish, so go ahead, and then come on back... How'd that $1,090 and change price look to you? Pretty sweet, eh? That is as long as you are a Gold holder!

So... What put the tiger in Gold's tank yesterday and overnight? Well, the weaker dollar helped... The thought became clearer that the cartel, I mean the Fed will keep rates on hold this week helped... But the real beef came from the announcement that the Reserve Bank of India was buying the 200 tons of Gold from the IMF... I know, I know, I told you yesterday that I thought it would be a "wash" for the dollar and the Gold price... But that was before I learned that the Reserve Bank of India paid for their $6.7 Billion dollars worth of Gold with... SDR's!

So... Either, the Reserve Bank of India (RBI) didn't want to get rid of their dollar reserves... (yeah, right!) or... The IMF didn't want anything to do with dollars, and preferred receiving SDR's! (for those of new to class, a SDR is a basket of currencies to make one unit called a Special Drawing Right, of which the IMF uses, and has been rumored to be the replacement for the dollar as the reserve currency of the world... The one government, one currency thing)

I'll pin my colors to the mast of the IMF not wanting anything to do with dollars at this point! Been there, done that, bought the T-shirt!

So... The price of Gold is nearing $1,100... I reminded my beautiful bride last night that just 2 months ago I told a group of close friends that they should seriously be considering buying Gold as it had slipped to $940 an ounce... I wonder what they think when they see Gold at nearly $1,100... I'm sure the V-8 head slap is going on all over my neighborhood!

OK... So what's going on with the currencies, as the dollar has had the hammer for 3 consecutive days now... Well... The dollar is back on the slippery slope this morning, as those same thoughts about the cartel, I mean (crying out loud Chuck, why can't you get that thought about the Fed really being a cartel out of your mind!) the Fed, will keep rates unchanged this week, really emphasizing the fact that Australia has raised rates 50 BPS so far, and Norway has raised them 25 BPS... There are places to go where you can get higher yields...

I get a kick out of some people that call the desk here, and say... "I'm looking for a high yield of around 8-10%, with no risk... Do you have that?" Sure, right here in my back pocket! NOT!

The FOMC meeting will be a 2-day meeting, so get the board games out, find the deck of cards, and make sure you have good batteries for the Battleship Game! When the Fed Heads get tired of the board games, and all, they'll announce tomorrow afternoon that they are going to leave rates unchanged, and that while they see improvement in the economy, sans the 3.5% 3rd QTR GDP, it's too soon to remove the accommodating rates... How do I know that? I don't... But, I'll bet a Krispy Kreme to a dollar that what they say is pretty darn close to that!

The key will be to see if the Fed Heads, led by Big Ben Bernanke, leave the words regarding the how long the low rates will remain, "extended period" for if they do... The dollar will immediately be sent to the woodshed once more, without passing Go, and without collecting $200! So... The statement following the rate announcement is the key tomorrow...

So... The euro is 1-cent higher this morning, the Aussie dollar is about 1-cent higher, and so on... Those that bought at yesterday's blue light special prices will be smiling like a Cheshire Cat this morning!

OK... I have to talk about this... For I've received a ton of emails about it...

Quite a few readers have sent me Nouriel Roubini's interview knowing that Mr. Roubini has long been a fave of mine.
Well... Mr. Roubini talked about the "mother of all Carry Trades" being the dollar, of which I told you had become the new funding currency for the Carry Trade a few months ago...

Mr. Roubini also talked about how this was fueling a huge run-up in the prices of risk assets... I've also told you about that, and how... Should the U.S. do the double dip that a huge sell off of stocks would probably occur, and cause an adverse affect on the risk assets of currencies and commodities....

So... All in all... Nothing new... So I was surprised that readers wanted me to comment on this... Well, the caveat here is that Mr. Roubini is calling for a massive sell off of the risk assets when the correction comes... He doesn't specify when this will happen...

I've also said that the risk assets have gone too far too fast, and that a correction is due... So, let's move on from there...

I see where Marc Faber is saying that the correction will net the dollar 10% VS the euro... Again, he doesn't say when this will happen, but that it will...

But again, as diversification people, with our eyes fixed on the horizon that shows that the only way the U.S. Gov't can repay their debts is with cheaper dollars... We just batten down the hatches for this correction, for we know that on the other side of the correction is another massive move upward...

There was something else that I wanted to talk about... And it's something that I'm sure I'll get a few emails about... Good and bad... But here goes... Did you see that Ford announced a nice profit for the last quarter... CAPITALISM ISN'T DEAD! Three cheers for Capitalism! Maybe that's all I'll say about it, for if I went into how I feel that Capitalism is getting beaten like a rented mule, I might start talking about stuff that doesn't need to be discussed here!

So way to go Ford! Didn't take bailout money... And 1 year later books a profit! Whereas GMAC is in need of additional bailout money, and Chrysler is Fiat now... Great use of taxpayer money wasn't it?

Here I go again... Sorry, didn't mean to go on this tangent about this stuff... It's just that I have no idea why this doesn't just tick off any American that reads about this stuff! But not to worry, the Gov't has more plans to spend money they don't have!

Hey! Earlier I talked about Australia's rate increases... Well, the Reserve Bank of Australia (RBA) is running scared these days... Scared that their rhetoric about rate increases is going to push the A$ to parity with the green/peachback... So guess what the RBA members have decided to do? You've got it! They're going to "tone down" their interest rate hike rhetoric... RBA Gov. Stevens said that the 28% gain in the A$ this year VS the U.S. dollar would be a good inflation fighter, and allow him to slow down the rate increases...

Well... Don't get off the A$ love train just because the RBA Gov. Stevens suggests that he could slow down rate increases... The A$ already enjoys more than 300 BPS of yield differential to the U.S. dollar, Japanese yen, Canadian dollar, and Swiss franc!

And the Lisbon Treaty that was hung up in the Czech Republic, has finally been signed by the Czech Republic's President, thus completing the rounds, and putting the Treaty in place. Now, I'm not a big fan of the Treaty, but... It's what the Eurozone needed to remain viable, and so it it's done... This removes the albatross from around the euro's neck, and will shut those people up that keep talking about a collapse of the European Union, and the euro...

Chris Wood is filling in for good friend David Galland this week on David's daily letter called "Casey's Daily Dispatch"... Anyway, Chris Wood had this to say yesterday, which I believe just about sums it all up regarding the Fed and Treasury here in the U.S....

"A group of federal agencies including the FDIC, Federal Reserve, and Office of Thrift Supervision just released new guidelines for how banks deal with troubled commercial real estate loans. And get this:

Under the guidelines, loans to creditworthy borrowers that have been restructured and are current won't be classified as high risk by regulators solely because the collateral backing them has declined to an amount less than the loan balance.

Yes, you read that correctly. Banks won't have to show losses "solely" because the collateral has fallen in value below the loan. Perhaps most incredible is that this move is being applauded by the business community. The next step will be a federal move to facilitate refinancing that same collateral."

Chuck here again... That's pretty amazing, don't you think? First the financial institutions were allowed to drop the "mark-to-market" on their collateral... And now this... And people still question why foreigners are growing very weary of these things, and becoming quite scared regarding their dollar backed holdings? They shouldn't question any longer, eh?

And then there was this...

Remember how excited I was that Ron Paul's bill to audit the Fed was going to discussion? I thought, surely (hey! Who's Shirley?) this would be it... The Fed would finally get audited, and treated like the Corporation they are! But, then Ty Keough sent me this, and my hopes were dashed...

Representative Ron Paul, the Texas Republican who has called for an end to the Federal Reserve, said legislation he introduced to audit monetary policy has been "gutted" while moving toward a possible vote in the Democratic-controlled House.

The bill, with 308 co-sponsors, has been stripped of provisions that would remove Fed exemptions from audits of transactions with foreign central banks, monetary policy deliberations, transactions made under the direction of the Federal Open Market Committee and communications between the Board, the reserve banks and staff, Paul said today.

"There's nothing left, it's been gutted," he said...

OK... To recap... Gold is soaring! Gold has reached a new record all-time high! The dollar has given back some of its gains the past 4 days as traders begin to realize that the Fed is going to keep rates unchanged tomorrow. The Gov't is up to its usual tricks regarding collateral and the bill to audit the Fed.

Currencies today 11/4/09: American Style: A$ .9080, kiwi .7245, C$ .9425, euro 1.4770, sterling 1.6525, Swiss .9770, European Style: rand 7.7365, krone 5.7150, SEK 7.0580, forint 187.60, zloty 2.89, koruna 17.6650, RUB 29.27, yen 90.80, sing 1.3970, HKD 7.75, INR 47.06, China 6.8270, pesos 13.22, BRL 1.7280, dollar index 76.14, Oil $80.02, 10-year 3.48%, Silver $17.43, and Gold... $1,091.70

That's it for today... I hear that my colleague on the Currency Capitalist newsletter that I do for the Sovereign Society, Ashish, is going to fill in for me at the Conference that I'm missing, and give my presentation on the Treasury Bubble... He'll do a great job! We've had 4 consecutive days of sunshine, and you should see the people, they are smiling again! I began making my plans for Spring Training with the family last night... Whenever I do that, I get all geeked up and ready to leave now! But I have 4 months to go! UGH! First we have our move to the new building next door, then Christmas, then New Year's, Orlando Money Show, and then finally March! Oh, and there's a conversion to a new system thrown in there somewhere! It's a moving target so we don't know for sure, but it will be HUGE! OK... Well, as with every day, it's time to go, so I hope you have a Wonderful Wednesday!

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

Consumer Spending Drives GDP?

Chuck Butler — Mon, 02 Nov 2009 15:44:08 GMT

..But First, A Word From Our Sponsor..
Gain exposure to currencies of emerging BRIC countries-and don't lose a dime on market risk

* 4 BRIC currencies: Brazilian real, Russian ruble, Indian rupee, Chinese renminbi
* High upside potential
* No market risk to deposited principal
* Low $1,500 minimum deposit

Don't miss this unique opportunity. Deadline to buy the BRIC MarketSafe CD is Dec. 3rd, 2009. Apply today or learn more at http://www.everbank.com/001CertificatesMSBRIC.aspx?referId=11808
.

In This Issue..

* Dollar rebounds after spending fades...
* Chinese Manufacturing rises...
* Eurozone Manufacturing rises...
* Australia as the proxy for global growth...

And Now... Today's Pfennig!

Consumer Spending Drives GDP?

Good day... And a Marvelous Monday to you! And Welcome to November! My least liked month! But that's a story for another time! I hope your Halloween was fun! The rain stopped here, there was a near full moon shining in the sky, and the little kids had a blast! And Hey! The Rams won a football game! WOW!

OK... Well... Friday was a blur to me, as I went to the doctor's office for a test, and then on my way to work, they called my cell and asked me to turn around and go to a lab for more tests... UGH! So, by the time I got to work, Jennifer had set everything up and begun trading for me... Then it was time to go home! So, I'm sitting here this morning, scratching my bald head trying to recall the currency prices on Friday... And Oh yeah! Now I remember! Do you recall the Thursday action after the GDP report showed such strength (whether you believe it or not) and the dollar got sold like pet rocks?

Well the Gov't had made such a big deal out of the fact that a good portion of the GDP report was consumer spending during the quarter... In fact 1.6% of the 3.5% increase was the Cash for Clunkers program! Well... That was a bad thing to do, for on Friday, Personal Spending and Income printed, and the Spending piece had fallen in September... So much for the euphoria of Consumer Spending bringing the economy out of the recession! Oh, and like I said last week, this plays right into my thoughts from long ago, that we would see some growth near the end of this year, but would slip right back into recession, thus a double-dip... So, the first two parts are in the books...

So... The currencies slid VS the dollar on Friday, and haven't really rebounded overnight from what I can see here at home, as I write the Pfennig at my kitchen table! The Aussie dollar (A$) seems to be champing at the bit to move higher VS the U.S. dollar, but just can't get the Big Dog, euro, to get off the porch this morning!

The reason the A$ is champing at the bit to move higher, is the news from China this past weekend that their Manufacturing data from October showed the fastest gain in 18 months! So, in keeping the Manufacturing Index here in the U.S. in mind, the Chinese Manufacturing Index moved to 55.4 in October, from the 55 in September, and the Chinese say that exports were strong... Ok... We have to apply the "believe 1/2 of what the Chinese tell us about their economy... If that's so, then the Manufacturing Index still is above the expansion line of 50... And that's a good thing for the global economies!

I would think that news like this from China would be a springboard for Commodities, and the Commodity Currencies of Australia, Brazil, Norway, New Zealand, and Canada...

Speaking of strong manufacturing... The Eurozone printed a strong Manufacturing Index report this morning too! Manufacturing in Europe expanded for the first time in 17 months, in October, increasing to 50.7 VS 49.3 in September!

The dollar index is beginning to show some weakness as I write this morning... And one would certainly think that news like this from China and the Eurozone, would push the dollar down... But, there's that stinkin' Trading Theme hanging over us like the Sword of Damocles! And with the news this past weekend that CIT Group was going to have to file bankruptcy, if things hold true, it would be good for the dollar... The flight to safety, and all that!

Hey! Doesn't this news about CIT Group tick you off a bit? It does me... And I'll tell you why! CIT Group had received $2.33 Billion of taxpayer money in an attempt to bail them out last year, but they failed any way! Again! Wouldn't it have been far better to just let them fail when they first showed signs of not being able to compete, and survive? I know that in the whole scheme of things $2.33 Billion doesn't sound like that much... Considering the Trillions that have been spend, allocated or guaranteed! But... $2.33 Billion here, and $2.33 Billion there, and pretty soon you're talking about a nice sized pile of cash, that would not have been wasted!

The Business Section of our local paper had an article this past weekend on what I was referring to last week regarding GMAC and Ally Bank... Here's David Nicklaus saying what I wanted to last week... "That clever Ally Bank ad, the one where a boy is denied a toy truck because of a "limited-time offer," omits a fact that would interest most viewers.

You, the taxpayer, are propping up Ally, the bank that's so good at making fun of other banks. And it looks like Ally's parent, GMAC Financial Services, will ask for more money soon."

So... The Gov't is in competition with private sector banks... And they can pay interest rates that are higher than other banks, because... If they lose money, they can just go back to the well and get more bailout money!

This is all just becoming one Big Mess folks... You've got to see what's going on here! It's called Big Gov't... And when you have Big Gov't, you have Big Deficits! The Gov't does not have any money to spend unless they steal it, I mean take it from taxpayers first! And they're spending what they don't have! Tax receipts are falling, and the Gov't's expenditures are rising! That's a bad formula folks...

And one that makes you so aware of the need to be diversified with a portion of your investments out of the dollar!

OK... I've got to stop there, I have to go to the doctor's office this morning, and I don't need my blood pressure boiling!

Hey! I was reading an article on Friday about Australia in which the Australian Treasurer, Wayne Swan, told reporters that he truly believes that the Australian economy is going to outpace most of the world in 2010... This plays well with my thought that I've held for so long, and have told you dear readers about for some time now, and that is... That Australia is the proxy for global growth... And if the "insiders" in Australia think their economy will outpace most of the world, that's a good sign for the global growth! And one that I think traders should be taking notice of!

I think that Brazil has a long way to go to catch up with Australia but, Brazil has made great leaps in the past 5 years, and has really taken the steps to be in the same conversation when talking about Australia... The country is still an Emerging Market though, and with that, you get wild swings in the currency... Just so you know!

I want to get back to the GDP report in the U.S. from last week... Recall that above, I told you that the Gov't made a Big Deal out of the fact that a large portion of the rise in GDP was consumer spending... But you have to ask yourself this question... "how are consumers propping up GDP with spending in the face of over 16% unemployment? Personal Consumption climbed while Personal Income fell in the quarter, as documented in the Pfennig each time they printed... So, the only way that works is if, you don't think, nah, we've had to have learned our lesson, right? Oh well, I'll throw it out there... The only way that works is if the money is borrowed... Credit cards, etc. OH NO! Tell me we're not going down this road again! Ahhh grasshopper, but Christmas is just around the corner... With 16% unemployment going on, this should be a very "plastic" Christmas shopping season!

Ok... The week ahead is chock-full-o-data and events... Like... The FOMC meeting tomorrow, that carries over to Wednesday... You know what I say about those two-day FOMC meetings! Got any Aces? Go Fish!

We'll see our own version of Manufacturing Index the ISM as it prints this morning... We'll also see Pending Home Sales. Tomorrow is the Auto Sales, and Factory Orders. Wednesday we'll get the Treasury Refunding Announcement, and Thursday is weekly initial Jobless Claims, and the stupid Productivity reports, and then Friday is the Jobs Jamboree!

So... We've got a lot to talk about his week... I'm supposed to be leaving for Cabo tomorrow, but I doubt the doctor is going to let me travel, so I'll probably be here all week. So, Chris gets off the hook this week most likely...

To recap... The euphoria that was all over the markets after the GDP report was wiped out by a very weak Consumer Spending report for September. The dollar rebounded on the "bad news for the economy" thus confirming that the "trading theme" is still in place. CIT Group filed for bankruptcy this weekend, thus wasting the $2.33 Billion, that was given to them by the Gov't from taxpayers! And both China and the Eurozone's manufacturing indexes were strong last month, which should be a good thing for the global economies, commodities, and so on...

I'm going to try something different this morning... I still get emails from people that question why I quote currencies in two different ways... Well, there are two pricing conventions in currencies, and so I try to keep currencies in the form they are quoted... But to make things easier... We'll break out the American Style, and the European Style...

Currencies today 11/2/09: American Style: A$ .9045, kiwi .72, C$ .9255, euro 1.4780, sterling 1.6360, Swiss .9790, European Style: rand 7.9175, krone 5.70, SEK 7.0315, forint 186.05, zloty 2.8740, koruna 17.88, RUB 29.20, yen 89.90, sing 1.3990, HKD 7.75, INR 46.97, China 6.8279, pesos 13.22, BRL 1.7635, dollar index 76.15, Oil $78.17, 10-year 3.62%, Silver $16.62, and Gold... $1,054.30

That's it for today... Well.. For once, it was a good football weekend here in St. Louis, as our Rams stopped a 17-game losing streak, and my beloved Missouri Tigers posted a Big 12 win. Little Buddy Alex's team remained undefeated, but tied. Two absolutely glorious sunny, blue sky days here after the what seemed to be 40 days of rain finally ended! November is off to a good start weather wise, but I know all too well what it has in store for us! Well, I'm off to see the Wizard! Speaking of which, my little granddaughter, Delaney Grace was the cutest Dorothy you've ever seen! She came by the office on Friday to show every here just how darn cute she is! OK... Time to go, this time for real... I hope you have a Marvelous Monday, and a good start to the week and month!

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

Jobless recovery?? Not going to happen....

Chuck Butler — Fri, 23 Oct 2009 14:56:00 GMT

..But First, A Word From Our Sponsor..
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* Leading indicators up, but employment down...
* 11 million new jobs in China...
* Pound sterling gets pounded...
* A Great Day for EverBank...

And Now... Today's Pfennig!

Jobless recovery?? Not going to happen....

Good day...and happy Friday! It has been a fairly busy week here at EverBank, with the issuance of another big BRIC MarketSafe CD, the maturity of another MarketSafe, and a big acquisition (more on that later). While things were a bit crazy at EverBank, the currency markets were fairly uneventful. The dollar started the day off with a move up after a positive report on US leading indicators, but it gave back most of the gains as the trading day wore on. At the end of the day, only one currency moved more than 1% vs. the greenback, with the pound sterling dropping almost 1.5%.

As just mentioned, the leading indicators for the US rose in September for a sixth straight month, giving confidence to those calling for continued expansion in 2010. The gauge which attempts to predict the economic outlook for the next 3 to 6 months climbed 1%, beating most economists forecasts. But much of the good news on the US economy is due to the government stimulus programs, and two other reports indicated future growth for the US is still a question mark.

Offsetting this positive report was the weekly jobless claims which rose, and a report which showed home prices fell. So apparently the leading indicators are predicting a recovery without jobs, and without a strong housing market. You can see why Chuck and I question reports of a 2010 recovery. The US economy will not be able to post strong growth with near double digit unemployment and with both residential and commercial real estate in the dumps.

One of the Fed heads agrees. Federal Reserve Bank of Boston President Eric Rosengren said the US economy is at risk of relapsing into recession after expanding in the second half of 2009. "It's certainly a risk," Rosengren said in an interview with CNBC. "That is why we don't want to take away the stimulus too quickly." I don't look for the Fed to move interest rates higher anytime soon; the leaders of our Fed realize a full US recovery is still a ways off.

Here is a question which needs to be asked: Can the world grow without a robust US consumer? I believe the answer is yes! Growth in Asia and Europe can propel the world out of the global recession without the help of the US consumer; and I think that there is a very good chance that is what is going to happen. Chuck has compared the current state of the US to what happened in Japan after its stock and real estate markets crashed in 1990. Japan plunged into a 10 year period of stagnant growth while the rest of the global economy prospered. Many will question how the global economy can grow without the help of its largest contributor, but Japan was the second largest economy during the 90's, and the rest of the world barely skipped a beat during their malaise.

With the emergence of the consumer in both China and India, the global economy can and will continue to grow even if the US is stagnant. I read a report this morning which stated China will create over 11 million jobs this year, 2 million more than the government had earlier predicted. These new jobs will continue to increase the standard of living in China, and create 11 million 'new' consumers.

While the current administration may talk about reversing the stimulus and government spending as the rest of the world starts to recover, their actions won't match their talk. I believe we will see interest rates stay low in the US for an extended period of time. We will also probably see additional stimulus proposals as US unemployment continues to rise and US consumers continue to tighten their purse strings.

As the rest of the world continues to recover, and central banks begin to increase rates in order to fight rising inflation; the US dollar will continue its slide. A strong dollar just isn't in the interest of the US if we have any plan to try and pay down the tremendous debts and stimulate growth through increased exports. The dollar will fall victim to policies which will be designed to try and push the US economy up to keep pace with the global recovery occurring in Asia and Europe. Despite all of the rhetoric about a 'strong dollar policy', the administration is willing to sacrifice the dollar in order to keep the US from slipping further into recession.

I don't think this is the right course to take for the US, but I firmly believe this is what is going to happen. The future is too far off for politicians to worry about; they focus on the short two year election cycle. They will continue to leverage the future of America with borrow and spend policies designed to keep the US economy on life support until it magically recovers. Their policies will cause a dramatic fall in the value of the US$ which will eventually make our exports competitive and finally spur growth in the manufacturing sector. This drop in the value of the US$ will also enable us to pay down our debts to foreign holders with cheaper US dollars.

I am not suggesting that the US will slip into a 'great depression', but I believe we will see an extended period of stagnant growth. Certain well run companies (like EverBank) will still be able to make a good profit, and the falling dollar will create opportunities for companies with a strong international presence. As an investor, you should look to hedge your portfolio against the inevitable fall in the value of the US$ by investing in non-dollar assets such as our WorldCurrency and MetalSelect accounts.

One major problem the sliding dollar causes for the rest of the world is that the price of oil is inversely related to the value of the dollar. As the dollar has steadily declined this year, the price of oil which is price in $, has risen. In fact, a study released yesterday showed oil is relatively cheap at $80 per barrel. The study showed the price of oil should be $88 per barrel with the euro trading at $1.50. As the dollar continues to slide, there will be further calls for oil to be priced and traded in some other currency besides the dollar, as countries try to de-link it to the falling greenback. If this would occur, it would be a major blow to the reserve status of the US$.

And the folks at PIMCO, the global bond giant based in California seem to agree. Richard Clarida, a strategic adviser at Pimco wrote a note to clients yesterday pointing to "an orderly dollar decline" as the "most likely scenario". He added "a disorderly decline, while unlikely, cannot be ruled out." In the note, he states that a collapse in the value of the dollar would jeopardize its status as the world's reserve currency. Not a rosy picture for the greenback.

Both the central bank of Sweden and South Africa announced they would be keeping rates unchanged yesterday, but the announcements have very different effects on the values of their currencies. The Riksbank of Sweden stated that they would keep their benchmark interest rates at .25% and said that level would be maintained until 'autumn' of next year. The Swedish krona slid against the dollar after the announcement. But later the

South Africa also left their rate unchanged at 7%, but the rand rallied as some had expected a 50 basis point cut. South Africa's central bank leaders said rising energy costs had added to inflationary pressures, and therefore rates would have to be maintained at their relatively high levels. The rand rallied after the announcement.

As mentioned earlier, the big loser overnight was the pound sterling, which fell over 1.5% vs. the dollar. A report this morning showed UK gross domestic product unexpectedly dropped in the third quarter, falling .4% from the previous three months. The British economy has now shrunk over six consecutive quarters, the most since records began in 1955. The report confirms the BOE will continue to keep the 'quantitative easing' policies of low interest rates and government purchases of debt in place. Both Chuck and I have railed against these policies, as they largely untested, and will likely lead to a spike in inflation down the road. Unfortunately the US has been following the UK in their attempts to borrow and spend their way out of recession. I don't think the future is too bright for either the pound sterling or the dollar.

Before leaving work yesterday, Chuck wrote me the following to add to today's Pfennig:

OK... I sure stirred up a bee's nest with my rant yesterday... It's always interesting when I do that, for the people that agree with me will far outweigh those that don't. But that's not the point... The point is that I got people to think about what's going on in the U.S. whether they agree or not!

So, with that, I'm going to talk about... GOTCHA! No opinions just facts...

Canada posted a stronger than expected Retail Sales in August printing at +.8% (forecast at +.4%)... Then that report was followed by the Bank of Canada's (BOC) Monetary Policy Report for this month, in which the BOC admitted that "Canada's economy is recovery due to monetary and fiscal stimulus, increased household wealth, improving financial conditions, higher commodity prices, and stronger business and consumer confidence."

Hmmm... Seems to be the same exact things I've been saying about Canada!

There is an important point in on the items the BOC talked about... And that is the stimulus... Once in a while I get notes from people telling my I bang on the U.S. for stimulus when every other country in the world did the same thing... Well, not quite... While every other country might have implemented stimulus... They were in a fiscal position of strength to do so, while we merely raised the national debt to levels that now place more than $38,000 of debt on each civilian in this country! So... There was a difference, folks... And that leads me to the point I've tried to make for years now, and that is why it is so important for a country to be a Surplus Country!

Colleague Aaron Stevenson brought this to my attention yesterday regarding the price of Gold... The charts show that the price of Gold basically traded back and forth for a flat result for 6 months prior to August 25, 2009...

From August 25th of 2009, Gold has gained 12%! So... Guess what was announced on August 25th that probably has a ton to do with this gain in Gold? Give up? August 25th was the day that the President announced that Ben Bernanke would be reappointed Fed Chairman...

Coinquidink? I don't think so!

I really appreciate it when Chuck gives me these notes to get me going when I am pfilling in for him. It gets the juices flowing instead of staring at a blank sheet of paper!

Both the high flying Australian and New Zealand dollars fell a bit vs. the US$ yesterday as investors worried about China pulling back there stimulus. The currencies, which were trading near their 14 month highs, were ripe for profit takers after China announced accelerated growth in the third quarter. With China clearly back on the growth path, some investors feared they would reverse some of the stimulus programs put into place over the past year. China will certainly start to pull back some of their expansionary policies, but I think this was just a good opportunity for 'traders' to book some nice profits. The Chinese economy will continue to grow, and their demand for raw materials will keep the exporters of Australia and New Zealand busy. As Chuck stated the other day, this isn't a crying opportunity but is rather a buying opportunity! We still feel the Aussie dollar is a solid currency to own.

Before moving on to the currency wrap-up, we had some great news from headquarters yesterday. It was announced that we reached an agreement to purchase Tygris Commercial Finance Group, Inc. Tygris is a private company that specializes in providing lease financing to small and mid-sized companies in specific industries such as healthcare and technology. In addition to diversifying our assets and earnings stream, the acquisition will provide more than $500 million of growth capital. You can read all of the details in the press release at http://www.tygriscf.com/press-releases.aspx#ctrlDeailsDiv It truly is another Great Day at EverBank!!

Currencies today 10/23/09: A$ .9252, kiwi .7555, C$ .9509, euro 1.5022, sterling 1.6386, Swiss .9929, rand 7.4514, krone 5.5395, SEK 6.81, forint 177.05, zloty 2.7790, koruna 17.2425, RUB 28.9797, yen 91.94, sing 1.3928, INR 46.52, China 6.8285, pesos 12.8944, BRL 1.7156, dollar index 75.323, Oil $81.12, 10-year 3.47%, Silver $17.70, and Gold... $1,060.95

That's it for today, by now Chuck is at the doctors for a full day of poking and prodding. I'm not sure how he keeps so calm going to the doctor for his checkups after all he has been through; and then to have to wait a few days before finding out the results! I'm sure he would appreciate all of your prayers for another round of good results! I spent the evening last night celebrating my father's 72nd birthday. He is in the advanced stages of Parkinson's, so we brought cake and ice cream to the nursing home and enjoyed a night with all of his 'housemates'. While he has probably already forgotten the celebration, he flashed us all a huge smile when we showed up with his presents. Hope everyone has a fantastic Friday and a wonderful weekend!!

Chris Gaffney, CFA
Vice President
EverBank World Markets
1-800-926-4922
1-314-647-3837

Will History Repeat Itself?

Chuck Butler — Tue, 20 Oct 2009 15:07:39 GMT

..But First, A Word From Our Sponsor..
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* High upside potential
* No market risk to deposited principal
* Low $1,500 minimum deposit

Don't miss this unique opportunity. Deadline to buy the BRIC MarketSafe CD is Dec. 3rd, 2009. Apply today or learn more at http://www.everbank.com/001CertificatesMSBRIC.aspx?referId=11808
.

In This Issue..

* Non-dollar currencies rally...
* A$'s and C$'s to parity?
* Reaching 40% of expenditures...
* Gold & Oil on the rise once again...

And Now... Today's Pfennig!

Will History Repeat Itself?

Good day... And a Terrific Tuesday to you! A long day on the desk for me yesterday, left me draggin' the line... But I'm rested and refreshed again this morning, so let's get to the Pfennig for today! The Finance Ministers of the Eurozone met yesterday, as I told you, and they've tried to stem the euro's rise... But, they'll need more than words to get the job done! And so, we begin a new day...

Front and Center this morning, the currencies, which had given back ground overnight to the dollar, are back in rally mode, and are taking liberties with the dollar once more. For most of the night that was not the case, though. The dollar had rallied back and sent the euro, for instance, to the 1.48 handle, after the single unit spent yesterday at 1.49 and change... There seemed to be a move to the dollar, but that didn't last long, and the currencies are once again rallying VS the dollar this morning, and the euro has pushed to 1.4970 as I write...

Daily noise, eh? Yes, you have to wade through this daily noise most days, and keep your eyes fixed on the horizon...

OK, I mentioned above that the Finance Ministers of the Eurozone met yesterday, and tried to stem the dollar's decline by backing the U.S. administration's stated preference for a strong dollar... Of course we all know that the U.S. administration's stated preference for a strong dollar is a bunch of horse dookie! So... What was it that the Eurozone F.M.'s were backing? A false statement by the U.S.? Now, that's something to hang your hat on, eh? The dolts just continue to mount daily don't they?

But, you can't be too hard on the beaver (Eurozone F.M.'s) for they have to sound like they don't want their euro to get too strong, for if they really said what they wanted to say, the euro would be back to 1.60 with a bullet in a heartbeat! So... In the end, I don't think currency traders were swayed by the Eurozone F.M.'s, at least not for too long!

Yesterday, I talked about Canada and the Bank of Canada (BOC) and how I thought that the BOC would remove their statement about interest rates remaining on hold until the 2nd half of 2010... I had a few readers question me on this, saying that Canada's economy is in no shape to withstand a rate hike... OK... Hear me out on this... I'm not saying that the BOC will hike rates now, or even in 2009... But, if Canadian energy prices of Oil, natural gas, and coal continue to get stronger, I'm afraid the BOC will have to entertain thoughts of raising rates to fight inflation... But not now... So... I hope you get what I'm saying here...

So... The U.S. fiscal deficit for 2009 was $1.42 Trillion... Remember how I used to take the previous administration to the woodshed for posting $450 Billion fiscal deficits? How did we go from $450 Billion to $1.42 Trillion, that is if that's really the number??? Well... That's not a question to really answer, folks, we all know how we got here... But now that we're here, what happens next?

I came across this when putting the two monthly newsletter together on Sunday, I think it would be appropriate to share it with you here...

Peter Bernholz (Professor Economics in Basel) studied the world's 12 most important periods of hyperinflation and discovered that the tipping point occurs when deficits amounted to 40% of the expenditures.

For the United States we have arrived at exactly that point. The deficit of $1.5 trillion amounts to 41.7% of the $3.6 trillion in expenses.

You see, that Peter Bernholz, rounds some numbers, but for those of you keeping score at home, the real point is that the U.S. deficits are greater than 40% of expenditures... And you know me, I truly believe in this history repeating itself, or as Mark Twain put it, it may not repeat itself but it rhymes... Mark Twain also wrote: "It's not worthwhile to try to keep history from repeating itself"...

So, the point I'm trying to make here is that according to Mr. Bernholz, we can soon expect a bout of hyperinflation! OH BOY! Where do I sign up for that? Not only do we have a falling dollar causing us to lose purchasing power, but what purchasing power we have left is going to be eaten away with inflation! Like I said, OH BOY! Gee Willikers, that sounds like the cat's meow! NOT!

So... Here we go again, with me getting on the soapbox and telling you the only way to protect yourself from a falling dollar and hyperinflation is to diversify with non-dollar currencies and precious metals...

OK... I get emails all the time from readers that say, "OK Chuck, you tell us to diversify, but you don't tell us what to buy"... Well... To the untrained eye, that would be true... But to long time readers they know better... So, keep reading, and it will hit you right between the eyes one day, and you'll slap your forehead and say, "I could have had a V-8"!

The boys and girls over at Citigroup have written a letter to their clients telling them that "the dollar is weakening because foreign central banks are diversifying their reserves and U.S. investors are buying high-yielding emerging market assets." The went on to say that, "The Australian and Canadian dollars are likely to rise to parity against the U.S. currency."

So, there's one more on the roster that believe Aussie dollars (A$) and loonies will go to parity against the dollar... The loonie isn't exactly the same stretch of a forecast as the A$, as loonies are almost 97-cents right now, with A$'s trading near 93-cents...

Doesn't that make sense given the talk we just had about hyperinflation? What currencies are going to help protect you against hyperinflation? The Commodity Currencies! Aussie, kiwi, Canada, Norway, Brazil and you can even throw in the S. African rand, for those that like rides on Mr. Toad's wild ride!

The folks at Citigroup also had this to say about the euro, which I found to be quite interesting... "The euro will extend gains against the U.S. dollar and the British pound, and may reach parity against the U.K. currency in 6 to 12 months."

I would think that for the euro to reach parity with the pound, it would involve the pound falling quite a bit from current levels... And that makes sense to me... Did you see the report the other day from the U.K. where they reported bank bad debt to be twice the forecast amount? YIKES!

You know... The Asian currencies which never really participated in the first bout of dollar weakness, are still stuck in the mud... Well, they are being manipulated to be stuck in the mud, for the most part... But, something's got to give here sooner or later. Why do I say that? Well, as I've told you for months now, the Chinese economy was the first to exit their slowdown / recession... Shoot Rudy, even Japan is showing signs of economic growth! And then we have India going strong too... And of course you have the "kind of Asian countries" of Australia and New Zealand... Where we already know that Australia has raise rates and New Zealand would love to raise rates... So, this region is leading the world out of the recession... Hmmm... I thought only the U.S. economy was allowed to do that! Uh-Oh, looks like we have a shift in how the world works!

Hey! Even Big Ben Bernanke sees the Asian countries as leading the world out of the global recession! Big Ben said... "Asia appears to be leading the global economic recovery." Hmmm... See, even a blind squirrel can find an acorn! HA!

I had to laugh when I read this headline this morning... "yen rises as Fujii repeats reluctance to stem currency's rise"... I laugh because the last time Japan's new Finance Minister talked about not intervening to stop the yen's rise, he back-pedaled and said that traders mis-took him to say that he was not going to intervene... So, this on again, off again love affair with Fujii and intervention, just makes me laugh! I would think that after getting burned on Fujii comments a couple of weeks ago, that Traders would not get too lathered up when he talks about not intervening...

Ok... Here in the U.S. while we are still a sovereign nation, the cartel, I mean the Fed Reserve, is doing some testing of reverse repos as a means of drawing the excess liquidity / stimulus out of the markets... I don't think we have to put too much into these tests right now... But it will be a method that the cartel uses at some point in the future... The IMF is against removing any stimulus now... So, that may carry some weight with the cartel, I don't know...

Gold prices rose yesterday for the first time in a couple of days, pushing back above $1,060... I would think that until we know for sure that the cartel is removing stimulus, that Gold would remain well bid... When we do know that stimulus is being removed... Gold might take a step or two back... But then we'll have to wait-n-see what happens with inflation...

I read where ETF holdings of Gold are sluggish... Well, that certainly makes sense to me! With what we're seeing these days from our Gov't pushing us toward who knows what (I know, but I get blasted by people whenever I say it out loud), physical Gold is the thing people want right now... And you can't get physical Gold out of an ETF! So... All those people that have long said that the ETF was just as good as holding Gold either in your buried coffee cans in the back yard, or in pooled accounts, are wrong, when it comes to physical Gold demands...

And, don't know about you, but I filled my gas tank the other day, and the price of gas has really shot up recently, eh? And a quick look at Oil prices and that tells it all... Oil prices have risen to $79, while trading at $69 just a month ago! Is Oil the proxy for rising inflation?

OK... To recap... The dollar rebounded a bit overnight, but has given back to a currency rally this morning. Citigroup believes Aussie and Canadian dollars will reach parity to the U.S. dollar. The Bank of Canada meets today. Our fiscal deficit reached 40% of our expenditures, which historically is a harbinger to hyperinflation, and Gold is back above $1,060 this morning...

Currencies today 10/20/09: A$ .9280, kiwi .7545, C$ .9690, euro 1.4975, sterling 1.6435, Swiss .99, rand 7.32, krone 5.56, SEK 6.9350, forint 176.50, zloty 2.7735, koruna 17.1470, RUB 29.15, yen 90.40, sing 1.3890, HKD 7.75, INR 46.11, China 6.8266, pesos 12.85, BRL 1.7360, dollar index 75.27, Oil $79.31, 10-year 3.37%, Silver $17.80, and Gold... $1,065.50

That's it for today... My good, dear friend, Mary Anne Aden, sent me a note last night, that really lit up my day... Mary Anne told me that Richard Russell recently mentioned me and the Pfennig... WOW! When a man as well respected as Richard Russell mentions me and my humble little Pfennig newsletter, then that's a great day! Mike Meyer just came in, returning from a trip to Jacksonville to watch the Rams / Jaguars game on Sunday... He travels once a year to watch the Rams... It actually was a nice day here yesterday with the sun out, and a hint of warmth in the air! The weather forecasters say El Nino is going to keep our winter warmer than usual and dryer than usual... That's fine with me! Well, I've got to go... I hope your Tuesday is Terrific!

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

A Loss Of Confidence In the U.S.?

Chuck Butler — Mon, 19 Oct 2009 14:53:00 GMT

...But First, A Word From Our Sponsor...
Gain exposure to currencies of emerging BRIC countries-and don't lose a dime on market risk

* 4 BRIC currencies: Brazilian real, Russian ruble, Indian rupee, Chinese renminbi
* High upside potential
* No market risk to deposited principal
* Low $1,500 minimum deposit

Don't miss this unique opportunity. Deadline to buy the BRIC MarketSafe CD is Dec. 3rd, 2009. Apply today or learn more at http://www.everbank.com/001CertificatesMSBRIC.aspx?referId=11808

In This Issue..

* Non-dollar currencies rally...
* Euros and Aussie dollars lead the pack...
* $1.42 Trillion Deficit for 2009!
* TIC's data gets ignored again!

And Now... Today's Pfennig!

A Loss Of Confidence In the U.S.?

Good day... And a Marvelous Monday to you! Another "lost" weekend for our college and professional football teams! UGH! The sun finally came out this weekend. YAHOO! It felt so good to be in the sun again... The TICs data was something that needed to be dealt with on Friday, but once again the markets ignored it... I'm telling you, this smells like, walks like, and talks like a gag order... OK... Let's get going this Marvelous Monday!

The non-dollar currencies all drifted on Friday, with the dollar seeing a bit of buying... But that's all been thrown to the curb this morning, as the non-dollar currencies, for the most part, are in rally mode VS the dollar.

The Big Dog, euro, has really pushed the envelope this morning, rising from 1.4860 to 1.4945 as I write... The Aussie dollar (A$) is also working alongside the euro pushing the dollar down. I just put the finishing touches on both the Review & Focus monthly letter, and my "other letter", the Currency Capitalist, yesterday... I had some strong words for the Gov't now and in the past that has allowed this weakness in the dollar. And trust me, if the U.S. Gov't wanted a strong dollar, all they would have to do is say so with conviction, and not this wamby pamby stuff they try to get away with just to put a governor on the dollar's decline... Think about this for a minute... It's true, it's really true... Your Gov't doesn't care about the currency... The currency that we all use, and think it will always be there for us to spend...

WOW! I really got carried away there, eh? I don't need to get up on the soapbox already on a Monday morning! But... These are the things that need to be said, and I'll say them! Not like our wamby pamby media, that will talk about the weak dollar, but never what causes it!

The Gov't finally got around to printing their final Monthly Budget Statement that would end their fiscal year (Sept 30th)... The final total was $1.42 Trillion in the red... That's 10% of GDP! That's the highest level since World War II! And remember when I kept telling you that the expenditures for this administration in 2009 would come in at $3.5 Trillion dollars? Well, that's just about where they came in... And with revenues dropping 16.6% from 2008, we are left with this atrocious Deficit of $1.42 Trillion! And don't forget (here I go sounding like an infomercial again) that the next 10 years is forecast to add an additional $9 trillion to our national debt!

OK, so what's up with the TIC's data from Friday? Remember now... The TIC's data is an accounting of the net foreign purchases which are needed to finance that atrocious deficit... So how'd we do? Well... The big picture of all flows in and out for the last 12 months turned negative and is just shy of the worst level recorded, which was in 1982. OUCH! Central Banks seem to be buying about the same amount, which isn't a good thing when you consider the increase in Treasury issuance... But the real fall off has come from the Moms and pops... The private investors if you will... So... Is this just an aberration, or... It could very well be a loss of confidence of global investors in the U.S....

There was a hint of this loss of confidence on Friday in the China Daily newspaper... And it wasn't the fact that the story was in the paper, it was the fact that the story was front and center for everyone to read... It was a quote by Big Al Greenspan, our former Fed Chairman who said that he "fears the budget deficit of the U.S. more than the collapse of the dollar." Hmmm...

What the heck is Big Al talking about? He knows well and good that the Deficit is the cause of the dollar depreciation! And just the fact that the Chinese put it front and center on their daily newspaper tells me that they are making fun of Big Al, and at the same time telling their readers that they should avoid dollars... I don't know what it tells anyone else, but that's what it tells me!

Recently, I've talked about seeing signs of a return to fundamentals... I really do believe that we're headed in that direction once again, which would be like manna from heaven to your Pfennig writer! Fundamentals are much easier to understand that these crazy trading themes that go against normal logical thinking!

Well... The boys over at PIMCO, the world's largest bond fund, seem to believe that "Fundamental forces are set to put downward pressure on the dollar as the recovery gathers momentum. Those forces include massive budget deficits, bets the Federal Reserve will keep borrowing costs near zero for an extended period, and prospects for a double-dip recession in the U.S."

Sound about right to me! Given those fundamentals for the dollar, and take away the "flight to safety" trading theme, you've got a Betty Crocker award winning recipe for a dollar decline!

The Bank of Canada (BOC) meets tomorrow... I'm going out on a limb here, to say that I think the BOC will remove that statement they've repeated for a few months now that interest rates would remain at current levels near zero until the 2nd half of 2010... Why do I think that, when the BOC has been so adamant about this statement in previous meetings? Ahhh grasshopper... First of all Australia has already raised interest rates, and their central banker has already talked very hawkish about future rate hikes... The other "Commodity Countries" of Norway, New Zealand and Brazil, are also beginning to talk up rate hikes... So, in my mind, the BOC will begin to "feel the heat" of their Commodity Brothers raising rates, and the only way they'll be able to move then is to remove the statement about leaving rates unchanged... NOW!

Getting back to the euro for a minute... I find this move higher by the euro VS the dollar this morning to be quite impressive, given that the Financial Times (FT) had an article saying, "It was time for the ECB (European Central Bank) to get serious about an overvalued euro"... Funny, the timing of this article... The Eurozone Finance Ministers are meeting today... And in the face of all this... The euro rallies!

And as I mentioned earlier in the letter, the A$ is stronger this morning... It's my feeling right now that the negativity toward the U.S. dollar is really seen and magnified in the performance of the A$... And why not? You've got the country that was not affected by the financial meltdown, a country that was the first to raise interest rates, a country that is rich in the commodities that China demands, and on a sidebar, China is forecast to grow 9% in the 3rd QTR, and a country that has a Central Banker that has given the green light for appreciation of the A$ VS the U.S. dollar!

The data cupboard is full of 2nd tier data prints this week, so I really don't think the markets will get any direction from the likes of PPI, Housing Starts, etc. But maybe they will! You never know with these fickle dudes!

So... To recap... The TICs data last Friday indicated a loss of confidence in the U.S., the Budget Deficit for the U.S. was $1.42 Trillion for the fiscal year ending Sept 30th. The currencies, for the most part, are rallying this morning VS the dollar, and the data cupboard will fail to give the markets direction this week. Some Chuck speak on the soapbox on a Marvelous Monday too!

Currencies today 10/19/09: A$ .9225, kiwi .7475, C$ .9670, euro 1.4935, sterling 1.63, Swiss .9865, rand 7.35, krone 5.5910, SEK 6.9580, forint 178.50, zloty 2.8130, koruna 17.29, RUB 29.33, yen 90.80, sing 1.3915, HKD 7.75, INR 46.30, China 6.8268, pesos 13.07, BRL 1.7130, dollar index 75.50, Oil $78.13, 10-year 3.45%, Silver $17.52, and Gold... $1,055.40

That's it for today... Hey! I forgot to mention last week that I had the featured guest essay on the Daily Reckoning (www.dailyreckoning.com) last Wednesday! If you aren't a Daily Reckoning reader, you missed it... But, because of the technology available to us, you can click here to read it: http://dailyreckoning.com/bric-nations-the-fundamentals/ Congrats to my little buddy Alex and his 8th grade Flyers teammates for completing a weekend sweep! Two football games, two smashing victories! Well, it's that time of the year again... On Friday of this week, I'll be going through a ton of tests, scans, needles and other stuff to make sure I'm still on top of the cancer that took over my body 2 years ago. So, I'll be out on Friday... But you still have me for the next 3 days! We closed out our latest BRIC MarketSafe CD last week, and opened the door to another one! This issue has been so popular that we decided to extend the funding period! OK... Time to hit send... I hope your Monday is Marvelous indeed!

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

Central Banks Diversify Out Of The Dollar!

Chuck Butler — Mon, 12 Oct 2009 14:42:45 GMT

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In This Issue..

* Currencies rally VS the dollar...
* Reasons why the U.S. wants a cheaper dollar...
* Interest rate differentials...
* Trade Deficit narrows...

And Now... Today's Pfennig!

Central Banks Diversify Out Of The Dollar!

Good day... And a Marvelous Monday to you! An absolutely awful weekend for our professional sports teams, as the Cardinals, Blues, and Rams all lost! The Cardinals were swept out of the playoffs! UGH! Talk about a downer for yours truly... I sat there, at the game, with my little buddy, and beautiful bride, and saw the writing on the wall early in the game... No life from those redbirds... And so, another baseball season comes to an end here in St. Louis...

Friday morning, after drying out from Thursday nights drenching, no wait, super soaking at Faurot Field in Columbia, I sat down to breakfast, and read the Pfennig... I noticed that Chris was on a roll about Geithner... I thought that it was a good finish to the things I said about him the previous day! Chris will have the conn on the Pfennig Tuesday through Friday this week...

OK... 3rd paragraph in before I get to the currencies, but Hey! Good things come to those who wait! HA! Well... The non-dollar currencies are back on the rally tracks VS the dollar this morning, after giving back some ground on Friday. The story that I brought to you on Thursday morning, about Central Banks diversifying, is really going around the block this morning... In case you forgot, the gist of the story was that Central Banks added to their currency reserves in the last quarter, and that they had put 63% of that new cash into euros and yen... For those of you keeping score at home, that's more than $80 Billion in one quarter!

No wonder, the euro and yen were taking liberties with the dollar in April, May and June... Of course, these two have continued taking liberties with the dollar in July, August and September, but we won't get the Currency Reserves data for another 3 months! But we all know what happened, and what has happened since March 1st of this year... Round and round we go, where we stop nobody knows!

Well... That is short-term wise, which over the years short term prognostications for currencies have proven to be very difficult to get right... Long term? Well, currencies for the most part make long sweeping moves, not one-way streets mind you, but long sweeping moves... And this long sweeping move by the dollar downward, is being aided by the U.S. Gov't! That's right, the U.S. Gov't, has shown a willingness to allow the dollar to weaken... Oh, yes, they carry on about a "strong dollar policy" and all that, but they don't back it up one iota... And, when we get down and dirty regarding U.S. dollar policy, it is my opinion, that the Gov't sees no way out... That they only chance they have to pay back debts, is with a cheaper dollar... That's it in a nutshell... The Gov't wants, and needs a cheaper dollar...

However, they don't want it overnight! They don't need it overnight! The debts aren't due right now... So, that's why you see them spit out stupid statements about a strong dollar policy, they all know that that's not what they really want, but they can't be seen as no willing to defend the dollar...

OK... I've given you Chuck speak... This is what I tell audiences all over North America that care to listen to me... It's all there in front of you... The deficit spending, the quantitative easing, the bailouts, the stimulus, the zero rate interest policy, the corporate scandals that go unchecked leaving foreign investors weary about their investments... And on and on and on... And then there's this little ditty, that should give you all the information you need to make the decision to diversify a portion of your investment portfolio out of the dollar... THE U.S. WANTS CHINA TO ALLOW THEIR CURRENCY TO GAIN VS THE DOLLAR!

When lawmakers, Central Bankers, U.S. Treasury Secretaries all go the China year after year, and beg, and plead, and whine, to the Chinese authorities that the renminbi needs to get stronger VS the dollar, what's a currency investors supposed to think? That's right, that the U.S. wants a weaker dollar, period.

Oh! And one more thing that's really scaring the bejeebers out of foreign investors including Central Banks, is the fact that the U.S. has this enormous national debt, and doesn't seem to care... U.S. lawmakers are oblivious to the deficit... In fact, they continue to look for new ways to deficit spend! UGH! This stuff just gets me going folks... If you could be here to see me pounding on the keys, shaking my head, and yelling at the wall, you might think I had gone crazy... Well, not as crazy as spending another, whatever, when we don't have it!

Last week, we had the former Fed Chairman, and the man I believe is at the roots of this whole financial mess we're in, Big Al Greenspan, talking about the economy, and the growth prospects, and what have you... I have no idea why anyone would listen to this guy... If you read Bill Fleckenstein's book on the Fed (Ignorance at the Federal Reserve... Greenspan's Bubbles) you'll have a Big Al's track record of wrong decisions, that go back to his days before becoming a Fed Head... Well... Ty sent me a note from James Kunstler's newsletter, where he jumped all over the Greenspan comments last week... This is a snippet of what James Kunstler had to say...

"Greenspan's greatest success may be to drive economics into such disrepute that it will be cut loose from the universities and only be taught by mail order or internet subscription from the same outfits that offer PhD's in astrology."

Now that's funny!

Alright then... Let's take a look around the horn, and see what's moving this morning... As I told you, the non-dollar currencies were back on the rally tracks VS the dollar this morning, and so, the Big Dog, euro, is moving higher, along with the Aussie dollar, Canadian dollar / loonie, and Norwegian krone...

Let's take the euro... Last week, The European Central Bank (ECB) met, and left rates unchanged, as suspected they would, and the risks were with ECB President, Trichet, after the meeting... When asked about the euro's strength, he simply repeated his statement from the previous meeting... Something about, the need for U.S. dollar strength... But nothing new, here folks, nothing to see, move along... I think his non-new statement was a indication that he's not willing to fight for dollar strength any more than he has, if the U.S. is not going to step in and join the fight! Memo to Trichet... You had better figure out who's going to be in that foxhole with you before you jump in! Bernanke? Geithner? YIKES!

The Aussie dollar (A$) continues to push the envelope of strength that a currency can gain by raising interest rates 25 BPS! I knew in my heart of hearts that a rate hike would underpin the A$, but didn't think it would be as beneficial as it has been... But then, maybe the thought that I shared with you last week, is gaining some credence... That thought? OH! I guess it would help if I reminded you what it was, eh? The thought, was that with the latest employment report showing such strength, that the Reserve Bank of Australia (RBA) would be back in November for another rate hike of 25 BPS!

The interest rate differentials just keep widening to the dollar, folks... And while, as I always say, interest rate differentials are the "end all" of currency valuation, it does go a long way toward attracting investment, and attracting investment goes a long way toward currency valuation! You know, the hip bone is connected to the leg bone, the leg bone is connected to the knee bone, etc., etc...

And while Canada certainly doesn't have a rate differential to the dollar, it does have the commodities, that are associated with energy... Oil, natural gas, and coal... If the prices of those commodities begin to rise it won't be long before we see the Bank of Canada (BOC) hike rates, whether the economy is ready for the rate hikes or not! And that thought has lit a fire under the loonie recently...

And finally, the Norwegian krone... Norway's Central Bank, The Norges Bank, resisted cutting rates to the bone, and while they never did get as low as the U.S. and Canada, they did get pretty low... But, remain higher than those in the U.S. and as I've said over and over again in the past couple of months, the Norges Bank will raise rates in 2009, so... That means the rate differential will widen.. And again, being forward looking, the currency markets' participants have taken the krone higher VS the dollar.

On the data front... Friday, the Trade Deficit narrowed for the first time in a couple of months... The thought is that the cheaper dollar during August, was the main reason for exports outpacing imports... While, a cheaper dollar won't cure the Trade Deficit completely, it certainly can put a major dent into it... So, here's another reason the U.S. Gov't would love to see a weaker dollar! Talk about "killing the golden goose"! If the U.S. Gov't were to talk up the dollar, it could very well, kill that golden exports goose!

We're still waiting for the Budget Statement to print folks... I'm always of the thought that the longer you have to wait for a piece of data to print, the more it's getting cooked, massaged, "adjusted"...

Wednesday this week, we'll see Retail Sales for September... The Butler Household Index (BHI) tells me that Retail Sales will be OK... Not negative, but OK... Not strong, but OK... Shoot Rudy, I even spent some money in September! But, my buying is small potatoes in the BHI!

Chris will bring you the results of the Retail Sales data along with the other data due this week...

So, to recap... The currencies are stronger this morning, with the euro leading the charge VS the dollar. The Central Banks diversification story that I told you about last Thursday, is really getting around the block, and causing dollar weakness. We went over the reasons for this diversification, and the willingness of the U.S. to just ignore their deficit, and spend more! Aussie, Norway, Canada's respective currencies join the euro with gains of their own VS the dollar... And... How the U.S. doesn't want to kill the golden goose... You'll have to read the entire report to get the details!

Currencies today 10/12/09: .9060, kiwi .7345, C$ .9680, euro 1.4760, sterling 1.58, Swiss .9725, rand 7.4150, krone 5.6390, SEK 6.96, forint 182.50, zloty 2.88, koruna 17.49, RUB 29.52, yen 90.10, sing 1.3970, HKD 7.75, INR 46.48, China 6.8228, pesos 13.21, BRL 1.74, dollar index 76.22, Oil $72.97, 10-year 3.38%, Silver $17.89, and Gold... $1,053.92

That's it for today... Happy Columbus Day! Did you know that bricks and mortar Banks are closed today, along with Federal offices, including the Post Office? Then why am I here? Oh! That's right, we're an internet/ direct bank! It will be a short day for us though, as we'll get everyone out of here early afternoon, hopefully. I'm headed to corporate meetings this week... I'm like the bull in the China Shop when it comes to being "corporate"! It rained so much here last week... The rivers and creeks were all over their banks... But the weekend was beautiful fall weather, ruined just a wee bit by the play of our teams! But, I won't go into that any more! It rained so much that my little buddy, Alex's, football game was postponed, now this weekend he has a game on Saturday and Sunday! OK... Onto my "other job"... HA! I hope your Columbus Day Monday is Marvelous!

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

G-7 To Discuss Currencies?

Chuck Butler — Thu, 01 Oct 2009 18:23:00 GMT

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In This Issue..

* The ball is in the dollar's court today...
* Aussie is unable to hold 14-month high...
* China and Eurozone print stronger PMI's
* Chock-full-o-data today...

And Now... Today's Pfennig!

G-7 To Discuss Currencies?

Good day... Welcome to October! And a Tub Thumpin' Thursday to you! No real reason to get Tub Thumpin', but I thought why not? The non-dollar currencies have given back their gains made yesterday to the dollar, in a game of what seems to be, give and take... A tennis match with the dollar, one day the ball is in the dollar's court, and the next day it's not! Really, kind of giving me a rash, watching this... I want some direction here!

So... When I turned on all my screens this morning, and then waited about 20 minutes for the new programs to be installed on them that the IT people left for the next time the computer started up... Hmmm, where was I? Oh! I was talking about when I first saw the currencies this morning... I saw that the euro had fallen back to 1.4560... And of course wanted to find out why...

Well, it seems that the G-7 Finance Ministers are going to meet this week, and there is already some discussion that the euro's rise will be discussed... OK... Currencies traders took this to mean that these mental giants in the G-7 will do something to stem the rise of the euro... Of course, the G-7 Fin Mins might just be discussing how impressive the euro's gains have been VS the dollar this year! HA!

This plays well with the thought I had and shared with you the other day, regarding Central Bankers from Japan and the Eurozone propping up the dollar... Trust me folks, these guys are smart puppies, and can see the writing on the wall for the dollar, just like you, me and the guy down the street that cuts his grass early in the morning... The last thing they want to happen is for everyone to get the idea that these Central Bankers won't prop up the dollar, for if that were to happen, it would spring open Pandora's Box of currency disasters for the dollar!

The Eurozone did receive some strong data this morning.... The latest Eurozone PMI printed. Eurozone PMI is just like here in the U.S. it's a measurement of the manufacturing activity. But only in the Eurozone it takes in all 16 member countries. This activity is then put into an index so that it can be easily monitored. And just like here in the U.S. the line in the sand of whether manufacturing is contracting or expanding is 50...

Eurozone PMI rose for the 5 straight month, but remained under 50, posting a 49.3 in September... But the trend is manufacturing's friend here, I would think, as it has risen steadily for the past 5 months.

Let's talk about something other than the Eurozone... The other day, I was interviewed by Reuters about dollar / yen. I told them that the Japanese yen did not have the fundamentals to support an 88 figure, which it had hit on two occasions in the past week. Well... The Japanese Tankan report, which takes the pulse of the economic activity in Japan, backed up what I had said earlier, when it reported that "Japanese companies plan to deepen investment cuts as profits slump, inhibiting the recovery from the nation's worst postwar recession."

Speaking of interviews... I did a quick one in a chat room at DTI, which is an investment education company. This quick interview was just a "teaser" for a full fledged 30 minutes of "Chuck speak" that will happen next Monday at 1:30 CT... It will be a power point presentation that comes across on your computer, with me talking over it... Sounds like it will be tre' cool... If you want to find out more click here... http://www.dtitrader.com/trading_education_MMM_everbank.htm

With the euro backing off this morning, the rest of the non-dollar currencies are doing the same. Aussie and kiwi have not been able to hold onto gains they made yesterday, and the rest of the currencies just fall in line. You know what I always say when this happens don't you? That's right... It gives everyone an opportunity to buy at cheaper levels than yesterday!

The other day, after the S&P/CaseShiller Home Price Index number printed and showed a month-to-month rise in home prices, I thought to myself, is this really something that can catch hold and continue to rise? I then began to put together a list of the "risks" to continued Home Price increases... The list as I have it:

1. 1.5 million homes on the dockets for foreclosure
2. 10% unemployment, with 39% unemployed for more than 6 months...
3. The potential stock market correction
4. The end of the 8% tax credit for first time home buyers, (that son, Andrew took advantage of this summer!)

Long Time Friend... Ed Bonawitz, agreed the list and added that if we just look at how the auto industry fell back into an abyss after the cash for clunkers program ended, imagine what the end of the 8% tax credit program will do...

I was talking with a customer yesterday that has traveled quite a bit over the years, and had businesses in China and Indonesia, etc. I asked him the question that everyone asks me all the time, regarding China's data... When I'm asked whether this is good data or not, I usually reply that I don't live there, so I have no other choice but to take it as printed... But, my customer, told me that he believed that, for instance, if China printed a 10% GDP, that it's probably inflated by 50%! YIKES!

So, with that in mind, China printed their PMI for September last night, and, according to the Chinese, it rose .3% to 54.3%... Again, a number for a PMI above 50 indicates expansion... So... Even if the Chinese inflated the data, their manufacturing sector would still be performing in an expansion mode...

And... What's good for the goose (China) is good for the gander (Australia)! I told you earlier that the Aussie dollar (A$) was not able to hold it's gains made yesterday that brought the A$ to .8859, a 14-month high for the currency. China is now on holiday for the next week, so the A$ will have to find some traction from other areas... So, it's not out of the realm of possibilities that the A$ drifts in the next week...

I see where Big Ben Bernanke will be giving some prepared remarks to lawmakers this morning about the need for strong consumer protection of financial services... Hmmm... This makes me laugh, and laugh hard! Isn't this kind of like the fox telling the farmer the need to secure the hen house after it's been raided?

I mean, the Fed had the control, the supervisory power, to protect consumers from the lending practices that went on but did they? NO! They turned their heads and looked the other way, while the mortgage mess grew and grew... Just like a child... If you look the other way when they misbehave, then the misbehaving will get worse, and worse...

Seems Big Ben was a little upset a couple of months ago, when it was proposed that there would be a new Consumer Protection Agency... He felt like the Fed was being knocked down a notch, and he criticized the proposal... I doubt he'll go down that road again, as I'm certain, he received a "memo" from the powers to be, which told him to shut his trap and go with the President's plan...

The data cupboard today yields the U.S. version of PMI, which we changed to ISM a few years ago... The ISM in the U.S. went back above 50 in August, and is expected to have gained a bit in September. This is good news for the economy... But one has to wonder about what happens after the all the build up for the cars for clunkers program filters through... But, with the dollar much weaker than 6 months ago, manufacturing certainly gets a lift.

We'll also see Personal Income and Spending, which unfortunately has shifted back to the days of us spending more than we make... Didn't we learn anything? It's Thursday, so the Weekly Initial Jobless Claims will print... And then rounding out the data today are reports on Vehicle Sales, and Pending Home Sales... So a very busy day at the data cupboard!

OK... Before I go to the recap and the currency round-up, I just had a thought about today's actions in the currencies VS the dollar. The Asian and European sessions sold the currencies and bought dollars... When the NY guys and girls arrive and see what has happened overnight, I suspect we'll see more selling, as they will have orders to fill... So... The cheaper levels could be still to come today...

Then there was this... Bank of America's CEO Ken Lewis announced his retirement... I find this to be somewhat strange... Very strange indeed...

To recap... The ball is back in the dollar's court today, as G-7 gets set to meet this weekend and maybe discuss the euro's rise... Japan's Tankan supports my belief that there are no fundamentals that support a yen at 88, and the Eurozone posts its 5th consecutive gain in manufacturing...

Currencies today 10/1/09: A$ .8790, kiwi .7210, C$ .9315, euro 1.4555, sterling 1.5990, Swiss .9590, rand 7.6645, krone 5.80, SEK 6.99, forint 185.65, zloty 2.9050, koruna 17.45, RUB 30.09, yen 90, sing 1.4125, HKD 7.75, INR 47.76, China 6.8265, pesos 13.55, BRL 1.7665, dollar index 77.10, Oil $70.10, 10-year 3.30%, Silver $16.61, and Gold... $1,005.25

That's it for today... Got my car back last night, glad for that! It's Thursday, so it must be raining! I'm still waiting for the real Cardinals to start playing baseball again! So, the 3rd QTR just ended... That means colder weather is ahead of us, and not that I'm going to begin complaining about cold weather now, but I will remind everyone that I've gotta go where it's warm! I bet your NFL team is better than ours! The lambs, I mean the Rams, are really bad... But, they are our team, and having a bad team is better than having no team, which we all experienced when the Big Red (football Cardinals) left for Arizona in 1989... OK... I woke up 15 minutes before my alarm was to go off this morning, as if, I needed to wake up any earlier! UGH! I'm going to hit send, and hope you have a Tub Thumpin' Thursday!

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

Whiplash Wednesday!

Chuck Butler — Wed, 30 Sep 2009 14:24:25 GMT

...But First, A Word From Our Sponsor...
Gain exposure to currencies of emerging BRIC countries-and don't lose a dime on market risk

* 4 BRIC currencies: Brazilian real, Russian ruble, Indian rupee, Chinese renminbi
* High upside potential
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Don't miss this unique opportunity. Deadline to buy the BRIC MarketSafe CD is Oct. 13, 2009. Apply today or learn more at http://www.everbank.com/001CertificatesMSBRIC.aspx?referId=11808

In This Issue..

* Currencies rebound VS the dollar...
* Aussie and kiwi lead the currencies higher...
* Data and Central Bank speeches today...
* Gold rebounds back to $1,000!

And Now... Today's Pfennig!

Whiplash Wednesday!

Good day... And a Wonderful Wednesday to you... Instead of a "turn around Tuesday", we're seeing a whiplash Wednesday! And for once in a month of Sundays, the Big Dog, euro didn't lead the other little dogs (currencies) off the porch to chase the dollar down the street!

No... This time it was the currencies of Australia and New Zealand that led the charge VS the dollar... The euro has taken up the charge since opening the doors to a new day of trading in Europe, so... It looks like it's a "take the dollar to the woodshed day"...

OK... Let's start first with the goings on yesterday and then build to a big crescendo! Yeah, right, like I can do that! HA! Any way...

As a reminder, yesterday we had the Russian rate cut, and the Japanese Fin Min giving the dollar a boost... We then saw some data that at first glance seemed to be good, but a quick look under the hood told the markets otherwise... Home Prices fell in July VS June, but are still down 13.3% VS last year... And Consumer Confidence surprised everyone by falling this month. It was expected to gain. So... As the day went on, it just didn't look like the U.S. data would be strong enough to cause dollar selling...

But then, overnight, we had a strong Retail Sales report in Australia, and a strong Business Confidence report in New Zealand, and the "global recovery thoughts" were back on! Game on, as Wayne and Garth would say! Yesterday morning, the Russian rate cut said "step back on the thoughts for a global recovery"... And then overnight, the reports from Australia and New Zealand said, "step forward on the thoughts for a global recovery"!

And so it is... We end the month, and quarter with the dollar on the losing end VS many currencies... This marks the second consecutive quarter of dollar losses... Does that sound like a trend to anyone? To me, I do not consider this to be a "new trend", but instead, simply a return to the underlying weak dollar trend, that went dormant for 6 months while the world sorted out the financial meltdown.

This is where, when I go out on the road and speak to people, I say that trends are not One Way Streets... There can be volatility within the trend. And thus this explains the 6 months from August of 2008 trough Feb of 2009... For most people that got into diversification using currencies and precious metals, they saw it for what it was, and simply battened down the hatches, and looked for deep discounts to add to their diversification... For some people, who got in for all the wrong reasons, and never thought about diversification, then they panicked and sold out at losses... For those that battened down the hatches, they were rewarded with this latest 6-month move... And that's all I'm going to say about that!

The boys and girls over at the IMF are trying really hard to keep the currencies in check and not let this become another rout on the dollar. The IMF issued a statement saying that there are still risks in the global recovery... Unfortunately, for the IMF, nobody is listening to them, judging from the dollar selling I've seen since I came in this morning!

Hey! I don't give the French much credit for anything... But I did see last night that they are cutting taxes on business! WOW! What a novel idea! And one that I think would behoove the current U.S. administration to follow... This is really a great way to get real traction in the economy... Give Businesses more room to breathe, and they will hire people, expand capital purchases, etc. Good show!

Yesterday, I was interviewed by Reuters for a story on dollar / yen... I was then quoted in a story that ran later in the day. I had said when I hung up the phone, that it would have been easier if the writer had just read the Pfennig that day! All I did was tell them what I had already told you in the Pfennig much earlier in the day! But... It was great to see my name in a national story anyway, eh?

OK... Getting back to Aussie and Kiwi... The Aussie Retail Sales report for August climbed .9%, erasing the -.9% loss in July! This report plays well with the recovery story and the thoughts that the Reserve Bank of Australia (RBA) will raise rates before year-end...

New Zealand saw their Employment Confidence Index climb to 103 last quarter, from 96.1, the previous 3 months... The report showed that 32.2% of companies surveyed, expected sales and profits to rise over the next 12 months... I know that doesn't sound like a resounding vote of confidence, but the previous number was 26%... So that's quite a jump!

Of these two, I expect The RBA to lead with the rate hikes, while the Reserve Bank of New Zealand (RBNZ) will drag its feet... They don't need the kiwi to start rising aggressively, as exporters in New Zealand are having a tough time now, with kiwi as strong as it is now!

