Daily Pfennig : Ben Bernanke

We Won't Get Fooled Again!

Chuck Butler — Tue, 17 Nov 2009 16:26:36 GMT

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In This Issue..

* Bernanke digs out some old words...
* Risk on, Risk off...
* Brazil to have a different meeting outcome?
* Winter Olympics are in Canada...

And Now... Today's Pfennig!

We Won't Get Fooled Again!

Good day... And a Terrific Tuesday to you! What a ride on Mr. Toad (Bernanke's) Wild Ride yesterday for the currencies! Gold? Well, at one point in the day, Gold had shot up $24 on the day! It topped out at $1,142... The shiny metal then gave some back on profit taking, but Whew! Gold holders have got to love it! Those that keep waiting for a pull-back... Well, they might be still waiting when the cows come home...

Yesterday, we had a couple of Fed Heads talking, but the Big Kahuna, stood out, and moved the markets with his statements... Here's the skinny...

Big Ben was giving a speech, and said that "The Fed will monitor closely the currencies, and that the Fed's policies will ensure that the dollar is strong." Now, when he first uttered those words, the dollar got bought and the non-dollar currencies were sold... But then, a few of us had this feeling... It was a feeling that we had heard all this before... And there... In the archives, circa June 2008... Bernanke said, "In collaboration with our colleagues at the Treasury, we continue to carefully monitor developments in foreign exchange markets." Wait! We won't get fooled again!

In June 2008, his statements spooked the markets into believing the Fed was really going to do something to bolster the dollar... But when nothing came along, the dollar REALLY got sold until the financial meltdown of August 2008... I mean... What has the Fed done in the past 1 1/2 years to "bolster the dollar"? Near zero interest rates that will remain in place for longer than they should... Quantitative easing... A Bloated balance sheet of toxic bonds...

You could see the V-8 moments on traders' faces when they realized, yesterday, that all this had been said before, and nothing came of it, so... Meet the new boss... Same as the old boss... We Won't Get Fooled Again! No No!

So, then traders reversed their buying of the dollar and sent the dollar to the woodshed... You should have seen the reversal... It was amazing... The Big Dog, euro, went from 1.4970 to 1.4860, and then turned around to rise to 1.50! ... Now, overnight, there has been some renewed selling of the non-dollar currencies, and the euro is back to 1.4910... Crazy... But not as crazy as Big Ben spouting off about "monitoring the currencies"... Yeah, right... And what are you going to do about them when they get out of line, Big Ben? Get the ruler out? I'll tell you what he'll do... Nothing... Absolutely nothing!

Memo to Big Ben... Ahem... Am I on? Ok, long time listener, first time caller... Big Ben... Just what policies are you talking about that will keep the dollar strong? In the future, you might want to list them, so that people like that Chuck Butler, doesn't rip your comments to shreds for their lack of truth, and facts...

Non-voting Fed Head, Fisher, had this to say yesterday... "Our job is to maintain the purchasing power of the dollar, while fostering the conditions that enable the economy to grow without fanning inflation." Hmmm I would say that he's got that right... But, apparently, somewhere along the way, the part about "maintaining the purchasing power of the dollar" got lost, eh? I mean, since the Fed / cartel was formed in 1913, the dollar has lost 95% of its purchasing power... YIKES! Most people that did their jobs that badly would be fired/ let go... These guys have had almost 100 years to figure this out, and have failed miserably... And hey! Before I get accused of something (I'm always accused of something, with everything I say), Fed Head Fisher was the one that described the Fed Heads' job, not me!

OK... While I'm on this subject of being accused... I have been beating on the U.S. administration for 9 years, folks... I know I've really stepped it up with the step up of deficit spending by this administration, but, I chastised the previous administration beginning with their protectionism measures in 2000, and never let up, with their deficit spending... Someone even said I never talked about Cheney and his "Deficits Don't Matter"... WHAT? I've even repeated the same joke several times about the Deficits don't Matter crowd, and that they remind me of a guy standing on the Empire State Building, he decides to jump off, and as he passes the 56th floor, he says... "So far, so good!"

Yes, so far, so good, because he hadn't hit the concrete to go splat yet... And neither had the deficits crowd... But they will, and in fact, they are getting awfully close to the concrete right now!

Well... Enough of that... I just get so ticked off sometimes... I write, and write, and people say I didn't say this or that... Don't know what else to say... So, I'll go on...

The U.S. economy got a boost yesterday when Retail Sales grew at a faster rate than forecast, growing 1.4% in October, above the 0.9% rise projected by Wall Street. The jump came on rebounding demand for cars, a sign the economy kept recovering despite climbing unemployment. Aside from automobiles in October, other sales rose just 0.2%.

But... Are these numbers suspicious? Well, when you look at the previous month's revision, you have to question these numbers as well... September Retail Sales, which were reported as -1.5%, actually fell -2.3%... I wonder what this number's revision next month has in store...

Today, the data cupboard is stocked to the brim with data prints... Producer Price Index (PPI) prints along with two of my faves, Industrial Production and Capacity Utilization... And then the Big Kahuna of the day... The TIC's data... For those of you new to class, The TIC's data stands for Treasury International Capital... Or... Easier to understand... It's the fancy, schmancy name for Net Security Purchases by Foreigners... This is how we track, how well we're doing as a county at financing our ever expanding deficit...

I made a mistake yesterday when talking about the Reserve Bank of Australia (RBA) and saying that if they didn't hike rates in December, that they would most likely come back in January at hike them... A reader pointed out to me that the RBA doesn't meet in January... OK... So, I guess I should have said that the RBA would hike at their next scheduled meeting!

Speaking of the RBA... They issued their latest meeting minutes, in which they sounded less hawkish than one would expect, since they raised rates at the same meeting... But this less hawkish tone, set off a round of Risk Aversion once again in the currency markets overnight... Risk on, Risk off, is reminding me of a Wayne and Garth street hockey game...

For, it's Risk on, one day, and Risk off the next day... So, while I find that the RBA minutes did set off this round of Risk off for the currencies, I don't see it having lasting power... Look for this all to fade, especially if we get a rogue data print in the U.S. today...

Late last week, I came across a story on the dollar that I totally forgot to talk about yesterday... So, here you go... Oh, by the way, strap yourself in for this one, and keep your arms and legs inside during the ride...

The German government's 5-person council of economic advisers issued a report that said, "After the massive global increase in U.S. dollar reserves in the past years, an "uncontrolled exit", especially in emerging economies from the U.S. dollar as a reserve currency is a possible trigger of instability in currency markets." The went on to say...

"Countries holding "high" dollar reserves should consider committing to selling their dollar holdings in a coordinated way over a longer period of time."

The folks over at the Royal Bank of Scotland (RBS) think that Bernanke's speech yesterday, basically gave the green light for a further, slow, gradual decline of the dollar... And, quite frankly, that's what traders would prefer to see too, given that they don't like getting whipsawed day in and day out by the Risk on, Risk off game... When assets go to fast one way or the other, it just causes strong corrections, and people get hurt by the movements... But a slow, gradual decline I would think would be the preference of the U.S. Gov't... That way, no one notices... It's not like a bubble that grows and everyone notices it...

Speaking of bubbles... And if you're like me, when I type, or say bubbles, I immediately think of Big Al Greenspan... Well, you'll love this Fed Head statement about bubbles... Here's Fed Head Kohn... "Asset price bubbles can be spotted when they become extreme, efforts to spot bubbles may result in seeing more than there is."

Now that statement plays well with Big Al Greenspan, who always claimed that bubbles could not be spotted before they got out of hand... Basically, what these two are saying in different ways is that the Fed could spot them, but probably wouldn't like it, and wouldn't have much at their disposal to do about it, so they just turn away...

And speaking of such... Fed Head Yellen said last night that the "U.S. stock market is not overvalued"... That's all I'll say about that!

OK... Hopefully, you are still with me here, and reading... And you will recall me going on and on about China and their FX currency swap agreements and how that was a baby step toward gaining a wider use of the renminbi... Well... Yesterday, there was a story, that I think Ty told me about, that talks about China preparing to float the renminbi, testing it in Hong Kong... The Chinese government has been moving to allow banks in Hong Kong to issue bonds, hold deposits, and settle trade with the mainland -- all in renminbi.

However, don't look for this conversion to a floating currency to happen soon... Financial analysts believe it will not happen before 2020... It may come sooner... But I wouldn't get all lathered up that it happens in the next year!

One of the best performing currencies VS the dollar this year, has been the Brazilian real, with a greater than 30% gain, so far... There's been a shakeup at the Brazilian Central Bank, and there will be a few new members, with voting power at the next meeting on December 9th... I still don't think the Brazilian real interest rate will be moved at this meeting, but with the new members, they might want to make a "statement" about how hawkish they are... And on December 10th, Brazil will print their 3rd QTR GDP, which I would think would be quite strong... You would have to think that the Central Bank will have privy to this report before they meet on the 9th... And with the new members possibly wanting to make a statement, there's a whole new outlook for the Central Bank meeting...

You know... As we draw closer to the end of the year, the closer we get to the winter Olympics which will be held in Vancouver, B.C. (and Whistler!) Going back to the early days of the World Markets Division at the old Mark Twain Bank, here in St. Louis, we tracked currencies from countries that were holding the Olympics, noticing that there was always a rise in the host country's currency... If that were to hold it would benefit the Canadian dollar / loonie... Will it hold true for the Vancouver Olympics? We'll have to wait-n-see, eh? But really... Wouldn't it be worth a flyer, a shekel or two to see if it did hold true?

And then there was this... Were you confused by the GM announcements yesterday? I was... First there was an announcement that GM would be paying back some of the bailout money to the Government... But then later it was announced that GM posted a $1.5 Billion loss... Kind of difficult to pay someone back, when you're booking losses, eh? Strange announcements for sure...

OK, to recap, which I forgot to do yesterday! UGH! The currencies were whipsawed yesterday by comments by Big Ben Bernanke, that we've heard before! The RBA issued a not-so-hawkish minutes report that spooked the markets and it's Risk off today... Brazil might have a different outlook for their next meeting in December, and the winter Olympics are ready for Vancouver, will that mean a boost for the loonie?

Currencies today 11/17/09: American style: A$ .9270, kiwi .7440, C$ .9450, euro 1.49, sterling 1.6775, Swiss .9840, European style: rand 7.4660, krone 5.62, SEK 6.8775, forint 179, zloty 2.76, koruna 17.1450, RUB 28.77, yen 89.30, sing 1.3870, HKD 7.75, INR 46.30, China 6.8266, pesos 13.01, BRL 1.7160, dollar index 75.38, Oil $78.24, 10-year 3.35%, Silver $18.16, and Gold... $1,030

That's it for today... Well, the college basketball season began last night... My beloved Missouri Tigers start tonight. The Tigers basketball team surprised quite a few people with their run last spring, hopefully they can repeat that! Our little Christine's husband is a high school basketball coach. Christine says that once the season starts, she rarely sees husband, Matt... She loves basketball season! HA! My little, adorable granddaughter, Delaney Grace, was at the house when I came home yesterday, and she ran out of the house to jump in my arms to hug me! WOW! Sure is great to have a little one around! OK... Late again today, UGH! Better get going... I hope your Tuesday is Terrific!

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

G-7 To Discuss Currencies?

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

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In This Issue..

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

And Now... Today's Pfennig!

G-7 To Discuss Currencies?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Oops, Did I Say That Out Loud?

Chuck Butler — Thu, 24 Sep 2009 14:36:53 GMT

..But First, A Word From Our Sponsor...
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In This Issue..

* A Wild and Wacky Wednesday...
* FOMC leave stimulus and QE in place...
* Will G-20 try to throw cold water on commodities?
* GATA receives a letter from the Fed...

And Now... Today's Pfennig!

Oops, Did I Say That Out Loud?

Good day... And a Thunderin' