Daily Pfennig : Bailout

Another New Record Level For Gold!

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

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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

Saying "NO" To Eastern Europe...

Chuck Butler — Mon, 02 Mar 2009 14:18:46 GMT

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In This Issue..

* Dollar continues to rally...
* John Taylor buys dollars...
* Canada sees a deficit!
* More bailout funding...

And Now... Today's Pfennig!

Saying "NO" To Eastern Europe...

Good day... And a Marvelous Monday to you! Welcome to March too! Here and a lot of the country saw March come in like a lion, which means it should go out like a lamb, right? Let's hope it begins turning in that direction before month-end! 9 days before I leave for Florida, the countdown begins!

Well... The currencies continue to trade heavy under the pressure of the dollar, and the "flight to safety" in Treasuries... The euro has lost the 1.26 handle and continues to look weaker and weaker all the time. The latest move down came as a result of new that Eurozone leaders rejected a request for Eastern Europe aid... Here's the skinny on that...

Hungary had proposed that Eastern European countries like themselves, Poland and the Czech Republic, receive loans totaling 180 Billion euros ($227 Billion dollars worth) from the Eurozone... Shot down..... I don't want to be... Shot down! Ahhh, a little April Wine this morning... But getting back to this latest development, this news of a rejection, leaves the Eastern European countries hanging, and trading this week, or until something changes, outside the euro... In other words, the Eastern European Countries, like Hungary, and the other two mentioned above, normally trade partially on their own, and partially with the backing of the euro, since these three particularly were once considered to be on the "fast track" to euro conversion.

So... Not only do the Eastern European currencies get taken to the woodshed, in today's environment with bailouts being the norm, the euro gets taken to the woodshed too for not "bailing out" their brothers...

This is what we've come to folks... If you're not going deeper in debt, and bailing everyone and their brother, nobody likes you any more! I read one person's thought on the Eurozone rejection, and they immediately stuck a knife in the Eurozone, saying "this shows European countries are behind the curve. They are acting against a global crisis with national measures." Hmmm... Ward... You were a little hard on the Beaver last night, weren't you?

The other BIG NEWS this morning was a report that John Taylor, who manages $11.4 Billion as chairman of New York-based FX Concepts, Inc. Let's listen in... "Whenever a banking system realizes it's in big trouble, it says, I have to take care of my next door neighbors and the businesses down the block. Then the currency of that country, it its banks are big in international lending like the U.S., will strengthen."

Needless to say, but, it certainly sounds like Mr. Taylor, has drunk the kool-aid, and is buying dollars along with the others seeking a "safe haven"...

I tell you this, because, someone wrote me recently, and said that I only print commentaries that agree with my stance... So there! This guy is HUGE, and he's buying dollars!

Well, the revision to 4th QTR GDP printed much worse than forecast on Friday... Let's see what the Wall Street Journal had to say about it... "Gross domestic product decreased at a seasonally adjusted 6.2% annual rate October through December, the Commerce Department reported in a new, revised estimate of fourth-quarter GDP. The sharply lower revision reflected adjustments downward of inventory investment, exports and consumer spending.

The 6.2% decline meant the worst quarterly showing for GDP since a 6.4% decrease in first-quarter 1982 GDP.

But... With like all "bad data" in recent times, the traders flocked to the dollar and U.S. Treasuries... Makes no sense to me, but then, I think logically... Not like some Ivy leaguer that never spent time in the mail room, learning the business from the bottom up... Wait! How did that thought go into my feelings about one of the reasons this mess is so bad? I was saving those thoughts for a "rainy day"... Oh well, there's a hint as to where that discussion might go, when I decide to really "let loose"!

Obviously, a decline of 6.2% is pretty dis-heartening for those that believe the recession will be V-shaped... Buzzzzzzzz! Thank you for playing, there's a nice parting gift for you at the door!

The data cupboard is stocked and ready to yield a plethora of data this week! We start today with Personal Income and Spending, and end the week with the Jobs Jamboree, in between we'll see the ISM Index (manufacturing), Pending Homes Sales, the Fed's Beige Book, and more! So, we won't be void of data to talk about this week.

It looks like January will be the month that sees jobs losses greater than 600K, as the "experts" have forecast the total job loss for January at 650K! Aye, Yay, Yay... That's just awful! The unemployment rate is expected to hit 7.9%, but don't be surprised if it prints a snowman... That's an 8 for you non-golfers, bad golfers I should say! I still believe that the unemployment rate will reach 8.5% before this is all over, and that's even taking into consideration that Obama's Stimulus is a smashing success! (here's the kicker though, that no one's talking about regarding these jobs that will be created by the Obama stimulus... For the most part, they will all be "short-term jobs". What happens when those "short-term jobs" end?)

OK... Enough! The data will print when it prints, so I'll just leave it there...

Back to Treasuries for a minute... A reader sent me a note that the 5-year Treasury auction priced at 1.92% yield... So, why the attraction to Treasuries? 1.92% for a 5-year Treasury? That's pitiful! And if the continued buying at that level doesn't represent an "overbought" situation than I'm not bald, overweight and short!

The Canadian dollar / loonie had a rough go of it on Friday after their Current Account printed as a deficit for the first time since 1999! So... After 9 years of surpluses, Canada is dealing with a deficit... The Current Account deficit totaled a seasonally adjusted C$ 7.486 Billion in the fourth quarter, bigger than the consensus forecast for a C$ 5.1 Billion shortfall. A slump in the goods trade account combined with a widening investment income deficit resulted in the largest Current Account deficit since 1993.

Japanese yen continues to weaken from it's lofty levels of just a couple of weeks ago... I tried to point this out to everyone when I said that the Unwinding of the Carry Trade looked as though it had come to an end... If the unwinding involved buying yen, then the end of the unwinding would involve not buying yen... Then when it stops getting stronger, profit taking begins, and... Well, that's where we are today with yen...

Remember last week when I mentioned that AIG could post the largest loss in U.S. Corporate history at $60 Billion? Well, they bettered that number posting a loss of $61.66 Billion! So... Guess who stepped in again to make sure they didn't fail? That's right! The U.S. Gov't... Here's the skinny as reported by the Wall Street Journal... "The federal government has revamped its rescue package to American International Group and will provide the troubled company another $30 billion, with the Treasury saying AIG continues "to face significant challenges." The announcement comes as the insurance giant posted a $61.66 billion net loss for the fourth quarter.

The new package comes as the company has burned through cash and has been unable to find buyers for pieces of its company that it hoped to sells to repay the government on its existing loan package, which totals some $150 billion.

>>>> back to me... I tell you this folks... I truly believe that the Gov't might as well find a big black hole and throw the $30 Billion into it, because now AIG is at $150 Billion in total loans, and still burning through cash... I hope I'm wrong, because as a taxpayer, I would hate to see this, but... I think we'll hear about more Tens of Billions being put into this company in the future...

Speaking of taxes... I met my guy on Friday to begin the tax accounting process... The time is slipping by pretty quickly folks, and April 15th will be here before we know it!

I've talked about how much I enjoy reading Caroline Baum's articles on Bloomberg before... And she has one now that really strikes a nerve with me, in that for once I have someone agreeing with me that the latest stimulus isn't addressing the problem with the banks... Here's a snippet...

"Fed Chairman Ben Bernanke said in congressional testimony last week that key to stabilizing the economy is stabilizing the financial system.

If that's the case -- and policy makers of all stripes seem to agree that it is -- why a $787 billion fiscal stimulus bill filled with political priorities and a budget that increases domestic spending by 8 percent?

As an economist friend of mine says, you can't force-feed someone who's in the middle of coronary thrombosis.

Better to make the treatment fit the disease. Revamping the health-care system won't fix the banks. Raising the price of carbon-based fuels and force feeding the nation alternative sources of energy won't loosen up lending. And higher taxes on the wealthy, and inevitably the not-so-wealthy, won't enhance bank solvency.

Doing so many things at once means a reduced focus on the root of the problem. There's a reason the tortoise beats the hare in Aesop's fable."

The entire story can be read here, and I highly recommend that you do... http://www.bloomberg.com/apps/news?pid=20601039&sid=aoKaIpGop7No&refer=columnist_baum

Currencies today 3/2/09: A$ .6325, kiwi .4935, C$ .7785, euro 1.2580, sterling 1.4150, Swiss .85, rand 10.3685, krone 7.20, SEK 9.22, forint 243.50, zloty 3.78, koruna 22.62, yen 97.10, sing 1.5540, HKD 7.7565, INR 51.94, China 6.8450, pesos 15.40, BRL 2.4120, Dollar index 88.72, Oil $42.38, Silver $13.10, and Gold... $946.55

That's it for today... Well, March is here, which means the NCAA Basketball tournament gets underway, which is always a great couple of weeks. It also means spring training games... Isn't it great to see baseball highlights on ESPN again? And on Saturday, I listened to our Mike Shannon announce the Cardinals' spring training game. There's nothing like baseball on the radio! Oh, you can watch it on TV, but you don't use your mind like you do when you listen to it on the radio... My little buddy, Alex, had his basketball season come to an end this past weekend. His coach told him yesterday that he had "played like a warrior"... Our little Christine gets her husband, Matt, back. Matt is a high-school basketball coach, and his season ended last week too! Time to go... Hope everyone has a Marvelous Monday!

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

Bank Losses Mount... Globally...

Chuck Butler — Wed, 18 Feb 2009 14:23:51 GMT

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In This Issue..

* The dollar continues to rally...
* Loan ratios figure big now...
* Bank nationalization returns to Germany...
* Gold pushes the envelope further...

And Now... Today's Pfennig!

Bank Losses Mount... Globally...

Good day... And while I hope it's a Wonderful Wednesday to you, I have sad and shocking news for us at EverBank. Yesterday, we were shocked to learn that a colleague and friend, John Kimsey has passed unexpectedly. Thoughts and prayers are with the family. John had joined the World Markets desk in November of last year, after a career in our Mortgage Division, and made an immediate impact with his personality, and his love of his family. His laugh, and smile were contagious, and will be missed.

I have no experience in dealing with the loss of a colleague, so I'll just leave it there, and move on. This will be short this morning, as I'm just not really in the mood to be in a normal writing mood.

The dollar continued to rule the roost yesterday, as the story that I broke to you yesterday regarding the Eastern European loan losses weighing heavily on the euro, really gained steam as the day went on. I have to apologize right here, right now, that I contradicted something I said and my friend John Mauldin said yesterday. I did not mean to do that, and I shows what happens when you write pre-5 a.m. I was of the thought that the U.S. losses were larger than those in Europe (overall, both East and West)... But upon further review, I see that NOT to be the case. It all goes back to lending ratios, which in good times people don't pay attention to... But in bad times, they begin to be as self-evident as a hatchet in one's forehead. U.S. Banks have a loan ratio of around 26 to 1... And European Banks have one that is around 60 to 1... Uh-Oh!

My long time friend, and sometimes colleague, Ed Bonawitz, sent me a note yesterday showing the rot on the vine... This stuff isn't for anyone under 13 to view, folks, it's nasty... Here are some facts to make you cringe... "Ireland's external debt, at $1.8 trillion, equals 900% of the country's $200 billion GDP. The United Kingdom's external debt of $10.5 trillion equals 456% of its $2.3 trillion GDP. Switzerland's external debt of $1.3 trillion equals 433% of its $300 billion GDP."

So... Now that the credit markets are locked tight, renegotiating the terms of these loans is virtually impossible... The IMF will need to step in Big Time, and as badly as I don't want to even say this, but have to, the Bundesbank, Germany's Central Bank, will have to step in also.

There's news this morning that Germany will take over Hypo Real Estate Holding, Inc. thus paving the way for the first German Bank nationalization since the 1930's...

So... Here's the deal folks, the way I see it... These countries are dealing with their own problems, and soon they will move to protectionism measures to keep trade at home... This will happen all over the world, and for my money, it will be akin to pushing Trade over the cliff. No way trade is able to recover from a blow like global protectionism, until it ends...

So, again, there's "uncertainty"... And the Uncertainty Hedge is here to help! Yesterday, I watched Gold move higher all day to the tune of $28 bringing the price of Gold to $970! This morning, there has to be a ton of profit taking, as Gold has backed off by $6... I'll say this again for anyone missing class on two different occasions last week... It appears that the large investors are moving to hard assets, like Gold and not to fiat currencies...

The TIC Flows data yesterday surprised on the upside, with a total of Net security purchases by foreigners rising to $34 Billion, while the previous month's negative -$21.7 Billion was revised down to negative -$25.6 Billion... So, if you average out the two months, we have a net of around $9 Billion, which is not enough to finance the deficit... And that just gets added to our financing needs down the road.

So... Europe is having problems with banks, just like here in the U.S. But keep in mind that at least Europe was dealing from a position of strength when this all materialized, and the financial meltdown began, while the U.S. was already deep in the deficit hole...

Today in the U.S. we get Housing Starts, Building Permits, Industrial Production, and Capacity Utilization all for January... And all should continue to show bad things for the U.S. economy. But as I said yesterday with the deficits rising, and everyone becoming comfortably numb with the numbers, they have long been comfortably numb with the rot on the data's vine here in the U.S. It's not that people don't care... It's that they see it, and realize they can't do a darn thing about it!

OK... GM was at the back door begging for more drugs, I mean bailout money yesterday... Here's what the Wall Street Journal had to say about it....

"General Motors plans to ask for access to an additional $16.6 billion in federal aid. The company said it will run out of money by next month without additional aid. GM also said it would close 14 U.S. plants, five more than previously planned. GM also would cut 47,000 global hourly, salaried jobs."

If I were "the man" doling out the bailout funds, I surely wouldn't want the closing of 14 plants and the loss of 47,000 jobs on my conscience... But! I wouldn't write the check, until GM gave me something in writing... 1. a plan to pay it back 2. why they believe this $16.6 Billion will "do the trick" for them. 3. what are their plans to get back in the black given the U.S. is in a recession, and not buying automobiles!

Well, the President signed the "new and improved" Stimulus Bill yesterday, and I totally misread what stocks would do with that news... I was fully expecting stocks to rally with the news... But instead we got a 300 point sell off in the DOW... Don't look now, but the Dow is now within less than a point of its November 20 closing low of 7552.29... Financials led the way for the stock losses yesterday as they too the Nestea plunge once again.

Good thing I'm not even your last pick for a "stock jockey"...

Yesterday's move pushed the Dow to near a -14% loss year-to-date. Even with the large investors trading in fiat currencies for hard assets (read Gold!), these currencies are still in better shape year-to-date than the DOW... And most of the red in the currencies has come in the past week.

Norway leads the G-10 currencies VS the dollar so far this year...

Someone asked me, (they are always asking me about Swiss!) to talk about Swiss again... Well, from the above note about loan loss problems Switzerland is not going to go Ollie, Ollie Oxen free... They've got some real banking problems, and that's the reason the Swiss franc has seen a -9% decline this year...

I got a chance to talk to an old Mark Twain Bank colleague yesterday... Craig Caringer called to check up on my health... What a great person always was, and apparently still is! Craig is a bond trader/ sales guru down in Florida... He tells me there are scant signs of liquidity returning to the markets, but scant for sure... Craig was the absolute best golfer I ever played a round of golf with. He is a Mizzou alum, and we had a blast talking about our Missouri Tigers ranked #10!

OK, I'm watching the euro trade higher this morning, than when I first came in... The range is small though, so it will be interesting to see if it can add to the gains I've seen already this morning. The trading pattern for some time now is for the overnight markets to push the currencies higher, and the U.S. markets to pull them back down.

There's a writer out there in writer-land, that wrote a piece this last weekend, saying that the banking problems in Europe were too big, and that the euro was doomed... WOW! Those are some strong words! I saw the report, and I just cringed... For we've heard these wild forecasts before... There was the so-called collapse of the euro right after its issuance in 1999... There was the so-called collapse of the euro right after Denmark voted "no" to joining the euro... There was the so-called collapse of the euro, after France voted "no" to accepting the constitution... And now this...

I'll say this now, just like I said during those previous crisis... The euro is here to stay, folks... The level of the euro VS the dollar may lose ground because of this problem, but it's here to stay... So, don't let yourself get all caught up in the sensationalism going on... Which reminds me of the Y2K stuff... Remember that?

OK... This went on a little longer than I anticipated... So let's go to the Big Finish together...

Currencies today 2/18/09: A$ .6385, kiwi .5115, C$ .7920, euro 1.2610, sterling 1.4210, Swiss .8525, rand 10.21, krone 7.01, SEK 8.81, forint 242, zloty 3.8350, koruna 23.09, yen 92.60, sing 1.53, HKD 7.7545, INR 49.97, China 6.8375, pesos 14.66, BRL 2.3390, dollar index 87.66, Oil $35.02, Silver $14.05, and Gold... $963

That's it for today... Again, thoughts and prayers to John's family. That's all I've got for today... I hope you have a wonderful Wednesday...

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

Another HUGE Currency Rally!

Chuck Butler — Mon, 29 Dec 2008 23:43:17 GMT

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In This Issue..

* Gaza bombing has dollar on the run...
* More proof we're turning Japanese...
* Adding to the debt burden...
* What will deflation do for the dollar?

And Now... Today's Pfennig!

A HUGE Currency Rally!

Good day... And a Marvelous Monday to you! Well... It's been a long time, now I'm coming back home! Actually, I've been home all of my winter vacation, but I'm referring to the trading desk and EverBank's office. I had a vacation that had a split personality, as I was sick for the first part of it, then went to the eye doctor to get another shot / injection in my eye. So much for the first part! The second part went quite well, with lots of rest and time spent with family. Are there two better ways to spend your time? Not in my book!

So... The currencies had a split personality while I was gone too... At first, they rallied like there was no tomorrow, but then sold off, and then range traded. So, we'll finish the year on a down note for most of the currencies, but knowing all too well that the markets are beginning to realize that the debts the U.S. is chalking up are not going to go away, and in fact they're just going to get worse, and that spells bad times for the dollar... Eventually...

I did a lot of reading on my vacation, and the book I read the most was one by Christopher Wood, titled: The Bubble Economy... Now, on first take you would think that he was talking about the U.S.... But that would be wrong... This is an old book, and was written about Japan's economy in the 90's... I've spent a ton of time talking about the similarities between Japan then, and the U.S. now. And this book, just brings those thoughts even closer! For instance... In the book he quote the Levy Institute circa 1991... "monetary policy would not, on its own, be able to restart a depressed economy suffering from asset deflation and widespread financial crisis, for lower interest rates cannot motivate fixed investment when the market is glutted with existing assets worth much less than it costs to replace them."

Oh my! We're turning Japanese, I really think so!

So... Then this weekend, a Pfennig reader sent me a link to a story on Bloomberg regarding the Japanese... Here's a snippet... "Japan should write-off its holdings of Treasuries because the U.S. government will struggle to finance increasing debt levels needed to dig the economy out of recession, said Akio Mikuni, president of credit ratings agency Mikuni & Co.

The dollar may lose as much as 40 percent of its value to 50 yen or 60 yen from the current spot rate of 90.40 today in Tokyo unless Japan takes "drastic measures" to help bail out the U.S. economy, Mikuni said. Treasury yields, which are near record lows, may fall further without debt relief, making it difficult for the U.S. to borrow elsewhere, Mikuni said."

Well...the "rest of the story" can be read by clicking here: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aFgHlh.Dn4Lc

As I write, the euro is back on the attack VS the dollar, with it trading above 1.43 once again. There has been a 2 figure move up in the euro from just last night, as it appears that the markets are running from the dollar with the Israeli / Gaza thing going on. The Swiss franc is back above 95-cents, and so on... I also noticed, while on vacation, that the Aussie dollar bounced nicely off its 65-cent level. And Commodities staged a nice rally / comeback while I was gone. Gold is trading around $880 again...

When I left, I had told you about a Santa Rally for the euro, and it did just that, even with the profit taking after reaching 1.45, it's still much higher than it was when I said that we should look for a Santa Rally. I also was hinting that the Trading Theme that we've seen in place since July, was beginning to show chinks in the armor. Those chinks are becoming major exposed areas, as the markets are returning to focus on the fundamentals the hang over the U.S economy and dollar like the Sword of Damocles.

So... I see that the Fed has opened the door to grease the tracks to make GMAC a "bank-holding company" Why? Ahhh grasshopper... If GMAC is a bank holding company, they would be eligible for TARP funds, which would put them on the fast tracks to obtaining taxpayer bailout funding.

The thing I see happening now is that "everyone and their brother" is going to line up for taxpayer bailout funding... We've already set the stages for car loans, and student loans, and next we'll get real estate guys and who knows what else! Everyone is lining up at the Government bailout trough...

So, thanks guys... Thanks for running up the taxpayer costs... Thanks for making it possible that my grandchildren will be burdened with these unbelievable financing costs of all this debt we're building... Thanks... But no thanks!

It's all sort of like Humpty Dumpty isn't it? You know, all the king's men and all the king's horses couldn't put Humpty Dumpty back together again. All the Big Ben Bernankes and Henry Paulsons are trying to put the economy back together again, but it "ain't happenin"! Just shows to go you that they should have left it all alone... Let it fail... Then pick up the pieces and begin again... I've had a few people along the way that tell me that I don't offer solutions all I do is pick at the wounds... But they just don't read into what I'm typing each morning... I've said all along that we would end up in a debt ridden society if we didn't stop spending... So, there's one solution... STOP SPENDING! And then I warned that these bailouts that began last spring with the $150 Billion in checks to consumers, was going to put us on the road to turning Japanese, and we should have let things go their normal business course... There was another solution!

Now, that we're here in this quagmire of debt and there's more coming folks... I recall telling Chris while I was gone that there are rumors that the next bailout amount could reach $1 Trillion! But now that we're here, what's a poor boy to do? Well... For me, it's called savings... And when things look really bad, and prices have fallen to the core, then I'll put those savings to work, and if everyone does the same, the economy will grow once again, but from a lower base, which is a good thing. Of course, should everyone begin to spend their savings at once, this will bring about inflation that comes out our ears, but let's worry about that then, eh? Besides, like no one really thinks that with interest rates near zero, and all this money going into the system, that eventually we won't have an inflation problem do they?

OK... Now, that was a lot to get off my chest on my first day back, eh?

We didn't see any economic data on Friday after Christmas, so one would think that there's some catching up to do this week to end the year. But the data cupboard is empty today too! And it looks like those that are responsible for restocking the data cupboard, have taken this week off too... One piece of data we will get is the ISM (manufacturing) Index for this month... And remember when this index was hovering around the contraction/ expansion level of 50 and I kept saying that it was going to go below it and fall? Well, the index number in Nov. stood at 36.2, that's a long way from 50, eh? And the "experts" have forecast another fall to levels not seen since 1980! UGH! Now... Early last fall I fretted about the reversal in the weak dollar and its affect on manufacturing... Exports had just posted a strong performance in the 2nd QTR, boosting GDP, because the dollar was so darn weak! Well, I said then, that those wishing for a stronger dollar had better be careful for what they wish for...

So, with the trading desks still undermanned the volumes will be thin for the most part, unless... We see a ton of "book squaring" today, to settle before the end of the year... Either way, we need to be aware of the fact that thin volumes can cause wild swings in the currencies... Take last night's action for instance. When I went to bed the euro was trading 1.4130, and that looked pretty darn good to me... But when I turned on the screens, here in the office, this morning, what did my wondering eyes did appear, but the euro trading at 1.4350!

This rally means the euro is only down 2.5% from a year ago, which is far better than it was showing a month ago! And the best performer of 2008? Like you didn't know! It was Japanese yen, up 24.7% since last year! WOW! Of course there are some real "problem children" in the currency performance roster... Aussie, kiwi, pound sterling, loonies, and krone are all showing pitiful performances for 2008... But, if the recent price action is any indication of what could happen in 2009, if we return to the fundamentals, then these pitiful performances might get put in the rear view mirror...

U.S. Treasury Sec. Henry Paulson is just about at the end of his "tour of duty", and you've got to think that he can't wait for the new administration to take over! I don't doubt for a minute that the new Treasury Sec. will pull back on the bailouts... But what I do question, with Paulson leaving, is what happens with China? Paulson didn't make the progress with China that he set out to make, but what he did do is keep the knuckleheads in D.C. from slapping trade tariffs on China... I have to wonder if that will be the direction of the new Secretary... If it is, then that won't be good for the dollar, as protectionism is never viewed as a positive for a currency. So, those questions and more are on the docket for 2009...

I received quite a few emails from readers while on vacation with a question about something that another newsletter writer wrote about the euro / dollar... The writer believed that deflation was going to be a big problem for the U.S. next year, and that would be a good thing for the dollar, thus pushing the euro to parity. Hmmm... Well, that may be true, for I don't know what's going to REALLY HAPPEN! But! I would just have to say that since we're mirroring Japan so much, let's go back and look at what deflation did for the yen in the late 90's when deflation was so prevalent... Oh, it doesn't look like deflation did yen any favors then... And I doubt it will do the dollar any favors this time around... So, there's my answer to that call by someone else... To me, though, this is all good, as it still means that there is a two-way trade, and that not everyone is on the same side of the ship!

So... Before I head to the Big Finish, let me re-cap today's action so far... The dollar has been hammered overnight on fears that the Israeli attacks on Hamas in the Gaza Strip will disrupt oil supplies to the U.S. This has driven the price of oil higher to $40.40, and has caused a traders to unload dollars... The data cupboard is empty today, and trading desks are undermanned, which could cause wild swings in the currencies this week.

Currencies today 12/29/08: A$ .6965, kiwi .5850, C$ .8210, euro 1.4355, sterling 1.4670, Swiss .9585, ISK 143.20, rand 9.55, krone 6.95, SEK 7.67, forint 186.10, zloty 2.9050, koruna 18.54, yen 90, baht 35, sing 1.4370, HKD 7.6710, INR 48.42, China 6.8525, pesos 13.46, BRL 2.3450, dollar index 79.70, Oil $40.40, Silver $11, and Gold $885.80

Oh, and thanks for all the kind words about our Christmas card / photo we sent out! Chris had a little error on his listing of the names on the photo... He said "right to left", but it really was left to right... Now, we've really got you confused, eh? HA!

That's it for today... Well, did you have a great Christmas / Holiday? I sure hope so! Do you have Big Plans for New Year's Eve? If you do, please be careful! I will get together with close friends for dinner, and return home! Thanks to Chris for another great job Pfilling in on the Pfennig! Chris sure had some very kind words about my beautiful bride last Friday. I thought he had ticked her off some way! HAHAHAHAHA! Wait till he sees my travel plans for March! I guess most people will be back today, except for Jen, who will be out this week. She needed it after me being gone two weeks! My beloved Missouri Tigers play in the Alamo Bowl tonight (a far cry from where they thought they might play this year!), against Northwestern. Should be a good game. Go Tigers! The bitter cold we had here has been replaced by normal temperatures, still chilly / cold, but not bitter cold like they were. So, that's all good... I guess it's not too early to talk about the Orlando Money Show, which will be Feb 4-7... I'll be there, God willing, along with others... I wonder where the currencies will be then? This is always the biggest show, best attended, and a welcome relief from the cold weather here in St. Louis! OK... That's all I've got for today... Let's make it a Marvelous Monday, eh?

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

Currency markets stabilize...

Chuck Butler — Mon, 22 Dec 2008 15:40:00 GMT

.........But First, A Word From Our Sponsor..........

Gold and silver prices are down.

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In This Issue..

* Currency markets stabilize (for now)...

* Data packed holiday shortened week...

* China cuts rates...

* Indian rupee falls...

And Now... Today's Pfennig!

Currency markets stabilize...

Good day...The dollar settled in at the slightly higher levels it reached Friday morning and is trading in a narrow range heading into a holiday shortened week. Trade desks across the globe will be mostly staffed by the backups as the big bosses take Christmas week off. Volume will likely be lighter, which can sometimes lead to an increase in volatility.

The data calendar is empty today, but chock full tomorrow and Christmas eve. Markets will be closed on Christmas day, and most will be closed again on the day following Christmas (known as boxing day). GDP, Personal Consumption, U of Michigan consume confidence, New Home Sales, Existing Home sales, House price index, Richmond Fed Man. Index, and ABC Consumer confidence numbers will all be released tomorrow. On Christmas eve the US will release MBA Mortgage applications, Personal Income, Personal Spending, PCE deflator, Durable Goods orders, and the weekly jobs numbers will all be released. I told you we will be packing in a weeks worth of data in the next two days!!

So what will all of this data mean to a thin currency market? I expect all of this data will show a US economy which is continuing to weaken. 3rd quarter GDP is expected to show a drop of .5%, and Personal Consumption is expected to have dropped 3.7% during last quarter. The housing industry continues to weaken, which will be reflected in this week's data. Personal Income is expected to be flat, with spending in the US to show a slight decrease. Durable goods orders will probably show a drop of 3%, and the weekly jobs data will end the data packed two days showing further weakness in the US labor market. The bias for the US$ will continue to be negative, as the next two days of economic data will confirm just how bad the state of the US economy is.

As I mentioned earlier, the currency markets have been trading in a tight range with the Commodity currencies of the Canadian dollar, South African Rand, and the Australian dollar leading the pack. The Japanese yen weakened slightly, trading back above 90 yen per dollar. The yen weakness came as investors slowly moved back into risk trades as a US bailout of GM and Chrysler moved closer to reality. The yen stayed lower vs. the US$ as China announced an interest rate cut in order to try and support its economy.

The dollar weakened a bit vs. the Euro which held just above 1.40 during early European trading. According to a story on Bloomberg by Stanley White, the Euro will likely rise to $1.50 in the next two weeks. The relative strength index for the Euro moved above 50 which illustrates the Euro is gaining momentum. The Fibonacci series of numbers says we are in a bullish trend, with resistance at $1.50 near a 150 percent projection of the euro's rise from its Dec. 4 low of $1.225 to its Dec. 16 high of $1.4147. White goes on to report the 14 day relative strength index shows the euro will start heading higher after a short correction.

The Australian and New Zealand dollars rose as the Feds bailout moved investors back toward higher risk trades. These currencies have been two of the biggest recipients of 'carry trade' flows, and the expected rescue of US automakers gave currency investors confidence to move back into these higher yielding currencies. Even after aggressive rate cuts in both South Sea nations, benchmark rates are still over 400 basis points better than in the US. If commodity prices can start to rebound, the combination would be very good for both the AUD$ and NZD$. I still favor the Australian currency vs. the kiwi, as New Zealand has a much larger current account deficit, which will need to be funded with foreign capital flows.

China's central bank cut interest rates for the fifth time in three months to try and support growth. Chinese leaders have stated they want to keep growth in the world's fourth biggest economy from dropping below 8%. The IMF predicts they will be unsuccessful, as a recent report released estimates 2009 Chinese growth at 5% to 6%. But the People's Bank of China is going to continue to try and meet their goal, using a combination of economic stimulus spending, lower deposit requirements, and easier credit. Mike Meyer tells me we have been fielding a number of callers selling their Renminbi deposits after Dr. Steve Sjuggerud suggested investors exit their positions. While I don't disagree that there are probably many currencies which will outperform the Renminbi, I do think the Renminbi will continue its slow ascent vs. the US$.

The Indian rupee fell sharply after its recent move to a 2 1/2 month high vs. the US$. The selling was probably due to importers taking advantage of the rupee's strength to lock in rates. The rupee touched 46.86 in trading on Friday, the highest since October 3, rebounding more than 8 percent from a record low of 50.615 on Dec. 2. Trading in the forward markets indicate the rupee will recover slightly from where it is trading now.

Currencies today 12/22/08: A$ .6861, kiwi .5755, C$ .8299, euro 1.3976, sterling 1.4807, Swiss .9096, ISK 176.5, rand 9.6712, krone 7.0286, SEK 7.7487, forint 189.52, zloty 2.9259, koruna 18.784, yen 89.96, baht 34.55, sing 1.449, HKD 7.75, INR 46.02, China 6.8512, pesos 13.12, BRL 2.3644, dollar index 80.88, Oil $42.95, Silver $10.965, and Gold... $842.52

That's it for today...Had a great weekend, as a couple of work crews worked long days so that I will be able to make my wife's Christmas eve deadline. I guess the injury to my hand had a silver lining, as these guys really knew what they were doing and probably did a better job than I would have been able to. I caught up with some Pfennig readers and old friends at a big formal ball on Saturday night and got to go watch the Blues vs. Boston yesterday. The new puppy is adorable, but is just like having another child, as he got us up a few times during the night. With temperatures hovering in the single digits, taking the puppy out to do his business is not an enjoyable experience!! Got to get to work, hope everyone has a Marvelous Monday!!

Chris Gaffney, CFA

Vice President

EverBank World Markets

1-800-926-4922

1-314-647-3837

Waiting on the FOMC meeting...

Chuck Butler — Mon, 15 Dec 2008 15:11:05 GMT

.........But First, A Word From Our Sponsor..........

Gold and silver prices are down.

Invest for as little as $5,000, avoid costly broker commissions, and receive account statements every month.

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In This Issue..

* FOMC to cut further...

* Bernanke turns his back on inflation...

* Kiwi and Australia rally...

* Gold continues to shine...

And Now... Today's Pfennig!

Waiting on the FOMC meeting...

Good day...and welcome to another week, hopefully the currency markets can continue their assault on the dollar which began a few weeks ago. The dollar index peaked back on November 21, and with the exception of a few days around the beginning of December, the greenback has consistently fallen vs. most of the major currencies. Friday was no exception, and the dollar continued to give back gains over the weekend with the Euro climbing back over $1.35 for the first time in two months.

This morning the markets are focusing on the Fed's Open Market Committee meeting and rate announcement which will come tomorrow. It is widely expected that Bernanke and his compatriots will push US interest rates close to just 0.5%, the lowest on records dating back to July 1954. From everything I've read over the weekend, this 50 basis point cut is pretty much a done deal, and currency traders are actually more interested in what the Fed's statement will say about 'alternative easing measures'. The rate announcement will come tomorrow at around 2:15 pm EST after a two day meeting. The FOMC meeting had originally been scheduled for just one day, but was extended so policy makers could study options for unusual steps to spur the economy. I guess they finally figured out that they are running out of room with the interest rate cuts!

The Feds newest weapon against the falling economy is 'quantitative easing', which the Bank of Japan used in the 1990's. This non-traditional method of easing centers around pumping money back into the financial markets as quickly as possible. The Fed has already started down this path by allowing its balance sheet to more than double in size after pumping over $1 trillion into financial markets. The markets are now expecting the Fed to announce it will start purchasing private sector mortgages to drive down home loan costs. By purchasing these bonds, the Fed would narrow the spread between their yields and yields on US Treasuries, and theoretically allowing banks to offer home loans at lower rates.

But the Fed has already pumped trillions into the banks in an effort to get them to start lending, so I'm not sure having the Fed narrow mortgage spreads will get these same banks to open up their lending windows. And even if the banks lower mortgage rates, they won't be lowering credit standards. Unemployment continues to rocket upward as more and more firms lay off workers. Do you think these banks are going to be willing to refinance someone who has just lost their job?

And what will be the long term impact of all of this 'quantitative easing'? The Fed is mashing on the money supply accelerator, totally ignoring the inflationary results which all of this will bring down the road. Ben Bernanke is smart enough to know the risks of the path he is speeding down, but right now he is choosing to ignore the consequences in an attempt to keep the economy from falling off the abyss. Some at the Fed believe they will be able to pull all of this added liquidity back out of the markets as soon as the economy starts to recover. But this is a very difficult thing to do, as the Fed would have to start pulling liquidity and increasing rates just as the economy is starting to turn. I think it is pretty obvious the 'experts' have a tough time calling the turning points, as it took them almost a year to call the recession!! And the consequence of missing the timing on pulling the liquidity back out of the market is much more drastic than mistiming the entry into the recession. Hyperinflation is waiting on the other side of this short term deflationary pause, and the Fed is currently looking the other way.

This weekend, President Bush announced that he is thinking about spending some of the TARP money which was set aside to stabilize the financial system to bail out the auto industry. This announcement caused a further sell off of the dollar as it is quickly losing its status as a safe-haven currency. Chuck was busy this weekend, but still found time to send me his thoughts:

"Well... We went to cut down our tree today, then watched Alex's basketball team get smoked! Put the tree up in a spiffy, with one of the greatest inventions of man kind, the swivel stand... And now I'm off to tell you what I've read about this weekend...

First though... A quote from Ronald Reagan... "The most terrifying words in the English language are: I'm from the government and I'm here to help"

OK, with that in mind, I wanted to discuss the bailout for the automakers, GM and Chrysler.

First of all, I know it will be tough for the autoworkers should they be laid off, especially at this time of the year. But, the problem here is the fact that the automakers have run their respective companies very badly, and now they expect the taxpayer to bail them out.

It was reported on Friday that the Gov't is "looking into" using TARP money for the automakers bailout since the Senate voted "no" to the $14 Billion plan.

First of all... Congress said nothing about helping carmakers, or any other non-financial business, in October when it authorized the $700 billion Troubled Asset Relief Program, or TARP. But yet, it is being discussed as the "funding source of funds"...

That fund was never designed to rescue manufacturing companies with long-term operational issues. It was designed to shore up confidence in the banking system in order to thaw the world's credit markets.

Our own David Nicklaus of the St. Louis Post Dispatch has this to say, which makes a whole lot of sense to me! "The Detroit Three have been losing market share for decades, and their bloated cost structure makes it difficult for them to turn a profit even in good times. They have too much debt, too many models, too many dealers and, sad to say, too many workers.

Congress seemed to view an auto bailout as a jobs program, and TARP is nothing of the sort. In fact, the Treasury has invested in Bank of America, which is eliminating 35,000 jobs, and Citigroup, which is slashing 52,000.

The Treasury program, as it's been used so far, at least lacks one of the worst features of the failed auto bill. Nothing in the TARP legislation allows the government to name a car czar."

Yes, a Car Czar... Those Czars worked out well for the Russians, eh?

But the thing that really gets my blood boiling folks, is the fact that if bailout had gone through with the Car Czar, it would have been one more nail in the free markets / business coffin, just another opportunity for those that want to run the country toward the socialist side of the ledger..."

That is one of the things I love about Chuck, you don't ever have to wonder where he stands on something!

As I started to say before I went off on my FOMC tangent, the dollar continued to give back ground vs. just about all of the major currencies over the weekend. The Euro was up over 1.2% vs. the dollar, and broke through the $1.35 handle. The only two currencies which sold off over the weekend were the South African rand and Brazilian real, which were down just slightly. In addition to the FOMC meeting and announcement, we will get the TIC flows, Empire manufacturing number, Industrial Production, and Capacity Utilization numbers today. Tomorrow will bring the CPI numbers along with housing starts, building permits, and ABC Consumer confidence. Wednesday will be a light data day with just the Current Account Balance reported, and Thursday will close out the data with the weekly jobs numbers along with Leading indicators.

The Australian and New Zealand dollars rose on speculation the FOMC will be cutting US interest rates. These two currencies will benefit from their higher rates with the US cutting rates to near zero. The currency markets have started to move back toward trading on fundamentals over the past few weeks, and interest rate differentials are one fundamental which favors the NZD and AUD. If the Fed's statement makes it known that interest rates will remain low for a long time, the dollar would likely fall further vs. the Aussie dollar, as the RBA has signaled that it is close to the end of its rate cutting cycle. Benchmark rates are nearly 400 basis points higher in Australia and New Zealand when compared with the same rates here in the US.

In a break with the recent trading pattern, the Japanese yen rallied along with the New Zealand and Australian dollars. A former Deputy Governor of the BOJ said Japan is probably not going to lower rates further; "with the interest rate already so low, a further reduction would have only limited impact." The central bank's Tankan survey today showed confidence among large manufacturers fell the most in 34 years as a deepening global financial crisis crimped export demand, forcing companies to pare production and fire workers. The yen's recent surge to a 13 year high has compounded woes for manufacturers.

Gold continued to rise over the weekend, pushing back up to an eight week high in London. The dollar's fall has spurred investors to move back into gold as an alternative investment. News that President Bush was looking to tap the bank bailout fund to keep GM and Chrysler out of bankruptcy spurred further purchases of gold. With the tremendous growth in the US money supply, and the FOMC turning their back on inflation concerns, precious metals should continue to gain ground. Gold is traditionally one of the best hedges against rising inflation.

Currencies today 12/15/08: A$ .6635, kiwi .5523, C$ .8138, euro 1.3473, sterling 1.4969, Swiss .8534, ISK 218, rand 10.1985 krone 6.9051, SEK 7.9963, forint 197.97, zloty 2.9644, koruna 19.428, yen 90.79, baht 34.88, sing 1.4773, HKD 7.75, INR 48.0512, China 6.85, pesos 13.5138, BRL 2.387, dollar index 83.15, Oil $48.52, Silver $10.36, and Gold... $827.60

That's it for today... The roads were a bit icy this morning, as we got a small taste of the ice storm which hit the Eastern states so hard over the weekend. But my drive into work was fantastic, as the 6 mile stretch of interstate running from my home to the office was reopened over the weekend. Some of the schools are closed this morning, so we will be shorthanded on the desk. Better get to work, hope everyone has a Marvelous Monday!!

Chris Gaffney, CFA

Vice President

EverBank World Markets

1-800-926-4922

1-314-647-3837

Bailout failure accelerates dollars decline...

Chuck Butler — Fri, 12 Dec 2008 15:32:54 GMT

...But First, A Word From Our Sponsor...

Now in Print: What You Need to Know About America's Economic Crisis

Based on the eye-opening film, IOUSA is your guide to America's enormous economic crisis. You won't find a more concise and complete evaluation of the global financial situation anywhere else.

Get your copy today: http://www.amazon.com/dp/0470222778?tag=dailyreckonin-20&camp=14573&creative=327641&linkCode=as1&creativeASIN=0470222778&adid=03WYRVDX49DN6K6GRQ4G&

....

In This Issue..

* Senate rejects auto bailout...

* ECB pushes back from the rate cut table...

* Goldman and Citigroup predict a dollar fall...

* China to continue to appreciate...

And Now... Today's Pfennig!

Bailout failure accelerates dollars decline...

Good day... Not sure when all of you will be receiving this today, as it took nearly over a half hour for my computer to boot up this morning. But its all good news for currency investors, so I'll get it written and out to you as quickly as I can. The dollar slowed its decent overnight, but continued to fall vs. most of the major currencies as the US Senate rejected the $14 billion bailout for the auto industry.

The big winner in the Senate rejection of the bailout plan was the Japanese yen, as Japanese car makers are predicted to grab an even bigger piece of the US auto market. The yen, which has been rallying due to global deleveraging and carry trade reversals, suddenly had another reason to rally. The yen rose to a 13 year high, trading below 90 yen per dollar, and some are now predicting a rise to 80. Finance Minister Shoichi Nakagawa boosted the yen further after telling reporters in Tokyo that Japan isn't considering intervening in the currency markets.

But even before the automakers got the bad news from the Senate, the dollar was falling faster than we've seen in the past few weeks. Chuck shouted out across the trade desk around noon yesterday that the dollar index, which tracks the greenback against the euro, yen, pound, Canadian dollar, Swedish krona, and Swiss franc, had fallen below the 55 day moving average. This is a major level for technical traders, and signaled the dollar could be headed for a further fall.

The data released yesterday showed initial jobless claims in the US surged to a 26 year high as the recession deepened. Claims increased to 573,000 last week, an increase of 58,000 from a revised 515,000 the previous week. The total number of workers staying on the benefit rolls jumped to just below 4.5 million, the most since November 1982.

While the markets had predicted another increase in the jobless claims, the trade deficit numbers were a big surprise. US exports slid to a seven month low causing the trade deficit to widen to $57.2 billion in October. No one I read was predicting a widening deficit. The worsening trade balance removes what has been the sole source of support for the economy during this recession.

A separate report issued by the Federal Reserve showed US household wealth fell by the most on record in the third quarter. Net worth for households and non-profit groups decreased by $2.81 trillion, the most since records began in 1952. So we have record unemployment, a widening trade deficit, and falling consumer net worth; not a good picture for the incoming President. But President Elect Obama has a plan, we can just spend our way out of this problem!! Chuck sent me the following comments yesterday afternoon:

"So... All this week I've talked about the President-elect's plan to spend more money since 1950 on infrastructure, which is fine in good times, but these are faaaaaaaaarrrrrrrr from "good times" for the economy... Well... Yesterday the P/E said this, "We understand that we've got to provide a blood infusion to the patient right now to make sure that the patient is stabilized. And that means that we can't worry about the deficit."

Can't worry about the deficit? Did I hear that correctly? Geez Louise, here we go again, sliding down the same old slippery slope of "deficits don't matter"! Aye, yi, yi! What is everyone smoking? I've said this before many times at presentations, and here in the Pfennig, but I can't pass this up... These people, who should know better, that claim that deficits don't matter, remind me of the guy standing on top of the Empire State Building, and decides to jump off... As he passes the 56th floor he says... "So far... So good!"

Well, that's right, so far he hasn't hit the ground! And... So far deficits have only bruised us, but they haven't hit the ground yet either! A quick look at my fave book on deficits, I.O.U.S.A. tells me that we've passed the $10 Trillion mark for Federal Debt... "today's deficits reduce national savings, which dramatically decreases productive investment and wealth-creating activities. Increased indebtedness to foreign lenders puts future financial decisions in the hands of people who may or may not have our interests in mind when they make them. Further, interest payments that have historically stayed home now provide more and more income to investors abroad."

"At the current rate, with existing laws, by 2040 the federal government will be spending twice as much as it takes in from taxes. Our children and grandchildren already face a more competitive, challenging, and uncertain world than most Americans have grown accustomed to."

Failure to recognize this by our leaders is the biggest mistake we can make... And comments like the one above from the new PE lead me to believe we'll have more of the same old "deficits don't matter" and that, my friends will eventually weigh heavily on the dollar...

Sorry to be so gloom and doom on a Friday... But that comment by the new PE just sent me reeling! Now, back to Chris..."

I've known Chuck for nearly 20 years now, and nothing gets his blood boiling as quick as the saying 'deficts don't matter'! The leaders of Europe sure think they matter, as the EU decided to trim down a proposed stimulus package, as Germany warded off calls by France and Britain for deficit-boosting programs. This announcement, combined with a statement by ECB council member and Bundesbank head Axel Weber caused the Euro to jump vs. the US$. ECB member Weber cautioned against reducing interest rates below 2 percent, suggesting the bank is probably near the end of its rate-cutting cycle. "If the benchmark rate sinks below 2 percent when medium to long term inflation expectations are just below 2 percent, that implies negative real interest rates," Weber said in an interview. "I would like to avoid that."

Weber knows the long term impacts of negative real interest rates, they are very inflationary. The generation before his lived through the German hyper inflation of the early 1920's which helps explain why financial leaders from Germany are such inflation hawks. So the 75 basis point cut by the ECB last week, which was the biggest in ECB history, will likely be the last cut for some time. The Euro has benefited from this perceived change in attitude. As of this morning, the Euro has risen over 5 percent vs. the US$ this week.

We have been suggesting that the recent dollar rally was not a change in the long term trend for the dollar, and some big name currency traders are starting to jump on our bandwagon. Goldman Sachs Group lowered its forecast for the dollar against the euro and the yen for 2009, saying the repatriation of overseas assets by US investors and demand for the greenback for funding are 'diminishing'. Goldman is now predicting the Euro will rally to $1.45 per euro by the end of next year, up from their previous prediction of $1.30. "We are at a turning point," Goldman's Jens Nordvig wrote in a research report. "We expect the dollar support from temporary deleveraging and funding flows to diminish, and, in that scenario, the underlying pressure from more standard sources should once again become more important." Sounds like he has been reading the Pfennig, as Chuck has been calling for a return to underlying fundamentals for a while now!

The folks at Citigroup are also jumping on the dollar bear bandwagon. "There are good indications that the US dollar is likely to weaken against many Asian currencies into year-end," wrote Tom Fitzpatrick and Shyam Devani, analysts at Citigroup. They went on to say the dollar will retreat from a two year high against an index of Asian currencies after breaching levels where orders to buy the greenback are clustered. They believe the dollar will fall vs. the Singapore dollar, Chinese Renminbi, and the Indian rupee.

The Chinese Renminbi continued to rally for a seventh day in a row, the longest winning streak since June. Assistant Finance Minister Zhu Guangyao vowed to keep the currency at a 'reasonable and balanced' level after the Chinese let it drop sharply on Dec. 1. China stalled the Renminbi's appreciation in July to aid exporters after letting it rise 6.6% in the first half of 2008. I think China will continue to slowly let the Renminbi appreciate, but will keep the pace of the appreciation at a manageable rate of 6 to 7 percent per year. China's economy is slowing, but Asia will continue to be the growth engine of the global economy. I still suggest investors allocate at least a portion of their investments into the Asian currencies of Singapore, Japan, or China.

Currencies today 12/12/08: A$ .6586, kiwi .5453, C$ .8038, euro 1.3363, sterling 1.4962, Swiss .8473, ISK 218, rand 10.2214 krone 6.8858, SEK 7.9616, forint 197.96, zloty 2.9621, koruna 19.488, yen 90.35, baht 35.01, sing 1.4918, HKD 7.75, INR 48.577, China 6.8433, pesos 13.3266, BRL 2.3684, dollar index 83.68, Oil $44.97, Silver $10.10, and Gold... $817.05

That's it for today... Drove the side streets in to work for the last time today. The highway department shut down a 5 mile stretch of interstate which runs from the front door of our office to my house. After a full year of taking side roads to and from work, I will be able to take the newly refurbished highway on Monday. This will drop my commute big time, and is great news for yours truly!! Chuck is off on his annual Christmas shopping trip with his buddies today. They start first thing in the morning and spend the entire day spreading Christmas cheer around town. Hopefully I will be able to meet up with them this evening, as they typically end their trip at a local restaurant/bar not too far from my home. 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

A HUGE Currency Rally!

Chuck Butler — Thu, 11 Dec 2008 15:00:55 GMT

...But First, A Word From Our Sponsor...

Now in Print: What You Need to Know About America's Economic Crisis

Based on the eye-opening film, IOUSA is your guide to America's enormous economic crisis. You won't find a more concise and complete evaluation of the global financial situation anywhere else.

Get your copy today: http://www.amazon.com/dp/0470222778?tag=dailyreckonin-20&camp=14573&creative=327641&linkCode=as1&creativeASIN=0470222778&adid=03WYRVDX49DN6K6GRQ4G&

....

In This Issue..

* Another currency rally....

* SNB cuts another 50 BPS!

* Budget Deficit continues to widen!

* Treasury yields go south for the winter!

And Now... Today's Pfennig!

A HUGE Currency Rally!

Good day... And a Tub Thumpin' Thursday to you! It's been quite the rally this week in the currencies led by the euro, which is like old times, eh? The Big Dog on the porch finally gets to stretch its legs and chase the dollar down the street! It's been a long time since we've seen this go on for more than a day. Yes, we've seen one day spikes, and even two day rallies turn into false dawns, but this one has lasted about a week now. Ever since last Friday's awful Jobs Jamboree, the tide has turned, and the Trading Theme that has held the currencies in a full nelson since the end of July, could very well be on the way out the door. I said that about the Trading Theme earlier this week, so I just wanted to repeat that to emphasize the point!

So... Yesterday, we saw the euro lead the currencies higher all day, with the single unit finishing the day in the 1.3050 area... I turned on the currency screens this morning, and what did my wondering eyes did appear, but the euro trading at 1.3170, and others bringing up the rear!

The Swiss National Bank (SNB) cut rates further this morning, bringing their internal rate to 1/2%, 50 BPS, that's it... So, one would think that bringing your interest rates to near zero, would NOT be a good thing for the currency, right? Well, in this day and age of rewarding a currency for lower interest rates to promote growth, that's not the case. The franc has rallied on the news... Of course it's probably just caught up in the euro's move higher.

Looks like the U.S. House of Representatives approved a $14 Billion package for GM and Chrysler, but the Senate has put some roadblocks out on this deal, and that puts the whole deal in jeopardy... A Final Jeopardy if you will for the contestants Gm and Chrysler! Notice I didn't include Ford. The people at Ford, backed out, and tried to put a 100 miles of desert between them and GM & Chrysler. Good for them!

Well, earlier in the week, the glimmering light of the bailout for the Big 3, helped the currencies... But now that the Trading Theme seems to be taking its last breaths, the news of the bailout in jeopardy, has helped the currencies, as this would mean that we could finally be back to focusing on fundamentals! Could we really? Is it possible? Well, maybe if you're real good and take a nap... No wait, that's what I used to tell the kids on Christmas Eve! It IS possible... But we need a few more days of what we've seen so far this week to confirm the Trading Theme to be a thing of the past.

Speaking of things of the past... A Bank of New York (BONY) strategist, issued a statement saying the, "Carry Trade is Dead and Buried." Hmmm... I beg to differ with him on that, for if we get investors and traders focused on fundamentals again, and the risk takers come out of the woodwork again, the Carry Trade could very well be on the burners again... But then, I do see his thought here and that is (I think it is) that if every Central Bank is cutting interest rates to the bone, there won't be any "high yielders" left to buy on the buy-side of the Carry Trade. Well, let's see now... Aussie and New Zealand were the BIG WINNERS of the last Carry Trade craziness, and their rates are lower, but still 3 and 4 hundred basis points above those in Japan, Switzerland and the U.S.! But, the Carry Traders might have to look further, and do some additional leg work this time to find the "high yielders" like... Brazil, and India...

OK... I came across this story yesterday and really had my blood boiling... I wanted to talk to the Big Boss Frank Trotter about it and get his thoughts, but the poor guy was tied up on the phone all day, well, all day that is, until I left to go home! Anyway, here's the base story, that the entire piece can be read here: http://www.cnbc.com/id/28153817/

The U.S. Federal Reserve is considering issuing its own debt for the first time, the Wall Street Journal said, citing people familiar with the matter.

"Fed officials have approached Congress about the move, which could include issuing bills or some other form of debt and would provide the central bank with more flexibility to tackle the financial crisis."

NOW WAIT JUST A MINUTE THERE BIG BEN! This is the bailiwick of the Treasury Dept, issuing debt! You've already got the printing press for currency, and now you want to issue your own Debt? This is complete madness I tell you, complete madness! I think the Fed is thinking of ways to deal with deflation...

Oh well, apparently, Big Ben can do whatever he pleases these days, the new President has named an "energy Czar" and the automakers might get a "Car Czar", the new President had better think about naming a Fed Reserve and Treasury dept Czar!

OK, yesterday's printing of the Monthly Budget Statement saw the monthly deficit not "as bad" as forecast, with the figure posting a $164.8 Billion deficit, instead of $171 Billion as forecast... That's still really bad folks, let's not get caught up in the media spin of talking about how it "wasn't as bad as forecast"! Let's focus on the fact that for the second consecutive month the Budget Deficit widened... And this month it went from $98 Billion in October to $164.8 Billion in November!

Of course you know why this is happening, right? No? Ahhh grasshopper... Recall the bailout money? Well, whenever any of it is spent, it will show up here! Want even further bad news here? Government revenue fell 4.2%, while spending soared 24%!

The Treasury Dept has written checks on all but $15 million of the first half of the $700 Billion allocated to help financial institutions.

So, as I said the other day when I mentioned that the President-elect's plan to spend more money on infrastructure since 1950 might be the right thing to do at the wrong time... We've got the deep, dark recession going on, the Credit Crisis and this collapse of revenue... But don't let that stop him! Why would we want to stop with the deficit spending here? I shake my head in disgust!

Today's data cupboard has the Trade Deficit for November, which should narrow, given the collapse of the Oil price. That and the recession should allow the Trade Deficit to narrow... But, let's not get caught up in the media spin on this too... You see, the Trade Deficit is still $53 Billion, which annually is $636 Billion... Which is probably right about where it will end out this year...

And... $53 Billion still needs to be financed! Let's not forget that little ditty!

I just watched the euro gap up to 1.32... This is a rout like I've not seen since last summer! And wouldn't you know it, here it is, and I'm going on vacation! Oh well, maybe the old adage that the currencies rally when Chuck's away, will come back!

I just can't pass up on this one though... And I know the legal beagles will be all over me on this, but here goes... This certainly looks like the Santa rally that I talked about earlier this week, eh?

I know, I know, it could all be reversed in a New York Minute, but you've seen these types of routs before...

Another currency on the rally tracks this week is the Chinese renminbi... After all the "bad talk" about China last week, the Chinese have said, "you'll be sorry"! What I'm talking about here is the fact that everyone is dissing the renminbi right now, and selling it, and pushing forward contracts down in value... And the Chinese, because they can, have moved the renminbi higher VS the dollar this week! There! In Your Face, disgrace!

So... What's everyone thinking these days buying Treasuries? I mean, the yield on a 3 month T-Bill is 1 BP! You have to go out 30 years in a Treasury Bond to get 3% yield! OUCH! But, investors keep buying! Well, I think what you've got going on here is simply the fact that all this repatriation of dollars has investors with tons of cash, that they don't want to put into banks, (for a number of reasons, like FDIC insurance limits, shaky banks, etc.) So, they put the cash into Treasuries, realizing that they may not earn any interest, but it will be there when they want it at some point in the future. And this "point in the future" is what scares the bejeebers out of me! Because when the icing is off the cake here, there will be a swift exodus from Treasuries, as no one will want to be the last man standing here... UH-OH! Just be careful folks...

The weekly Initial Jobless Claims will also print this morning. We've seen a huge increase to average above 500K in the Weekly Initial Claims, and that should hold true today. This isn't a good thing folks...

Well, the rally this week hasn't been cornered by currencies... The Commodities have come back too! Oil is up $2, but the real meat here is the rally in Gold! Gold this morning is perched above $827, when it was sitting at $770 just a week ago!

Currencies today 12/11/08: A$ .6660, kiwi .5525, C$ .8015, euro 1.3235, sterling 1.49, Swiss .84, ISK 215.50, rand 10.13, krone 6.95, SEK 8, forint 199, zloty 3.01, koruna 19.64, yen 91.30, baht 35, sing 1.4890, HKD 7.75, INR 48.30, China 6.8515, pesos 13.30, BRL 2.3950, dollar index 84.33, Oil $45.50, Silver $10.46, and Gold... $832

That's it for today... And for me until after Christmas... I'll probably send Chris notes from time to time, but I really don't expect to be monitoring the markets THAT much while on vacation! And of course, I'll attempt to write a Christmas Pfennig, which has been a tradition that goes back to 1992! I've got the Review & Focus to do while on vacation and my "other" newsletter, the Currency Capitalist to do too! Don't know what I'm talking about there? Well, for new readers, I was honored to be asked to be the main writer for a "paid for" newsletter that is published by the Sovereign Society, called the "Currency Capitalist"... So, I've got "all that" going for me! My little buddy, Alex, is still sick, poor guy, he was supposed to be playing in the 7&8th grade jazz ensemble concerts last night... It's beginning to look a lot like Christmas, as the house gets decorated, and we will finally go to cut down our Christmas tree on Sunday. (Hope Alex is better by then!) This is late for us, as we normally put up our tree earlier in the month! I love a Christmas Tree in the house! OK, I've carried on enough, Mike's here, Mary's here... I'll head out now... I'll leave you with the note I put in the December Review & Focus...

I wish everyone a joyous Holiday Season. Myself, I celebrate Christmas, and say Merry Christmas in hopes that it doesn't offend anyone that doesn't celebrate Christmas.

May the light of faith, the warmth of heart, and the love of family be your gifts this year...

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837

A Bailout For The Big 3...

Chuck Butler — Wed, 10 Dec 2008 14:44:31 GMT

...But First, A Word From Our Sponsor...

Now in Print: What You Need to Know About America's Economic Crisis

Based on the eye-opening film, IOUSA is your guide to America's enormous economic crisis. You won't find a more concise and complete evaluation of the global financial situation anywhere else.

Get your copy today: http://www.amazon.com/dp/0470222778?tag=dailyreckonin-20&camp=14573&creative=327641&linkCode=as1&creativeASIN=0470222778&adid=03WYRVDX49DN6K6GRQ4G&

....

In This Issue..

* Another currency rally....

* Bank of Canada cuts 75 BPS!

* A Santa rally?

* What Asia thinks...

And Now... Today's Pfennig!

A Bailout For The Big 3...

Good day... And a Wonderful Wednesday to you! We didn't get that snow I talked about yesterday, I guess the milk and bread on the grocery store shelves are safe today! Had to get "all dressed up" last night for a function that brought together a ton of old Mark Twain Bank people, among others. It was great, but I stood for two hours and I'm paying for it this morning... UGH!

OK... Another day of "healing" for the currencies, as the 1.29 handle was achieved and held on to in the overnight markets. Slowly... Like sand through the hourglass, these are the days of currency healing! HA! That show, Days of our Lives, was burned into my brain as a kid, as it was my mother's fave soap.

The single unit was higher within the 1.29 handle overnight than it is right now, as it has given back a bit of ground on the news that a European Union Commissioner, Buti, said that, "economic indicators point south very badly." This is strictly, jawboning to keep the euro's move VS the dollar in check, folks...

The Bank of Canada (BOC) did cut rates yesterday 75 BPS... You may recall me telling you yesterday that the "experts" thought the cut would be 50 BPS, but I thought it would be 75 BPS... Maybe, one day, these surveys of "experts" will include the Pfennig writer, as he seems to be more "on target" than the current "experts"! Now, Chuck, who would you be referring to here? HA!

I also said yesterday that I didn't think the markets would care, and they didn't, as the larger rate cut did little to hurt the loonie. In fact, the loonie rallied a bit on the news!

Again, I don't understand the mentality here with these Central Bank rate cuts... It's not the cost of the credit that's keeping the credit crisis all locked up, it's the availability of such credit / money! So... Here's a memo to Central Banks around the world... "STOP ALREADY!" All you're are doing is inviting inflation into your economy, and debasing your currency!

That glimmering light that I talked about the other day for the Credit Crisis is getting smaller all the time, as the Big 3 still don't have their bailout from the Gov't (read taxpayers)... It now looks as though it could get done today, but at a much smaller figure than previously discussed. It now looks as though the Big 3 will get $15 Billion and they had better smile and say "thank you very much" as they leave the room!

It also looks like the Big 3 will get the "Car Czar" that they so desperately fought to keep from looking over them. The "Car Czar" will have the power to call Chapter 11 on GM or Chrysler should they not deliver a sound plan by the end of March. Geez Louise, why do they get 4 months to some up with a sound plan? They should have had one to get the funds to begin with! OK, I had better stop there, I'm really pounding the keys right now... I think I'll step away for a minute and cool off...

OK, I'm back now, hope you didn't miss me, or that I was away too long! No wait, this is text, you have no idea how long I was gone! Silly me!

You know... I was thinking aloud in my car yesterday, and saying to myself that it sure looks like all those pundits that called for a breakup of the European Union by the end of the year, will have to put their tails between their collective legs, and fade away... You know, the European Union (EU) had more pressure on them in 2005, when the French voted no on the Constitution, and other things, and they held steadfast then, and if they could it then, then this little tiff with Spain and Italy will pass... These pundits like to point to the problems that Italy is experiencing... And I say..."What's so new about that? Italy has had problems since I've been following currencies (1985 for those of you keeping score at home)! I truly believe that Italy and Spain like to complain about the European Union and the euro, but when they get behind closed doors, when they let their hair hang down, they thank their lucky stars that they were included in the Euro Club!

The boys and girls over at Bank of America (BOA) believe they are seeing the dollar repatriation flows waning... Now, I wonder how many research people they employ over at BOA, when all it would take is for one of them to read the Pfennig, to see that I said all that yesterday! Any way... Let's listen to what BOA had to say about this... "The repatriation demand for the dollar may have run its course, we retain our core long euro-dollar exposure and add long euro-dollar exposure today"... Now... You would think that given the size of BOA that saying something like that could really "move the market"...

But, given the markets "don't care" attitude until the credit crisis unlocks, I understand why it didn't! The BIG POINT here is that we could very well be seeing all this dollar repatriation end. And... Like I said Monday, the risk takers were slowly dipping their toes back into the waters which is what it will take to get the currencies and precious metals on the rally tracks again. But, put these two things working together, and voila' you've got the makings of what could very well be a Santa Rally...

The boys over at the Bank of Japan (BOJ) are at "it" again... Mom... He's doing it again! He's looking at me! Mom! He's got his hand on my side of the car seat! OK, I'll stop there... But the BOJ was "jawboning" again in an attempt to keep the yen from strengthening further VS the dollar. BOJ Gov Shirakawa reminded the markets last night that the Ministry of Finance has the option of intervening if necessary... The Ministry of Finance (MOF) are the signal callers for the BOJ, and they are the ones that determine if intervention is to come into play. For new readers... BOJ intervention means the Bank sells yen in the markets to keep it from getting too strong.

In the currency world, this is called a "dirty float"... And the MOF and BOJ like to keep it "dirty"...

OK, I was laughing when I wrote that last bit, but notice I didn't carry on... Maybe I'm growing up! HA!

Down Under in the South Pacific, Australia saw a very nice rise in Consumer Confidence of 7.6%, adding on to November's 4.3% gain. The index collapsed this summer, but with the rate cuts the Reserve Bank of Australia (RBA) have instituted, it seems to be rounding back into shape.

In New Zealand, Reserve Bank of New Zealand (RBNZ) Gov. Bollard, gave a speech titled "Everyone needs to play their part." In the speech, Bollard, reminded everyone that New Zealand's inflation rate is still very high (5.1%). Hmmm... Was that the "wink and nod" that interest rates are not going to go much lower? I think it was folks.. But I guess it all depends on if the rest of the world continues to think that by cutting rates they will unlock the credit crisis!

Both of these things for Aussie and kiwi could underpin the currencies at current levels...

And another "Commodity Currency" the Brazilian real really put on the Ritz yesterday with a very strong rally... Just another sign that the risk takers are dipping their toes again...

OK... I'll slide away from the currencies for a minute to talk about a news article that one of my fave writers, William Pesek, provided to Bloomberg, titled: China Will Be Happy Geithner Isn't a Goldman Guy... Here are some snippets of the article that can be read in its entirety at: http://www.bloomberg.com/apps/news?pid=20601039&sid=aa4nka49enf0&refer=columnist_pesek

"Why does Goldman Sachs run your government?"

After seven-plus years in Asia, I'm no longer startled by this question. It was posed to me yet again recently -- this time by Kuala Lumpur taxi driver Sumit Kotari.

"What's wrong with America is that it's run by investment bankers, mostly from the same bank," the 49-year-old Malaysian said. "How can Americans stand for it? Is Barack Obama from Goldman Sachs, too?"

It has been reported in Asia that Neel Kashkari, assistant Treasury secretary in charge of the Troubled Asset Relief Program, worked for the same New York-based investment bank. President-elect Obama's decision to seek advice from other former Goldman Sachs bigwigs, such as Robert Rubin, also grabbed attention.

Even the guy helping choose a replacement for Timothy Geithner at the Fed Bank of New York came from Goldman Sachs. It makes one breathe a sigh of relief that Geithner, who will be the next Treasury secretary, doesn't have Goldman Sachs on his resume.

The point here isn't to pick on Goldman Sachs. Yet it is seen by many in Asia as the gold standard of investment banks. Its name also is a byword for the perception of incestuous ties between Wall Street and Washington."

OK, I'm back now... The point of the discussion is to acknowledge that to Asian, it appears that Goldman Sachs runs our country... Now, that may be perception, but as they teach you perception is reality. And you have to wonder if the Asian Central Banks are shaking their heads at what we're doing, and how we're doing it... Now, some might say, "Who cares what the Asian Central Banks think of what and how we're doing it.?" Ahhh grasshopper... We all have to be very cognizant of what the Asian Central Banks think about us, because, you see... They hold most of our I.O.U.'s and they could make things very messy for us any time they wish!

So... How about the Illinois Gov. getting arrested yesterday? Could it be two Illinois Governors incarcerated? That whole story is pretty amazing that someone would do what he is alleged to have done, knowing that his phone was tapped!

Ok enough of that! We'll see the Monthly Budget Statement / Deficit for November, today... Look for it to explode!

Currencies today 12/10/08: A$ .6590, kiwi .5465, C$ .7950, euro 1.2950, sterling 1.4830, Swiss .83, ISK 261, rand 10.21, krone 7.0475, SEK 8.1650, forint 203.50, zloty 3.05, koruna 19.99, yen 92.60, baht 35.50, sing 1.5010, HKD 7.75, INR 49.01, China 6.8835, pesos 13.50, BRL 2.4725, dollar index 85.71, Oil $43.80, Silver $10.02, and Gold... $792

That's it for today... Got a chance to talk to my old friend, and softball teammate, the wiley old veteran Jack last night. Talk about someone that doesn't seem to age... And someone that loves Missouri Football more than me, Dean... And my good friend and colleague, Chris Gaffney, helped me out BIG TIME, by going out in the rain and moving my car up next to the door for me... What a class guy! My little buddy, Alex, is still in the sick bay, poor guy... I was remiss in not mentioning the retirement of Greg Maddux the other day... There's another class guy! One more day of getting up with the milkman, and then I'm off to see the Wizard... Well, not really, just vacation... I do go to the eye doctor again next week while I'm on vacation. Unfortunately, I've had no improvement in my left eye... Time to get movin'! I hope your Wednesday is Wonderful!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837

Spending More Money...

Chuck Butler — Tue, 09 Dec 2008 16:14:53 GMT

...But First, A Word From Our Sponsor...

Now in Print: What You Need to Know About America's Economic Crisis

Based on the eye-opening film, IOUSA is your guide to America's enormous economic crisis. You won't find a more concise and complete evaluation of the global financial situation anywhere else.

Get your copy today: http://www.amazon.com/dp/0470222778?tag=dailyreckonin-20&camp=14573&creative=327641&linkCode=as1&creativeASIN=0470222778&adid=03WYRVDX49DN6K6GRQ4G&

....

In This Issue..

* Turn back the clocks to 1950...

* Currencies rally on the day...

* Bank of Canada to cut rates today...

* Fed Funds to zero?

And Now... Today's Pfennig!

Spending More Money...

Good day... And a Terrific Tuesday to you! It's raining like cats and dogs outside, and that rain is supposed to turn to snow tonight, so we've got that going for us! Always love that rain to snow bit, as it puts a nice layer of ice under the snow!

Well... It looks like the new president wants to spend more money... Yes, President-elect Obama, presented his economic plan yesterday, and before doing so, issued a warning that the economy is going to get a lot worse before it gets better. His plan calls for a pledge to spend the most on infrastructure since the 1950's... Now, let me say this... The Big Boss, Frank Trotter, and I talk about this all the time... To spend money on Financial Institutions and things that don't get used more than once like bullets and bombs, isn't our "fave" way to spend money... But building something that could be used over and over again, well, that makes sense... However, this spending could be coming at the absolute most awful timing, as the Deficits are exploding in front of our eyes, and it certainly isn't as appealing as watching the fireworks display in Vancouver!

Yes... So, Obama's call that the economy will get worse before it gets better, plays well with his pledge to spend more money...

This spending pledge really helped the currencies yesterday, otherwise I wouldn't have spent 30-seconds talking about it! You see, the markets are slowly coming back to the fundamentals, the risk takers are slowly coming back too, and when that happens in earnest, we should see the end of this stupid Trading Theme that has gone on far too long for my taste! But back to the markets' reaction to the announcement... Of course, you have to remember that we still have over a month before Obama takes office, and unless he's going to pound this message in everyone's heads every day until then, this could all be forgotten soon... And then we'll be able to tell if the Trading Theme is a thing of the past, or if we have to continue to live with this for some time to come.

So, the currencies rallied throughout the day yesterday, but saw some consolidation overnight, and then very tight trading ranges this morning in Europe. The euro traded briefly with a 1.29 handle yesterday... This morning, German Investor Confidence as measured by the think tank, ZEW, unexpectedly rose for a second month. Apparently, Investors like the European Central Bank (ECB) rate cuts, eh? While this repot on the outside would appear to be positive for the euro, the markets are still focused on the Credit Crisis... So, it has had little to no impact.

The Bank of Canada (BOC) meets to discuss rates today... I'm sure they will cut them, why wouldn't they follow the rest of the world's Central Banks in a race to zero percent? The rate announcement will come around 9 am this morning, and the "experts" are forecasting a 50 BPS rate cut. But I say, why go so low? They can point to the rest of the world and say, see, we're just keeping up with the Joneses... So... Yours truly expects 75 BPS... Canadian Housing Starts fell 22% last month! So... This, larger rate cut, won't hurt or help the loonie, as the markets "just don't care!" anymore... You can hear them singing... I don't care anymore... I don't care anymore... I don't care, what you do...

OK, If I can't play, then I'm taking my bat and ball and going home! Yes, the famous tantrum thrown by millions of kids over the years, looks like it's being played out again over at the Brokerage that owns a bull... Yesterday, I told you about Merrill's CEO John Thain, in a tiff over a $10 million bonus with the compensation committee. Well, yesterday Mr. Thain, according to the Wall Street Journal, said "no mas" , forget about it! He has announced that he will not accept a bonus this year. "That's right, if I can't have $10 million, I won't take anything!" OK, the last quote was mine, but that's what I hear him saying... Hey! Why not take the $10 million down to the Salvation Army!

Yes, I know, that's all is "stuff" and not of currencies... So I digress...I couldn't pass it by though, you know me!... So, I apologize! So, back to the currencies and economies, eh?

Well... It didn't take the people that bought Anheuser Busch long to begin their cost cutting... The Anheuser-InBev people announced yesterday that 1,000 of my fellow St. Louisans will be cut from the payrolls... You can see them in the boardroom frothing at the mouth when the Jobs Jamboree was printed on Friday... This is how I see this going down... "Hey, did you see that 533K jobs were lost in November, Carlos? Yes, I did, and that gives us a chance to move up our job cutting to now, as we can point to the "economy" as the culprit in the job cuts."

Hey, did you see the "Money and Politics Show" on TV last night? (I didn't, as I'm sure I was in bed!) But, the former CEO of Bear Stearns, Alan Greenberg, was interviewed and he said that, "There's no more Wall Street. That model doesn't work because it's at the mercy of rumors. The entire make-up of Wall Street has changed forever."

Hmmm... Interesting take, don't you think? Or could be just sour grapes, as his company was forced to sell at bargain basement prices to JP Morgan.

Are you following the hearing on the fall of Fannie and Freddie? Well, the Washington Post says that the House Committee on Oversight and Gov't Reform will hear that... "Internal Freddie Mac documents show that senior executives at the company were warned years ago that they were offering mortgages that could pose dangers to the firm, hurt borrowers and generate more risky loans throughout the industry."

There will also be a memo that circulated Freddie... "former Freddie chief enterprise risk officer David Andrukonis wrote that the company was buying mortgages that appear "to target borrowers who would have trouble qualifying for a mortgage if their financial position were adequately disclosed."

I could really go into a tailspin right here, and head down the road that points fingers and calls for public hangings and that sort of thing, but I'll stop right there! No need to rehash this stuff!

But doesn't hearing that stuff just get your blood boiling!

The Tribune Company did indeed file for bankruptcy yesterday, as the rumors said they would.

OK... I was looking at a rate screen on the Bloomie yesterday, and noticed something that really struck me as interesting. The Fed Funds rate is 1/16th... But wait! Didn't the Fed cut the Fed Funds rate to 1% at the last meeting? Yes, they did grasshopper, but... The people in the trenches are trading Fed Funds to each other at 1/16th... Does that tell you something? Well... It tells me that my inclinations that the Fed is going to move rates to near zero, are bang on! These daily transactions wouldn't be trading this low, unless rates were going there! Bernanke-san... Just call him Bernanke-san, as you sing, I'm turning Japanese, yes, I turning Japanese, I really think so!

For new readers, that whole production is all about the fact that I believe that the U.S. is following Japan and Japan's leaders in how they dealt with the decade of economic mess... If you go back to the mid-90's you'll find the Japanese economy circling the bowl, and the Japanese Gov't and Central Bank, issuing stimulus package after stimulus package, building huge amounts of Gov't debt, and cutting interest rates to zero... Now... Ask yourself, what country / Central Bank does that remind you of in 2008? By Joe, you've got it! You sank my battleship! It's the U.S. / Fed!

Still no word on the Gov't's answer for the Big 3 automakers here in the U.S. We're waiting for the final answers if you will on whether the Big 3 get bailout money, how much, and will they get a "Car Czar" to oversee them... The stock jockeys liked the news yesterday that it looked like a thumbs up for the Big 3... Until then... We wait.

The Chinese renminbi is back on the rally tracks VS the dollar after some hemming and hawing over the Paulson / China talks... I still don't expect much from this, but slow positive moves are better than none!

Currencies today 12/9/08: A$ .6555, kiwi .5415, C$.7960, euro 1.2860, sterling 1.4775, Swiss .8245, ISK 261, rand 10.19, krone 7.12, SEK 8.17, forint 205, zloty 3.0590, koruna 20.03, yen 92.60, baht 35.45, sing 1.5040, HKD 7.75, INR 49.59, China 6.8734, pesos 13.46, BRL 2.4780, dollar index 86.16, Oil $43.45, Silver $9.88, and Gold... $770.50

That's it for today... Whew! What a long day yesterday! I was beat when I left last night! No worries, I'll make up for that long day yesterday, today! My little buddy, Alex, was up almost all night, sick. I felt bad for him, as I've been there before, and it's not seashells and balloons for sure! Just hope he doesn't pass it on to me or my beautiful bride. A lot of the people in Jacksonville, that read the Pfennig, and had heard all this talk over the years about my beautiful bride, finally got to meet her Saturday night... I'm sure they walked away, saying, "that Chuck was bang on with that description!" Finally rounded up the kids to go and cut down Christmas trees this Sunday. This is always a "family event" (except last year, when I couldn't go because of my leg), and if my little buddy, Alex, has anything to say about this, it will always remain just that! He, wants the family to decorate the house together, cut down the tree, etc. I tell people all the time that he is so eerily like I was at his age. And this stuff is right up my alley! OK, I carried on too much here, time to go, and finish up yesterday's work! I hope your Tuesday turns Terrific!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837

The Worst Jobs Report Since 1974!

Chuck Butler — Mon, 08 Dec 2008 15:10:41 GMT

...But First, A Word From Our Sponsor...

Now in Print: What You Need to Know About America's Economic Crisis

Based on the eye-opening film, IOUSA is your guide to America's enormous economic crisis. You won't find a more concise and complete evaluation of the global financial situation anywhere else.

Get your copy today: http://www.amazon.com/dp/0470222778?tag=dailyreckonin-20&camp=14573&creative=327641&linkCode=as1&creativeASIN=0470222778&adid=03WYRVDX49DN6K6GRQ4G&

....

In This Issue..

* Will -533K turn to -600K?

* A glimmer of light brings back risk takers...

* Another week of data...

* Fedspeak today...

And Now... Today's Pfennig!

The Worst Jobs Report Since 1974!

Good day... And a Marvelous Monday to you! What a Whirlwind Weekend for your truly, as it came and went, I did a ton of stuff, but no rest, and this morning, I was reminded that I had not gotten any rest! UGH! But! It was all fun! A great time in Jacksonville at the Headquarters' version of a Holiday Party... It was great to see the folks there that I know.

OK... Did you see the rot on labor's vine Friday? The Jobs Jamboree was very unkind to many, with a 533K jobs lost in November. That number was the worst figure since 1974! The tally of 1.9 million jobs lost this year surpasses the losses of the past two recessions, and according to the Wall Street Journal, signals that the current downturn could be the worst since the years immediately following World War II.

The unemployment rate ticked up to 6.7% from 6.5%, a separate Labor Department survey showed, the highest rate in 15 years. But the jobless rate -- which is based on figures of people looking for work -- was contained by the ranks of discouraged job-seekers giving up their searches. A broader government measure of unemployment, which includes those who want to work but are no longer actively seeking positions, jumped to 12.5% in November from 11.8% a month earlier.

Now... The thing that really ticks me off folks, is the fact that the October figure saw a major revision. You might recall that the September figure which was bad enough, was revised up by over 100K... Then last month we saw a negative -240K figure, which was bad enough, but one month later the figure is revised up to -320K... So, in my mind, the -533K figure reported this month for November, will probably be revised upward to the -600K figure... UGH!

So... All that rot, and the currencies hardly noticed! The trading range for the day was very tight, with a bias to sell dollars. In the overnight markets, the bias to sell dollars has really caught some wind in its sails. I'll tell you this, so hear me now and listen to me later... But the markets are really becoming predictable. You see, any time it appears there could very well be a light at the end of the tunnel, the fundamentals come back into focus (somewhat, because if they really came into focus, we would see dollars selling like funnel cakes at a State Fair), and the dollar gets sold.

The markets think they see a glimmering light this morning, as it appears the Big 3 will get some cash from the Gov't... Probably not as much ($40 Billion) that they wanted, but more than they originally asked for ($25 Billion)... I heard that they were bickering over whether they would accept having an "Auto-Czar" named by the Gov't, placed over them and to allocate the money... They should simply take the funds and be happy they got them!

This glimmering light always bring with it a chance for the high yielders to rebound, as risk takers stick their toes back into the chilled waters of Carry Trades. And that's exactly what we saw overnight, with the Aussie, kiwi, real, and rand all with strong rebounds VS the dollar. The glimmering light also lets Gold shine. So, the Commodities and the Commodity currencies all look better this morning. But, while I was typing the above, I had to laugh at my reference of Aussie and kiwi as "high yielders"... The way their Central Banks have been slashing rates, it amazing they can still hold up the "high yield banner"... But with the Big 3 of U.S., U.K., and Japan all with either zero rates and rates falling to zero, 3&4% yields look pretty lofty, eh?

And speaking of the risk takers coming back into the markets... It is really illustrated with the Japanese yen falling from 91 to 93 since Friday morning... I've explained all this before, so I won't bore every day readers with that again... If you want more info on this, you might want to check out the Pfennig's web site: www.dailypfennig.com where you can find today's letter, along with 6 months worth of archives... You'll probably find lots of Pfennigs that have full disclosure of what's going on here...

I saw this story on Reuters that really caught my attention... "One of the top managers of China Investment Corp, (CIC) the country's $200 billion sovereign wealth fund, reckons current dollar strength is temporary and he would like to bet that the U.S. currency is headed lower.

CIC President Gao Xiqing said in an interview with monthly U.S. magazine The Atlantic that," Everyone is saying, Oh, look, the dollar is getting stronger! I say, that's really temporary. It's simply because a lot of people need to cash in, they need U.S. dollars in order to pay back their creditors. But after a short while, the dollar may be going down again. I'd like to bet on that!"

Sounds like Mr. Gao and I would be good drinking buddies, as we think the same way! I wonder if he would like to take on the Cardinals as his baseball team?....

Speaking of drinking buddies... Here's another one that would probably fall into that category... Here's another story on Reuters... "Foundations for the dollar's recent rally have not been solid. The result of repatriation, deleveraging, quantitative easing and a major scarcity of dollars," said Bob Sinche, head of global FX and rate strategy at The Bank of America in New York. "But now we are bound for a correction."

Now, if you ask me (and I know you didn't, but you probably would if you ran into me, and I said, Hey! Would you like to ask me a question? HA!) but if you ask me, it sure seems as though these two guys could be Pfennig readers! But it would be better if they are not... For if they are not, then that means they're seeing things the same as I do, and not just using the Pfennig for their fame and fortune! HAHAHAHA HAHAHAHAHAHAHAHAHAHA!

So, after all the rate cuts last week, the Fed still gets their turn at the rate cut table next week, and I don't expect the Fed Heads to disappoint the rate cut campers in any sense of the imagination! And this could be the one that really brings the fact that yield differentials "SHOULD" be in play, and that the dollar "SHOULD" be in trouble... I'm really thinking that we could see a Santa rally for the currencies from here to the end of the month... Now... That's just me thinking out loud... I did NOT tell anyone, nor give advice to anyone to go out and buy euros today because I said there was going to be a rally! Of course, I could give you the wink and nod, but then you wouldn't see it because I can't physically wink and nod here in the Pfennig!

OK, I carry on, but it just gets me to no end... Advice... Yeah... Well the only advice I do give people is to love their families and friends, for in the end, that's all you've got! That, and the fact that investors should diversify their investment portfolios, so that not all of their investments are dollar denominated. Just like real estate's key word is "location"... Investing's key word is "diversification"...

In the "sign of the times" that I've been detailing lately... The Wall Street Journal reported that Merrill Lynch's CEO, John Thain, has suggested to directors that he get a 2008 bonus of as much as $10 million, but the battered securities firm's compensation committee is resisting his request.

And... The Tribune Company is preparing for a possible bankruptcy-protection filing as soon as this week. (I could say that I guess this isn't a good time to bring up all the millions they spent on Kerry Wood and Mark Prior... ) (and yes, I know, that wasn't playing nice with my Cubs friends)...

And... U.S. President-elect Barack Obama's pledged to create the largest infrastructure spending package since the 1950s to revive the economy.

The data cupboard will yield some interesting data this week for us to chew on... Like the Monthly Budget Statement (deficit), and the Trade Balance (deficit), and Retail Sales... The Retail Sales figure should remain pretty disappointing. A quick check of the BHI (Butler Household Index) tells me that! I tried to help the BHI, but that was last week, in December... So, in the end, there's more awful data to deal with, and by the time the Retail Sales figures are printed on Friday, this week, the glimmer of light provided by a deal with the Big 3, will have faded, and we could begin to feel pretty gloomy and doomy again.

But not me! I begin my Winter vacation on Friday... And I can guarantee you that I will not be checking on Retail Sales on Friday, as this is our "guys shopping day"... All the "guys" read the Pfennig, so I hope they are ready to go this Friday!

We get some "Fed Speak" today from Mssrs. Kroszner, Rosengren, and Kohn... They'll most likely be setting the table for the FOMC meeting next week...

Currencies today 12/8/08: A$ .6635, kiwi .5435, C$ .80, euro 1.2865, sterling 1.4865, Swiss .8250, ISK 261, rand 10.24, krone 7.08, SEK 8.12, forint 205.70, zloty 2.4450, koruna 20.02, yen 93.26, baht 35.54, sing 1.5090, HKD 7.7510, INR 49.59, China 6.8808, pesos 13.47, BRL 2.4410, dollar index 86.08, Oil $42.75, Silver $9.76, and Gold... $769.88

That's it for today... Well... My beloved Missouri Tigers got spanked by big bad Oklahoma on Saturday night. I saw the game with the score 10-7, and didn't see any more, only heard the final score. UGH! They're still going bowling though... Alamo Bowl, in San Antonio, TX... Not what they hoped for at the beginning of the season, but better than the football depression of the 90's! the folks in Jacksonville were all happy about their Gators... Got my first ever hug around the neck from little Delaney Grace last night. She gives them to Alex all the time, but this was the first one for me! She's so darn cute! I noticed the other day that the readership of the Pfennig had grown by about 3,000 readers in the past couple of months... So... Welcome... Well, Mike and Mary have arrived, Geez Louise, I'm getting later every day! YIKES! Oh well, I do my best... I hope you have a Marvelous Monday!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837

Buying Buicks Instead Of Bonds...

Chuck Butler — Thu, 04 Dec 2008 15:04:11 GMT

...But First, A Word From Our Sponsor...

Now in Print: What You Need to Know About America's Economic Crisis

Based on the eye-opening film, IOUSA is your guide to America's enormous economic crisis. You won't find a more concise and complete evaluation of the global financial situation anywhere else.

Get your copy today: http://www.amazon.com/dp/0470222778?tag=dailyreckonin-20&camp=14573&creative=327641&linkCode=as1&creativeASIN=0470222778&adid=03WYRVDX49DN6K6GRQ4G&

....

In This Issue..

* Currencies trade in a tight range...

* Another new plan to help homeowners...

* RBNZ and Riksbank slash interest rates!

* The Governorator speaks!

And Now... Today's Pfennig!

Buying Buicks Instead Of Bonds...

Good day... And a Tub Thumpin' Thursday to you! It's going to be a Tub Thumpin' Thursday in Europe for sure, given the Central Banks of England and the Eurozone are meeting and will probably cut interest rates to levels that haven't been seen in a while! The automakers are in deep dookie folks, according to them, and are in need of funds / bailout money right now! The head of Ford believes his company can withstand the recession, but fears for GM and Chrysler... The UAW has made some concessions to help the automakers, but it could be a case of too little, too late...

Well... Another day of doldrums in the currencies, with the bias, what little there is, to buy dollars. The stock jockeys received some manna from heaven yesterday when it was announced that the U.S. Treasury Department is considering a plan to halt the slide in home prices that would lower mortgage rates using Fannie Mae and Freddie Mac. The plan could reduce rates for newly issued loans to as low as 4.5%.

Here's a snippet of the story that ran in the Wall Street Journal yesterday..."Government officials are under pressure to stem foreclosures, which underpin much of the current financial crisis. Treasury has struggled for months to come up with a plan that would ease the market without appearing to bail out homeowners and lenders.

Under the plan, Treasury would buy securities underpinning loans guaranteed by the two mortgage giants, which are temporarily under the control of the government, as well as those guaranteed by the Federal Housing Administration. Fannie and Freddie guarantee a large proportion of all new home loans made in the U.S."

OK... So they came up with a plan... I have to think about this a bit, as I see the "good" it could do, but there's always a "bad" to these things too, and once again, I'm sure it circles around the fact that Gov't is going to be in the mortgage business... We inch closer and closer, all the time to socialism folks... It all began when they mandated that in a free country we HAVE to wear seat belts... Now don't get me wrong, I wear them because I believe it's the safe / right thing to do, but shouldn't that be MY choice and not the mandate of the Gov't? Any way, please don't flood my email box with notes telling me how wrong I am on this... It won't help, this is what I believe, period!

Whew! I really went off on a tangent there, eh? OK, before you begin to think I'm a nut case... Let's get back to currencies and economies!

The Reserve Bank of New Zealand (RBNZ) did cut rates, as I suspected, by 150 BPS yesterday... This brings the total of rate cuts by the RBNZ since September to 325 BPS! I think the RBNZ truly believes that global inflation is taking a major step backwards... And it probably is to a degree, but the RBNZ had better be ready to go the "other way" once this slide in inflation tips back... Of course I don't believe we'll see that for some time (6-months at least), so go ahead and frolic in the sun with rate cuts while you can RBNZ... Just be ready, that's all I'm saying...

Bond holders of New Zealand issues have to be frolicking in the sun for sure, and their "locked in yield to maturity" is now, at least 150 BPS, if not 325 BPS higher than new issues, which makes their bonds "more valuable"...

U.K. Prime Minister Gordon Brown unveiled a scheme to allow borrowers experiencing a temporary loss of income due to the downturn to defer mortgage interest payments for up to two years. The U.K. Gov't will guarantee the lenders against the risk of loss from the deferred payments... That's going to be quite interesting to see how that plays out... But shoot Rudy, if the Gov't is going to let you go Ollie, Ollie, oxen free on your mortgage payment for two years, with NO bad stuff happening to you and your credit, I can see the mortgage holders lining up on the right for this!

The U.S. Fed Reserve's Beige Book that usually gives us an indication of what to expect in the next FOMC meeting, which will take place December 16th, printed yesterday... And it could be probably listed on Amazon under "horror" books! Put away the sharp objects folks, for it's not just me ranting about these problems any longer, the Fed Reserve, your Central Bank, you know, the people that are supposed to be protecting the value of our currency, by providing price stability, and full employment (and are failing miserably at both!), now are ADMITTING that the problems are real... Here's a short review from the Beige Book...

Based on data collected prior to November 24th, the Beige Book painted a grim picture of the outlook for growth in the fourth quarter. Lenders tightened standards for loans and lending contracted over the period. Several districts noted increases in delinquencies and defaults.

Consumer spending, which played a lead role in the growth downturn in the third quarter, was reported to have weakened.

Hey, this little tidbit came across my screen yesterday... The number of days that the S&P 500 has moved up or down by more than 5% during the Trading Day...

1950 - 2006 34 days...

2008 44 days! With 22 of them coming since October 1st!

Talk about volatile! WOW!

OK... One of my fave economic writers, Caroline Baum, wrote a piece on Bloomberg that caught my eye... Hey! That makes sense now, since I really can only see good out of one eye! Anyway... Here's a snippet of the story by Caroline Baum, titled, "Bernanke should buy Buicks instead of bonds"...

"It tells you just how far we've come when the headline, "Fed May Buy Treasuries," gets a reaction.

Buying Treasuries is the age-old way of adding reserves to the banking system, setting in motion the money-creation process.

Historically, these so-called permanent open market operations were designed to have no impact on the shape of the yield curve. The goal was simply to satisfy the banking system's demand for reserves.

Treasury securities used to make up the lion's share of the Federal Reserve's balance sheet. No longer. As of Nov. 28, the Fed held $476 billion of securities carrying the full faith and credit of the U.S. government, less than a quarter of its balance sheet. One year ago, the comparable figures for the Fed's Treasury holdings were $780 billion and 90 percent.

When the banking system starts functioning again, and the Fed has to mop up all the excess reserves banks are holding instead of lending, the reality is "it doesn't have enough Treasuries," said Paul Kasriel, chief economist at the Northern Trust Corp. in Chicago.

Banks were holding $605 billion of reserves in excess of the amount required as of Nov. 19. "Maybe the Fed will have to raise reserve requirements," Kasriel says. "It'll be 1937 all over again."

Many Great Depression scholars, including the late Milton Friedman and Anna Schwartz, point to the Fed's doubling of reserve requirements in 1936-1937 as triggering the second leg down in the economy, which was recovering in the mid-1930s."

OK, back to me... All this talk today is causing me to search for something "fun" to talk about, because it's all been gloom and doom, eh?

Sweden's Riksbank announced a 175 BPS rate cut this morning. WOW! Another Huge cut, makes you think that the Bank of England and European Central Bank might have something up their sleeves too! And in Canada, their Central Bank doesn't meet until next week, but Canada has other problems going on, as there are rumblings about a suspension of Parliament...

The Governorator, Arnold Schwarzenegger, has called a Fiscal Emergency for the state of California... I feel like he won't be the only governor to do so... You see, the Federal Gov't is giving all it's McLovin' to Financial Institutions right now, and the States are hurtin' for certain... The states that have for decades told the Fed Gov't to "get out of their business", will now be knocking on the Gov't's door, and be the next in line to ask for bailouts...

And then, one final thought before going to the Big Finish... I saw this yesterday, and almost fell out of my chair! (now that would not be a good thing!) Let's see what your take is on this....

I know that sure seemed as though the Fed and Treasury had found every last way of pushing off debt from one generation to the next, BlackRock's Peter Fisher has thought of a clever new one: a 100-year treasury bond. That way, the government can keep borrowing money to finance today's bailouts, and won't really have to start bleeding cash until after most of us are dead and gone...

Let's hope that thought by Peter Fisher doesn't even cross the minds of Paulson and Bernanke!

Currencies today 12/4/08: A$ .6470, kiwi .5365, C$ .7945, euro 1.2640, sterling 1.46, Swiss .8245, ISK 261, rand 10.2585, krone 7.17, SEK 8.3430, forint 207, zloty 3.0650, koruna 20.3425, yen 92.55, baht 35.70, sing 1.5275, HKD 7.7510, INR 49.85, China 6.8820, pesos 13.62, BRL 2.4790, dollar index 87.22, Oil $47.16, Silver $9.57, and Gold... $769.35

That's it for today... The snow that was predicted for us yesterday failed to materialize... That's fine with me! Our office coordinator, Danielle, put up my little Christmas Tree by my desk yesterday after I left. My tree is decorated with Missouri Tigers stuff! It's beginning to look a lot like Christmas... (got you singing that song didn't I?) We've been in our office here for 4 years today (I believe)... And we already outgrew the space that seemed to be HUGE when we moved in... So, we'll be moving next door in 6 months... I sure hope we run out of space again in 4 years! I go to see my kidney doctor this afternoon. He's a delightful man, that I truly enjoy going to see... My darling daughter, Dawn, sent us pictures of Delaney Grace on Santa's lap... They were hilarious, as Delaney wanted no part of the Big Guy! I used to be the Santa at my older kids' school and in the neighborhood. (it's the one thing I DO have the body for! HA!) I kind of miss doing that, instead I just go and read The Night Before Christmas to Dawn's kindergarten class... The kids love it, I love it, and it's over in about 10 minutes! Sort of like the reading time for a Pfennig! Speaking of which... I need to go... I hope you have a Tub Thumpin' Thursday!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837

Automakers Say They Need Funding Now...

Chuck Butler — Wed, 03 Dec 2008 14:54:31 GMT

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In This Issue..

* Currencies trade in a tight range...

* China...

* Commodity prices to blame...

* "Safe" Treasuries?

And Now... Today's Pfennig!

Automakers Say They Need Funding Now...

Good day... And a Wonderful Wednesday to you! Well... I went "shopping" yesterday evening... At least I can say I did my bit to keep the economy afloat! HA! Thanks to all who sent along notes to me yesterday with kind words. I truly appreciate the kind words, you are all too kind! The automakers made their pleas to Congress yesterday, and they claim they are in deep dookie! GM says they need $4 Billion right now! And... The original $25 Billion figure has grown to $35 to $40 Billion...

The currencies were lifeless yesterday, with only a blip up in euros to 1.2740, only to give it back overnight. Aussie dollars (A$) rallied on the Huge 100 BPS rate cut news from the previous night, but at the end of the day, that was all but forgotten... It was as if the currencies did a Hans and Franz... Got all pumped up... But then turned into 100 lb weaklings again as the day turned to night.

Hey! I've written a bit about China this week, and the renminbi, and I must have scared quite a few holders of the currency, because, my trading screen is lit up with nothing but renminbi sell trades... Interesting... For the last couple of years, I tried to illustrate a picture that would show that owning Japanese yen, was a far better choice than Chinese renminbi... But, that fell on blind eyes... I see that UBS (Union Bank of Switzerland) believes that there "limited scope" for renminbi to drop much further, while Morgan Stanley believes we'll see a 10% drop in renminbi...

I think I will pin my colors to the UBS mast on that one... I just can't see why China would want all the negative press that would go along with allowing their currency to drop VS the dollar by 10%... The UBS research team said that, "Depreciation would likely invite criticism that china is a adopting a beggar-thy-neighbor type of policy, leading to possible protectionist responses from China's major export markets."

The NBER call on the recession brought out a lot of economists that are saying, "they knew it all along"... Yeah, right... However, there was one particular economist / analyst that has been saying the U.S. was in a recession for years! That's our old friend, John Williams of Shadow Statistics (shadowstats.com) I would love to show you the chart, but the Pfennig template doesn't allow me to do that... So, you'll just have to read about it!

Shadowstats.com uses a methodology that calculates GDP "old school" and when using this methodology, Showstats.com says that beside a brief blip into positive growth in 2004, the U.S. economy has been in negative GDP growth since 2000! I guess, John Williams won't be asked to be the keynote speaker at the NBER holiday party, eh? HA!

The U.S. data cupboard gets restocked today as we build to a crescendo on Friday with the Jobs Jamboree. Today, we'll see the ADP employment report, which as I've explained in the past, is a good indicator as to what we can expect in the Jobs Jamboree numbers. ADP is forecast to show a negative -200K job loss in November. Right now, the Jobs Jamboree is forecast to show a negative -325K job loss in November, so the ADP report is no sight for sore eyes over at the Bureau of Labor Statistics (BLS), who count the beans on the Jobs Jamboree. (and quite poorly, I might add!)

The "stupid" Productivity data for the 3rd QTR will also print... The old Fed Chairman, Big Al Greenspan, used to think the world of Productivity... He thought is was the "end all" in the "new economy" and the reason inflation stayed low, and he could keep rates low... Well, it wasn't the "end all", and the "new economy" was a bust, inflation wasn't really low, it was just "adjusted with changes to the CPI basket of goods to make inflation figures look low, and keeping interest rates so low, is the root of all evil for us today, now weren't they...

The awful fundamentals continue to mount for the U.S. and the dollar... But, as I've said over and over and over again, this dance is gonna be a drag... No wait! I have no idea where that Dave Clark 5 song came from! But, as I've said before, and will say again... These fundamentals are being swept under the rug and ignored, as long as the Credit Crisis has a tight grip on the markets. But, in my heart of hearts, I truly believe that all this bad data will come back to haunt the dollar, if the Credit Crisis can get some WD-40 applied to it, and unlock it.

The Reserve Bank of New Zealand's rate cut announcement should be coming forth this afternoon. Yesterday, I said I thought the RBNZ would cut 150 BPS... They very well could go more than 150 BPS, as their internal cash rate was the highest in the industrialized nations before all this rate cutting began in September.

I saw a piece of data that pointed out that Commodity Prices are down 18% YOY. OUCH! This is the worst performance for Commodity Prices since 1991. This is the main culprit in the poor currency performances of the Commodity Currencies like: A$, kiwi, loonies, rand, and real... (Australia, New Zealand, Canada, South Africa, and Brazil) This, and the unwinding of the Carry Trade, which hurt the high yielding Commodity Currencies, A$, kiwi, rand and real. So, a double whammy hitting these guys...

So... You have to ask yourself this question... Do you believe the Commodities are finished? Is this the end of their bull market that lasted only 7 years? Remember, our friend, Jim Rogers has documented that for over 200 years, Commodity Bull Markets averaged 17-22 years in length... And you might be saying but Chuck, you just said that Commodities were down 18% this year... Doesn't that tell you that it came to an end? Ahhh... Grasshopper... This Bull Market is a Trend, and trends are not "One-Way Streets" they have volatility, and they can see losses... But in the end, the underlying fundamentals return and the trend continues.

This is exactly what I tell you about the currency trends all the time... We had dollar weakness from 2002 thru 2004, then dollar strength in 2005, only to return to the underlying fundamentals in 2006, 2007, and 1/2 of 2008. Was the dollar strength in 2005 the "end of the weak dollar trend"? No! it wasn't... And I truly believe that the dollar strength since July this year will prove NOT to be the end of the weak dollar trend now!

You know, one of the things fueling dollar strength right now is the flight to safety in U.S. Treasuries... Oh by gosh, by golly, it's time for mistletoe and holly, and some straight talk about Treasuries. Everyone and their brother is buying Treasuries, which pushes the prices of the asset higher, and the yield lower... Big Ben Bernanke must be getting a bonus at the end of the year, for the Treasuries he sells... I say this because he announced the other day that the Fed is "considering" to buy long term Treasuries. (when you see "considering" just figure that it's a done deal!) Well, the Fed hasn't bought long term Treasuries since I was a kid, the Beatles were new, and I had hair!

For your troubles... A 3-month T-Bill will pay you 6 BPS... Folks, after the broker takes his pound of flesh to do the trade, you are paying the Gov't to hold your money! Want to go out further on the yield curve? OK... How about a 10-year Treasury? 2.70%, which again, will barely pay you anything by the time the broker charges you to do the trade. And those "long-term Treasuries" that Big Ben is "considering" buying? Where do I sign up for 3.2% yield in a 30-year Treasury... NOT!

It's crazy! I don't see the appeal... Especially considering the fact that when the Credit Crisis in unlocked, the unwinding in these "safe" Treasuries should be quite swift and push the price of those bonds down quickly, which will cause some investors to book losses, while paying the Gov't to hold their money...

These are just my thoughts... Market commentary...

OK, before I head to the Big Finish, someone asked me to talk about Swiss francs, as they think that Swiss Banking is going to cause a Big problem for the franc. Hmmmm... Could be, but I would think the Swiss, being a rich nation, would be able to deal with the problems that UBS and others have without causing too much of a problem for them and the franc. I still think of Swiss francs as a very good alternative to euros... Along with Norway, Sweden and Denmark... All surplus / positive balance of payments countries...

Oh, and this one last thing... I saw where mortgage applications more than doubled last week. This is probably the result of the announcement that the Fed will begin to buy mortgage backed debt directly... Yes, that's right folks... The Gov't may very well own your mortgage in the future... Now, as inviting as having a Gov't guaranteed loan might sound... Does anyone else find this arrangement to be creepy?

Currencies today 12/3/08: A$ .6435, kiwi .5295, C$ .7985, euro 1.2645, sterling 1.4735, Swiss .8265, ISK (no quote yesterday), rand 10.2825, krone 7.0850, SEK 8.2675, forint 207.25, zloty 3.03, koruna 20.18, yen 93.20, baht 35.55, sing 1.5290, HKD 7.7515, INR 50, China 6.8820, pesos 13.61, BRL 2.4190, dollar index 87.07, Oil $47.29, Silver $9.43, and Gold... $776.75

That's it for today... You know it's the Christmas season when Rudolf the Red nosed Reindeer is on TV... And tonight, it will be on TV for the 44th year! WOW! That's a looooonnnnngggg time! We're supposed to get our first "accumulation" of snow this afternoon. Since I walk with a cane these days to offset all the stuff they did to allow me to keep my leg, snow is no friend of mine... But, just another obstacle for me that I take in stride... We had a "full desk" yesterday, WOW! Everyone was in their places with bright shiny faces! This Saturday is St. Nick's Day... This is a great tradition in our house. My older kids, Dawn and Andrew, still put their shoes out side their room door until they moved out of the house! Saturday night is the Big 12 Championship. This will be the second consecutive year that my beloved Missouri Tigers play the Big Bad Oklahoma Sooners who have scored 60+ points in their last 4 games... I will be somewhere Saturday night, and not able to watch the game, which is probably a good thing. I'll record the game... Just in case... You never know! Time to go... I hope you have a Wonderful Wednesday!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837

Maybe It's Time For A Change?

Chuck Butler — Wed, 26 Nov 2008 17:14:00 GMT

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In This Issue..

* Currencies continue to rally...
* More Stimulus...
* Data shows more rot on the vine...
* A Thanksgiving thought...

And Now... Today's Pfennig!

Maybe It's Time For A Change?

Good day... And a Wonderful Wednesday to you! The day before Thanksgiving... Tonight is, historically, the biggest "going out" night for the younger crowd, as they all return home from college, etc. Not for yours truly though... A little reminder that Friday I will not be writing... Friday night, a large group of friends and family are starting the holiday season off with a gathering at the Butler House, before all heading to see the Trans Siberian Orchestra's Holiday Concert... I'm getting pumped up for that!

OK... Another rally day in the currencies yesterday... One that wasn't as pronounced as Monday's 3-cent rally... But a rally just the same, and at one point, the euro was trading above 1.30... Hadn't seen that level in a while, so welcome back to the 1.30 level, Mr. euro...

Someone sent me a note the other day, and said, why don't you talk about Australia, Canada, and Swiss more? Hmmmm... Maybe they don't read the Pfennig "every day"... But those currencies are in my notes most days, and if they are not, they are a part of the overall direction in currencies that are being pushed down by the Trading Theme... But in the spirit of the season...

Aussie dollars have rebounded nicely the last three days, but this is really putting a band-aid on a bullet wound, for the A$ has suffered a shot to the heart, and you're to blame, no wait! They've gotten bashed, beaten and left for dead, by the unwinding Carry Trades, and Commodities price collapse. Large interest rate cuts by the Reserve Bank of Australia (RBA) haven't helped the A$... And so... Until risk is back in the markets, driving commodities higher and bringing the battered Carry Traders back, the A$ will not be on the short list of currencies that can mount a rally VS the dollar... Should those two items come back with vengeance? Now that's a horse of a different color!

The Canadian dollar is getting tarred with the same brush as the A$, only the main commodity pushing the C$ down is the price of oil... Now, this is a case of: Torn between two lovers, feeling like a fool... I would love to see the C$ rebound, but it needs a higher oil price to do so, and I'm not about to turn my back on lower oil prices! I love less than $2 gas!

Now there are those that would tell you that this current level of the price of oil is just a fleeting moment price, and that we're still in store for $8 gas down the road... OK, I'm not sure I can get my arms around that, unless... We as a country do what we've done about gas driven automobiles for the last 35 years... Nothing, absolutely nothing! Then $8 gas is probably in our future... But it's not now, and won't be next week or next month, or even next year... Let's all hope it's not in our future at all!

The Swiss franc... Oh, where to start? The Swiss National Bank (SNB) shot an arrow into the heart of the franc last week, when they cut interest rates 100 BPS... Who would have thought that the SNB had 100 BPS of rate cut arrows in their quiver? But they did, and now francs are back on the block.... The "block" I'm talking about is the selling short block to fund Carry Trades, where they held court with Japanese yen, until the SNB began raising rates in 2007... Then the U.S. dollar took over, and that's where we are now... Good thing for francs that the Carry Trade and risk Aversion is hanging over the markets like the Sword of Damocles right now...

You know... We've been stuck in this Trading Theme of investors buying dollars whenever the economic Tsunami looks deeper, darker and more dangerous, for so long now, I had to sit back and examine this current currency rally further for what it was... At first, I thought this was simply a case of the currencies rallying because the "light at the end of the tunnel was brighter" as witnessed by the large rallies in stocks, caused by the bailout of Citicorp... But, then if that was the "true case" we would have seen the yen get sold along with the dollar... And guess what? Japanese yen was rallying too, while the dollar got sold!

In short- it seems like the market is starting to realize that all the various stimulus packages and bailouts our "leaders are throwing at the problems our economy faces and recognizing that while they may or may not lead us to the promised land of no deep, dark, dangerous recession, one thing that is a certainty is they will need to be financed. And isn't this the Big Problem for the dollar that I've talked about for over a year now? In the end, the reality will be that this is all negative for the dollar... And well, in the end, our fiscal well being.

Yes, I completely understand that Europe faces a similar challenge, but let's face the facts here, Europe has a surplus, right now at least, and does not have the funding requirements that the U.S. does...

And finally, there's the "other" thought... The dollar has gone a long way in a very short time erasing 5 years of gains from some currencies... It was about time that it paused for the cause...

So... In keeping with the thought about the stimulus packages and bailouts... The Fed and Treasury announced another round yesterday... You might want to sit down, and reach for your wallet, just to make sure it's still there!

Here's how the Wall Street Journal reported the news... "The U.S. on Tuesday stepped up its efforts to support strained credit markets through new programs aimed at boosting consumer credit and the market for mortgage-backed securities.

Under the Term Asset-Backed Securities Loan Facility, or TALF, the Federal Reserve will extend up to $200 billion in non-recourse loans to holders of asset-backed securities backed by consumer and small-business loans.

The Fed also said it will purchase up to $100 billion in GSE debt through a series of competitive auctions starting next week. It will also purchase up to $500 billion in mortgage-backed securities backed by GSEs, with the goal of starting that program by the end of the year."

For those of you that didn't experience "new math"... (HAHAHAHAHAHA 2+2 is still 4!) the tote board shows us that yesterday's announcement totals $800 Billion in addition to what they already have in the hopper! Geez Louise, when will this all stop? The Fed's balance sheet has grown by over $1.3 Trillion so far this year and could very well be turning Japanese once again! What am I talking about here? Well... You all know how I've been saying that the U.S. if following Japan's model of the 90's? Well... The Japanese added debt on to debt creating stimulus packages and bailouts too, and then lowered interest rates to zero, and the only thing left was targeting the quantity of money rather than its price. By that I'm trying to say that they didn't care what happened to the yen's value, they printed and printed... Oh brother! Here we go again! Are we doomed to experience a decade of deflation like the Japanese did?

I don't think so... I think our deflationary period will be much shorter, and then on the other side of that, we'll see inflation that will cause you to reach for your wallet again to see if it's still there! This inflation will push commodities back into the limelight, and once again the dollar will be punished...

That's my story, and I'm sticking to it!

OK... The data yesterday was more of the same-o, same-o, awful looking stuff... U.S. preliminary 3rd QTR GDP printed at negative -.5%, and Personal Consumption (which the Fed used to look at closely, but doubt they do any longer) fell to negative -3.7% from -3.2% in the 3rd QTR. And, the S&P/CaseShiller House Price Index fell another 17.4% in September from a year ago. The rot on the Housing price vine still has some additional deterioration to go, unfortunately...

The Data Cupboard continues to yield plenty for us to look at each day with a heaping helping of Personal Income and Spending for October today. In addition, we'll see Durable Goods Orders for October, the Weekly Initial Jobless Claims, Chicago Purchasing Managers Index (manufacturing for that region), U of Michigan Consumer Confidence, and New Home Sales for October... Whew! My fingers are worn out after all that! HA!

But there's more... I've been wanting to have a brief discussion about this for some time now, and each day I experience a loss of memory and forget to do so! What am I talking about, I hear you asking? Well... It's Gold... And not just the price of Gold in dollars, which has rebounded nicely this past week... But to point out that Gold has been rising VS all the currencies. Which makes sense right? The dollar has pounded the currencies for 4 months, and Gold gets stronger in those currencies... It's an interesting situation... So, Gold hasn't sunk VS the other currencies like it has VS the dollar.

OK... Here's the dilemma for the currency traders today... We've got all this data to deal with, and everyone is going to be trying to leave early today to get a head start on getting home for Thanksgiving... Will the lack of volume this afternoon cause wild swings? It has a history of doing so...

China has cut their internal interest rate to help stimulate their economy, which the OED lowered their forecast for China's economic growth from 9% to 7.5%... Well... 7.5% still sounds pretty darn good, doesn't it? Especially, when you consider that by the time the 4th QTR U.S. GDP numbers are printed (not until probably Fed 2009), they will show U.S. GDP to be a negative -5.0%!!!!!!

OK... Now that was a lot for the day before Thanksgiving, eh? I had better stop here, as I don't want to get you stuffed before your Thanksgiving meal!

Currencies today 11/26/08: A$ .6480, kiwi .55, C$ .8175, euro 1.2960, sterling 1.5340, Swiss .8375, ISK 235 (really, this is the quote we received Monday!) rand 9.8880, krone 6.9530, SEK 7.9260, forint 201.30, zloty 2.9180, koruna 19.48, yen 95.40, baht 35.20, sing 1.5080, HKD 7.7550, INR 49.43, China 6.8285, pesos 13.37, BRL 2.3370, dollar index 85.38, Oil $51.60, Silver $10.29, and Gold... $816.84

That's it for today... Well... I've written today's Pfennig knowing all long that I had no network to get it out... I noticed the problem when I logged on this morning... No network... And since I get here long before most of our IT people are wiping the sleep out of their eyes, (not a knock on them, just to point out how early I get here) The Pfennig probably won't go out for a few hours this morning... So... I've got that going for me this morning! UGH!

Tomorrow is Thanksgiving... It's quite a day as families gather and celebrate with wonderful meals and lively conversations. It's also a day for some great football games! Here's a Thanksgiving poem for you...

Leaves are falling everywhere,
A bit of chill is in the air,
It's time for fun and food galore,
For turkey, pumpkin pie, and more...
Autumn is here and that means one thing,
All the joy that Thanksgiving brings.

And as we gather together
From wherever we live
We give thanks to our Fathers above
For the earth and its harvest,
For freedom and peace,
And, especially,
For the people we Love.

I hope everyone has a wonderful and fulfilling Thanksgiving.

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

Citi Gets More "Gov't Money"...

Chuck Butler — Tue, 25 Nov 2008 16:18:07 GMT

.........But First, A Word From Our Sponsor..........

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In This Issue..

* Bailout fuels a rally...

* How long the rally last?

* A slew of data today...

* Thoughts from Jim Rogers...

And Now... Today's Pfennig!

Citi Gets More "Gov't Money"...

Good day... And a Terrific Tuesday to you! Now that was quite the Investment Conference I just attended and gave two presentations to! Someone sent me a headline that appeared on the internet prior to the Conference that read: Three Kings of the Financial World on Tap to Speak for the Next WMI M2... And guess what? They considered me as one of those in the headline! WOW! OK, no... I'm not getting a big head, I've got my beautiful bride to keep me humble. She responded to hearing about this article with a heaping helping of, "OK King, take out the trash!" HAHAHAHAHAHA!

OK... Chris left me some notes about the currency markets yesterday, so let's listen in to what Chris had to say, since he was here, and I was driving an hour to the airport in Fort Meyers, flying, and driving home yesterday. Herrrrreeee's Johnny! I mean Chris!

"The currencies continued their assault on the dollar today as investors felt more comfortable returning to the higher yielding currencies. Brazil was the biggest mover, advancing over 6 percent vs. the US$. Sweden also advanced for a second day, moving up over 5% against the greenback. The only currency which gave ground vs. the dollar was the Japanese Yen which was sold as investors moved back into the carry trades.

There really wasn't a single event which sent the dollar down, but instead the currencies steadily increased throughout the day. Bad housing data in the morning confirmed that house prices are continuing to fall and while sales have tumbled. The median price of homes in the US fell 11.3 percent from a year earlier, the largest drop on record.

But equity investors weren't frightened by the data, and were actually encouraged by President elect Obama's call for a large stimulus package. With the stock market rallying, currency investors felt comfortable enough to pick up some bargains in the Brazilian real and other higher yielding currencies. This is the pattern which we have been seeing over the past few weeks, and one which looks to continue through the end of the year. I don't personally think this is the turning point for the dollar, as we will likely see some more safe haven buying before the end of the year. But longer term investors can still take advantage of the prices on some of the beaten down currencies which still have good fundamentals. I would include the Nordic currencies of Sweden and Norway along with the commodity currencies of Australia and Brazil."

Thanks Chris... That makes my job a bit easier this morning!

I did receive a note from a chartist that mentioned that the S&P 500 index was nearing a very critical level last week, and the timing of the Citicorp bailout couldn't have come at any better time for this index. On a side bar... I told the over 300 people in attendance at the Wealth Masters Conference on Saturday, that they should market this down... "I fully expect the Gov't to make a Capital infusion / bailout in Citicorp next week." WOW! Was I bang on with that call or what? OK, or what, I hear you! But getting back to the bailout... I was wondering....

How this is all gets paid for without impacting the dollar negatively... And then that made me wonder just how long this "rally" can last given all the rot on the vine, and that the problems still don't have any answers to them! But.... I guess we should enjoy this for now, eh?

And then there's Gold... Talk about a rally for the ages since last Thursday! Gold traded up to and over the $800 figure in the past two trading days. However, in keeping with the thought above regarding just how long this "rally" can last... It looks like the shine is off the new car as stock futures are down 1% this morning, and Gold has lost $16 since the London Morning Fixing, which took place while we were all sleeping. Even me!

The euro has given back 1-cent too... So, I guess I'm answering my own question with this update of the prices, eh?

I guess a lot of people are wondering what I think of the new Obama Economic Team... I would say that with Larry Summers, it quite strong... But shoot Rudy, you never know what these guys will do under pressure... I mean, it sure looked as though the Bush Administration did well with Henry Paulson after Paul O'Neil told them to shove the job where the sun doesn't shine... Oh, you don't know about that story? Well... I suggest you either find where the movie I.O.U.S.A. is playing right now, or pick up the book at Amazon... It's all there...

Getting back to Bush's pick of Paulson... And for that matter, Bernanke... The Un-dynamic duo, have really let the country down, but given their credentials you would have never imagined this quagmire we're in would happen under their watch, when they were first appointed, would you?

So, I'll reserve judgment until I see what the color of their economic plans are... If it's more of the same-o, same-o, stimulus plans, rate cuts and no cut in Gov't spending, then you can rest assured I'll go after them with the same brush that I use to tar the current knuckleheads...

I just have to hope that they can pull a Bullwinkle, and have something up their sleeve! The data continues to leave a sour taste in one's mouth, and now with Citicorp needed Gov't money, you've just got to figure the other Big Banks are lining up to get their heaping helping of Gov't money... Of course, we all know that it's not really "Gov't money" right? IT'S OUR MONEY!

Speaking of data... Today, we'll see 3rd QTR GDP, which is expected to be negative... Did we expect anything else? This will be a preliminary number and is expected to be -.5%... I fully expect this number to jump big time into negative territory when the updates/ revisions are eventually printed. We'll also see Personal Consumption for the 3rd QTR, which is expected to also be negative (-3.2%). But that's not all, if you order now, we'll also send you these lifetime guaranteed Ginsu knives!

No wait! What I wanted to say is that's not all, we'll also see the S&P/CaseShiller Home Price Index for September, which is expected to continue to show more home prices falling. Probably to the tune of around -16%! Consumer Confidence will also print today, (Whew! This is a ton-o-data, eh?) and some other second tier data will also print.

I think the markets looked at the data Calendar and decided to take some profits on some items that had rallied for two days, because none of this data is going to give anyone a warm and fuzzy... No way, no how! UGH!

In Canada last night... Finance Minister, Flaherty, said that the worst of the financial crisis is probably not over and that he may take fiscal stimulus measures before the end of the fiscal year, which is next March... Folks, this is Central Bank parlance for "there will be more rate cuts"... Too bad for the Canadian dollar / loonie... Every time it looks like it could build some steam, either the Finance Minister or Bank of Canada come along and release the steam.

Our long time friend, Jim Rogers, was back in the news yesterday, as he gave an interview to Bloomberg... Here are some snippets of the interview... Jim Rogers...

"The dollar is going to lose its status as the world's reserve currency."

"it will be devalued and it will go down a lot. These guys in Washington, they want to debase the currency."

"If I were doing it today, and what I have done today, is buy the yen."

"But, it is also an artificial move, it's a difficult problem to find out what is a sound currency."

"In Mid-October, I started buying commodities."

"It's astonishing how low some of these prices (in commodities) are."

Well... I've always enjoyed listening to or reading what Jim Rogers has to say, and this is no different...

Another old friend, Thom Calandra, is back in the newsletter writing business, and Thom was kind enough to put me on his mailing list. Thom gave me and our currencies a huge lift back in 2002, when at the time, he was the editor of CBS MarketWatch, and wrote about our currency CD's, especially Aussie dollars... Glad to see you back Thom!

Currencies today 11/25/08: A$ .6410, kiwi .5410, C$ .8070, euro 1.2875, sterling 1.51, Swiss .8330, rand 9.8955, krone 7.0250, SEK 8.0250, forint 202.70, zloty 2.98, koruna 19.76, yen 96.35, baht 35.25, sing 1.5150, HKD 7.7539, INR 49.99, China 6.8260, pesos 13.38, BRL 2.2860, dollar index 86.12, Oil $52.50, Silver $10.39, and Gold... $812.50

That's it for today... I got a chance to rest a bit while on Marco Island for the Conference. And had a real treat there... I know that I've told you that cancer took my mom, dad, and oldest sister... Well, my oldest sister, Brenda, lived on Marco Island, (I actually had to go there to bring her home for cancer treatments) and was married with two young boys. (my nephews) Well, after she died, her husband, Robert and the boys, went back home to Marco Island, and I had not seen him in 20 years. I found him this year, and we got to spend one night together, with dinner and lots of catching up to do... It was great to see him again! This will be a short week for yours truly... And I will not be writing on Thursday or Friday, so you'll have to settle for reading archives at the Pfennig's website: www.dailypfennig.com ! My darling granddaughter, Delaney Grace, left us a picture on our refrigerator... It's a hand turkey, and a bunch of scribble... It had been awhile since we had "artwork" on our refrigerator! She's so darn cute! Are you ready for Thanksgiving? If you're traveling this Thanksgiving, please travel safely! Well... Time to get to work and get caught up on stuff... I hope your Tuesday is Terrific!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837