Whenever the Commodity Currencies of Australia and New Zealand have good performances VS the dollar, the other Commodity Currencies get to play along... So that means the performances VS the dollar of Canada, South Africa, Norway, and Brazil have been good.

There is some risk in the currency markets today though... First, we have some data due, and second we have Fed Vice Chairman Donald Kohn, and European Central Bank (ECB) President, Trichet, due to speak today... Could this be more Central Bank parlance for propping up the dollar, that is seen as being on the skids again this morning? I think it just might... Especially, if Kohn doesn't mention that the Fed is going to keep rates at near zero for some time to come. If we don't hear that... Then I think the "con" is on to prop up the dollar...

But don't let that bother you too much... These guys can only affect the currencies for short periods of time with their verbal jawboning... After that, they need to walk the walk with coordinated intervention, if they're going to talk the talk!

Speaking of the data... We'll see the color of the 2nd QTR GDP, and the wild and wacky ADP Employment Change reports... The Chicago PMI (manufacturing for that region) will also show its colors... All of these are expected to show improvement in the U.S. economy... And, if the trading pattern remains in place... Any signs of improvement in the U.S. economy normally results in more dollar weakness!

So... In the end, the data inducing dollar weakness, might be offset by the Central Bank jawboning... In which case, we'll spend the day in a tight trading range for sure! But what happens if Kohn and Trichet, don't support the dollar in their speeches? Then it will all be up to the data!

This morning, Canada will print their latest GDP report... The forecasts are for a very weak report... I'm going to go out on a limb, yes it will be a big fat one to support me, and say that I expect Canada's GDP to surprise on the up-side... If so, the loonie would look to add to gains it already has booked this morning VS the dollar.

With the Commodity Currencies on the rise this morning, Gold has returned to $1,000! Gold remained below $1,000 for about 5 days, in which there were ample opportunities to buy the dips below $1,000...

And... As we close out the month and quarter, the Russian rate cut is all but forgotten about, which is exactly how I told you it would play out... The global recovery theme is back with a vengeance!

OK... I'm going to step up on the soap box now, so if you do not care to listen to another Chuck soap box rant, then skip ahead two paragraphs!

You know... We wouldn't be having these discussions about dollar weakness every day, if the Budget Deficits weren't piling up on top of other deficits... Hey! Remember when I used to take the previous administration to the woodshed for piling up $450 Billion dollar Budget Deficits? Well, that certainly seems to be but a drop in the bucket of the nearly $2 Trillion Budget Deficit that will post this year, and the forecast for $9 Trillion more in the next 9 years...

That all leads me to this... We need to express to our representatives in Washington D.C. that is very important, and the they should focus their attention on this first and foremost! I doubt that we'll ever get there again, but, wouldn't that be nice for our grand kids? I just don't understand why we go around spending money on this that and the other things, and don't ever stop to think about the immoral things we are doing to our future generations... I guess I mean to say that the "we" I'm talking about is not you and me! It's the knuckleheads in D.C... That is, other than Ron Paul, who seems to be the only person in D.C. that understands all this deficit spending...

Ok, down from the soap box now... You're free to move about the Pfennig!

To recap... Aussie and kiwi lead the currencies higher VS the dollar overnight, after each respective country printed a strong economic report, thus putting the global recovery thoughts back on track. We have data, and Central Bank speeches to navigate through today. The non-dollar currencies close a second consecutive quarter of gains VS the dollar, and Gold has returned to $1,000....

Currencies today 9/30/09: A$ .8835, kiwi .7220, C$ .9330, euro 1.4665, sterling 1.61, Swiss .9725, rand 7.4240, krone 5.7675, SEK 6.96, forint 183.90, zloty 2.88, koruna 17.1570, RUB 30, yen 89.50, sing 1.41, HKD 7.75, INR 48.11, China 6.8264, pesos 13.48, BRL 1.7870, dollar index 76.56, Oil $67.78, 10-year 3.31%, Silver $16.48, and Gold... $1,003.45

That's it for today... I had to take my car in for service yesterday, and they gave me a Grand Marquis to drive... Because of my mini-handicap, I have a difficult time getting in and out of a car like that... But what was funny was when my little buddy Alex came home and told me that it looked like a car that is given to a 16 year old by their grandfather to drive... HA! Hey! It's transportation! My dad drove a Crown Victoria, that's much like this car... As soon as I climbed in the car, I thought about him, and that car... That Tsunami that hit American Samoa sure looked deadly... Our thoughts should be with those people today... OK... Memo to Cardinals... Just because you clinched your playoff spot early doesn't give you the right to forget how to play baseball! Get back to work! And with that, I bid you farewell for today... Be sure to make today a Wonderful Wednesday!

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

Retail Sales Soar!

Chuck Butler — Wed, 16 Sep 2009 14:20:00 GMT

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In This Issue..

* Currencies rally on Retail Sales!
* China likes investments in Canada...
* Big Ben the "inflation fighter"...
* Gold climbs to $1,018!

And Now... Today's Pfennig!

Retail Sales Soar!

Good day... And a Wonderful Wednesday to you! Good news for me this morning, the pain in my left knee has subsided... Now, If I could just get that swelling to go down, I'd be in tall cotton! This has been quite the ordeal on the old Pfennig writer, and one that I will be glad to put in the rear view mirror!

Well... When I turned on the currency screens this morning, the euro was trading with a 1.47 handle! WOW! It just skipped to my Lou right through the 1.46 handle, eh? It began yesterday afternoon, the dollar was getting sold on the news of a strong Retail Sales figure, more on that in a minute, and the euro was edging up the 1.46 ladder... The move to get it past 1.47 came in the overnight markets... Now, having gotten you all lathered up about 1.47, I have to say that since I turned on the currency screens, the euro has lost ground back to 1.4688, but still... That's quite an impressive move from yesterday morning, eh?

OK... The issue with the Retail Sales figure causing dollar weakness is a time honored tradition... NOT! Well, it is if you only count the last 9 months... But traditionally, a figure like the one that printed yesterday, would have attracted buyers for the dollar, not the opposite that occurred... Here's the skinny, as I see it...

Retail Sales for August were quite strong, and showed signs that the move was more than the Cash for Clunkers program, and Back to School buying... There are quite a few people/ economists/ analysts out there now jumping on the President's bandwagon that the recession is over based on this report... For those of you at home keeping score, Retail Sales for August printed at +2.7%!

Does one Retail Sales report that's being trumped up with a Government Deficit Spending program, and Back to School buying really tell us that the recession is over? Was it over when the Germans bombed Pearl Harbor? HA! (from Animal House, I know very well the Japanese bombed Pearl Harbor)... You know, it kind of ruins the funny line when you have to make disclaimers... But... I've had people send me emails before telling me, that I should know better that the Germans didn't bomb Pearl Harbor!

OK, I went off on a tangent there, eh? Any way... I wonder if all those people wearing the President endorsed end of the recession rose colored glasses ever stopped to wonder if gas purchases might have helped trump up this figure? Well, I did, you knew I would! And I found that rising gasoline prices sent service station receipts up 5.1% in the month. If we had journalists like we used to have, they would have known to go look at the rising gas price component of the report, since just last week the Trade Deficit jumped by 16% in one month due to rising oil prices!

So... With Retail Sales shooting toward the moon, the dollar selling increased... Because, if the thought here (and not my thought!) is that if Retail Sales are jumping again, it must mean the U.S. Consumer is buying again, and that will help kick the global recession in the rear, and the risk takers come out of the walls, the U.S. Treasury "safe haven" buyers sell to get out of their losses, and they all go to better investments... It may be what they think, to be better... Stocks... But for the most part, these investors seek out higher yielding or better income potential investments... And you won't find those on the Big Board... You won't find them at the local bond house... You'll only find them abroad, in foreign deposit rates, and foreign bond yields...

Now... That everyone is all lathered up about this euphoria going on in the markets... I'm still keeping a light on for a HUGE stock market sell off, which would adversely affect the values of all these risk assets that risk takers have been going into... Commodities, currencies, stocks would all be affected...

However, if that HUGE sell off never comes... Who wants to stand in front of the bus that has Gold above $1,000 and the euro posting a nearly 17% gains since March 1st... But that's nothing folks! The New Zealand dollar (kiwi) has gained 44% since March 1st... The list of currency gains since March 1st is amazing... Simply amazing... Here's a sample... Aussie dollars +38%, Norway +23%, loonies +21%, and so on... So, now you see the bus that I'm talking about!

Big Ben Bernanke had this to say yesterday... "Even though from a technical perspective the recession is very likely over at this point, it's still going to feel like a very weak economy for some time." He also said that he "may have to accept a slow recovery and high unemployment as the price for defending my inflation fighting credentials."

Ok.. Excuse me for a minute, I have to go in the other room and either laugh my rear off or, throw up! Big Ben has "inflation fighting credentials"? Since when? And just where is he hiding these credentials? Or... Maybe his description of "inflation fighting credentials" is different from mine! Hmmm... I shake my head in disgust...

Speaking of the Fed and inflation... My good friend, David Galland, who writes an absolutely fabulous daily letter regarding the goings on in the world called "Casey's Daily Dispatch", and can be found here: http://www.caseyresearch.com/casey-services/free-publications/caseys-daily-dispatch/ , had this to say yesterday regarding this subject of the Fed and inflation...

"Reason Magazine is one of the few magazines I read with any regularity. In the current edition, they had a couple of items that I thought were especially interesting. Ironic, actually.

The first was about a comic book the Fed has published discussing inflation, as well as defending its autonomy. You can view it by following the link below. What you should find interesting is that they make several clear mistakes in describing inflation - for instance, by saying that if the price of oil goes up, that causes inflation. And on the very first page, they state that "The dictionary defines inflation as a substantial and continuing rise in the general price level."

But that is not what the dictionary says - every entry I checked always includes ". related to an increase in the volume of money," or words to that effect. Kind of scary, when the organization charged with fighting inflation doesn't actually know what it is.

You can read the comic yourself here, straight off the New York Fed's website. http://ia301540.us.archive.org/2/items/gov.frb.ny.comic.inflation/gov.frb.ny.comic.inflation.pdf

OK... I'm back now... I saw a report last night that showed the results of a survey that showed the Chinese are very interested in investing in Canada... It was reported that China sees energy, natural resources, agriculture and biotechnology as the most promising areas of Canada's economy... Hmmm... Isn't that the same things I've listed over the years? (well minus the biotechnology) Any way... The report also showed China having interest in the U.S. and Australia...

Money flow is a very important thing to watch in the investment world... And if money is going to be flowing into Canada and Australia from China, that will be good for those countries and their respective currencies. As far as the U.S. is concerned... Forgetaboutit! Remember when China wanted to buy that oil company in California a couple of years ago? I doubt that China will want to get dragged through a mile of broken glass and razor blades again!

Yesterday, I told you about the dollar denominated bonds being issued by Germany, and how I viewed it as a green light from Big Ben Bernanke for other countries to take over the destruction of the dollar, that the Fed has carried the flag for since 1913... I told you I had another frightening thing that I would bring to you this morning... So with no further delay...

The Chinese government has told Chinese companies they do not have to honor derivatives and commodity futures contracts made with Western financial institutions. Ruh-Roh...

This appears to be one of those things that passes in the night, and then one day smacks us right between the eyes, and we say, "Where did that come from?" Well... If came from the Chinese Gov't that told Chinese companies that they did not have to honor derivatives and commodity futures contracts made with Western financial institutions... That's where!

Ok, I can hear you saying, How can they do that, Chuck? Well... When you're a 200 pound gorilla, you can sit where you want, and you can do what you want! China is taking the stance that you come get us, if you think you were wronged!

What does this do to the institutions that wrote these contracts with China, Chuck? Well... That's the cheese that binds folks... It's going to hurt... And it's going to hurt bad... But, nobody really knows just how many or how much risk is out there... But, if one day you wake up and hear on the news that the financial markets here are melting down once again, you'll be able to say... Ahhh, it must be that Chinese announcement that Chuck talked about!

Big Al Greenspan was back in the news last night... First, I want to quiz you on something...
Who said, "In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value."

Well... You'll never guess who, so I might as well tell you, but when you hear it you'll bust a gut, given the whole low interest rate, high money supply environment he created at the Fed... It was..... Drum roll please... Alan Greenspan, from an article written in 1966 entitled "Gold and Economic Freedom"

Any way... Big Al was back in the news, and said that he's worried that lawmakers will hamper the Fed's efforts to rein in its monetary stimulus, and that inflation might "swamp" the bond market. See, how Big Al is sticking up for the Fed, and putting down the groundwork now, to blame lawmakers when inflation is soaring on the other side of the recession?

Big Al is dastardly... I wouldn't be surprised to see a Commie flag nailed to the wall of his garage! HA! Long time readers know my dislike for this guy as a Fed Head, and how he might now have paved the road to this mess we've been in, but he laid the foundation!

OK... The data cupboard will yield a boat load of data today, and it will interesting to see how the dollar reacts to it... Leading off for the data cupboard today is the stupid CPI data for August... Batting second is the Current Account Deficit, and in the all important third position in the batting order we have The Tic Flows, batting clean-up is Chuck's faves Industrial Production and Capacity Utilization... WOW! What a line-up! A Murderer's Row for data if you will!

Since no one but me and my friends over at the Daily Reckoning and 5-minute Forecast, seem to care about the Deficits, the markets will probably wax over the Current Account Deficit... And I don't care about CPI... So that brings us the TIC Flows for July, and I'm fearful that this data will be harmful to our future... And the experts are forecasting a bump up in Industrial Production and Capacity Utilization, which would indicate a stronger economy, and given what we saw yesterday with the stronger Retail Sales, one would think that a bump up in Industrial Production and Capacity Utilization would be bad for the dollar...

Finally... Someone with some brains! I was beginning to think that these guys were all kin to the scarecrow! Yesterday, I told you about how the new governing party in Japan is calling for increased currency intervention... Well, finally someone that understands! Japanese Finance Minister, Fujii, said that he is "against intervention if their moves are gradual, and that I don't think they are fluctuating rapidly now."

It looks like currency traders in the overnight markets were paying attention, and immediately began buying up Japanese yen... The yen is pushing the envelope once again to a sub 90 level... And that! Would be a very good thing for yen holders!

While I'm on "feel good stories"... I might as well mention that Gold has finally made a strong move above $1,000, moving to $1,018 as I write! Silver is kicking tail and taking names later too, with a strong move to $17.35! The Retail Sales data in the U.S. yesterday kicked off a new phase of "inflation protection buying"

OK... To recap today... Retail Sales in the U.S. were very strong, setting off a new wave of dollar selling, to currencies and precious metals. China likes Canada and Australia, and China tells their companies not to honor derivative contracts with Western institutions. And we have a boat load of data to get through today in the U.S.

Currencies today 9/16: A$ .8720, kiwi .7135, C$ .9365, euro 1.4680, sterling 1.6525, Swiss .9665, rand 7.3625, krone 5.8615, SEK 6.9070, forint 184, zloty 2.8240, koruna 17.27, RUB 30.61, yen 90.30, sing 1.4120, HKD 7.75, INR 48.24, China 6.8260, pesos 13.24, BRL 1.8030, dollar index 76.30, Oil $70.75, 10-year 3.40%, Silver $17.35, and Gold... $1,017.50

That's it for today... I just looked up and noticed I was running late with the Pfennig this morning. UGH! So, I guess it's good that I don't have a lot to talk about here... I was going to the day game today... But had to back out because of the problem with my knee... But now the pain is subsiding... I wonder if there's still a ticket... Nah... I gave it away! Go Cards! As a part of the hockey Blues web site, they have a picture of Chris Gaffney's son, Brendan! He's a star! Chris has taken Brendan to hockey games since he could barely see over the side boards. When the games were on TV, you could watch Brendan running back and forth in his space, as Chris has ticket along the glass! Ok... Enough... Time to roll, April Showers is here, and that means I'm late! I sure hope your Wednesday is Wonderful!

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

U.S. Manufacturing On The Rise...

Chuck Butler — Wed, 02 Sep 2009 14:18:22 GMT

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In This Issue..

* Risk Assets Get Sold!
* ISM hits 52.9!
* Aussie GDP rises!
* China leading the way!

And Now... Today's Pfennig!

U.S. Manufacturing On The Rise...

Good day... And a Wonderful Wednesday to you! Well, all that back and forth between rally and sell off for the currencies came to an abrupt halt yesterday, when the dollar bulls went on a rampage. There was some very strong economic data to help the move, but the real thing that brought the currencies to their knees was the stock sell off of 185 points...

Get this... Now we all know that the risk assets of stocks, commodities, and currencies have all been tied together for some time now... So, I was surprised to see a story titled: "Currency Markets Taken For A Ride By Stocks" Hmmm, maybe this person just woke up from a 9-month coma, eh? Any way, that doesn't matter, it's just another opinion that coincides with mine!

I had a read send me a note yesterday asking me to explain my lingo when talking about "handles"... OK... A quick run-though of this... It's an old Bond trading term, that I carried over from bond trading to currencies. So... A "handle" is the whole number... So, if Norwegian krone is trading at 6.0350... "6" is a serious number... It's all the fingers on your hand plus your thumber... No, Wait! "6" is the "handle"... Hope that helps!

OK... Back to currencies... One has to wonder what's going on these days... I mean for over 9 months, whenever there was strong data in the U.S. the dollar would get sold... But now, that's all changed... And, since when does a rise in manufacturing lead to a 185 point stock sell off? It's crazy out there folks! There's nothing that's trading on fundamentals...

The strong data I'm talking about is the ISM (Manufacturing) Index that printed for August yesterday... For the first time in 19 months, the Index rose above the 50 level to 52.9! That's a good performance for the manufacturing sector, and one that will probably bring economists, and politicians to claim the recession to be over... Well, that may be... FOR NOW! Double dipping... It's in our future, I can feel it! And don't forget what I explained to you yesterday regarding the weaker dollar playing a big part in Manufacturing's rise....

A reader that's a Manufacturer sent me a note... "Regarding the uptick in the manufacturing index: from where I'm sitting I don't see it as an increase in demand for our products, but rather a re-building of inventories from an oversold position. We've seen a bounce off the bottom in May that has been carried through this month but it appears to be leveling off."

So... Once again, this is the kind of thing I believe to be "real economics"... Real stuff! Not the surveys, not the hedonic adjustments, not the cooking of books... Real Stuff!

And, before I go on to other things... I normally look at the employment component of the ISM to give me an indication of what the Jobs Jamboree will show, which prints on Friday this week. The ISM employment component showed a job loss of -225,000... So, we're still losing jobs...

OK, back at the currencies ranch, the dollar is beating up on the currencies, but what's that I see? Ahhh... It's the Aussie dollar (A$) mounting a rally in the face of this dollar strength! Let's go to the tape to find out what's going on there!

2nd QTR GDP in Australia printed stronger than forecast at +.6%, (VS +.3% forecast) and stronger than the 1st QTR print of +.4%... This uptick has really brought the rate hike campers back out into the streets. Recall, that a couple of months ago, I wrote about how Australia might end up being the first to raise rates after the financial meltdown of 2008... (It's neck and neck between Australia and Norway)... The thought then that the rate hike would come in the 1st QTR of 2010... But there are those now that are thinking the first rate hike could come this year! October's Reserve Bank of Australia meeting is being targeted now... Put this in you calendar to come back to...

Speaking of Norway... The rate hike campers here had to take a step back yesterday after Norway's PMI (Manufacturing Index) was a disappointing print. Norwegian PMI, which just a month ago was knocking on the 50 number, at 49.7, fell back to 42.3 In August... UGH! So, the Norwegian krone, which had just Monday, traded with a 5 handle, got smoked on this print.... But, I don't think this is something that we should get our undies in a bunch about. This is just one print... And probably only delays Norway's rate hike by a month or two...

Recall on Monday this week I told you that we would have all kinds o' data this week, and all over the world. Well... In keeping with that... China too, printed their Manufacturing Index report last night. The state-sanctioned China Federation of Logistics and Purchasing said its purchasing managers index (manufacturing) rose to 54 from July's 53.3 on a 100-point scale where numbers above 50 show activity expanding. It marked the sixth month of expansion.

So... Just like I told you a couple of months ago... China was going to be the first to exit the economic mess / slowdown / recession / depression, depending on where you live... This marks 6 consecutive months of prints above 50...

I watched Gold get sold yesterday too, and wondered to myself, or maybe it was out loud, our little Christine, who sits next to me, has to listen to all my comments about things all day... I'm sure, she "heard" me wondering to myself! Any ways... What I was wondering about was the price of Gold and how it seemed to be stuck in the $950 range... I did see recently where the Central Banks around the world had signed a new agreement on the amount of Gold that they sell... The good news for Gold was that the Central Bankers agreed on a smaller amount as their maximum amount of Gold that can be sold each year...

Imagine if you will for a moment, where the price of Gold would be today, if those Central Banks hadn't dumped Gold on the markets for the last 9 years? The fact that Gold has risen from $250 to $950, in the face of these Central Bank sales is amazing! And now... The amount the Central Banks can dump on the markets each year is smaller... What do you think that means for the price of Gold? I know what I think it means!

Talk about getting "dumped" that's what happened to the Brazilian real yesterday... Yes, most of the currencies sold off... But real was really sold off! That makes some sense in that real had out performed most currencies this year, and therefore, the selling, or profit taking would be on a larger scale... I think this selling was overdone though, and I would look for the real to make an attempt to come back today...

Today, the data cupboard here in the U.S. has the ADP Employment report, which is kind of a wild hair, report that hardly ever gives a good indication of what to expect in the Jobs Jamboree... But just for the record the forecast for the ADP report is for job losses of -250,000... Which is close enough for Gov't work to the ISM employment component, I talked about above.

We'll also see the stupid Productivity report for 2nd QTR... I've explained why I think this report is stupid in the past, so I won't spend a lot of time on that.

Factory Orders is the only "real" piece of data that I care to look at this morning... July's Factory Orders will print and most likely show an increase of 2.2%...

Then later this afternoon, the minutes of the latest FOMC meeting (8/12) will print. Hmmm... You never know what these minutes might reveal, I've always maintained that if they were the "real" minutes we would see things like... B-10, By Joe, You've sunk my Battleship! HA!

And on that note... I'll head to the Big Finish...

Currencies today 9/2/09: A$ .8325, kiwi .6755, C$ .9065, euro 1.4235, sterling 1.6220, Swiss .9385, rand 7.86, krone 6.0950, SEK 7.2320, forint 193.75, zloty 2.9240, koruna 18, RUB 31.96, yen 92.60, sing 1.4430, HKD 7.7510, INR 48.98, China 6.8310, pesos 13.63, BRL 1.9140, dollar index 78.59, Oil $68.74, 10-year 3.37%, Silver $14.95, and Gold... $956.15

That's it for today... Well... I'm happy you, dear reader, are still reading... I had a guy rant at me yesterday regarding my talking about the Cardinals and Tigers and my family here... HEY! It's my letter! My suggestion... Simply stop reading at the Currency Round-up! So... That sure was a nice win last night for my beloved Cardinals... In a case of "pick your poison" the Brewers intentionally walked Albert Pujols, only to have Matt Holiday hit a home-run! WOW! This is becoming a special season for the Cardinals, for sure! Still battling pain and stiffness in my left knee, I thought the steroids that they shot in the knee joint were supposed to have begun to work by now... Oh well, ice and more ice helps... We had our draft for our Fantasy Football league.. This is silly stuff, but it's interesting at times! OK... Let's get working on what we need to do to make this a Wonderful Wednesday!

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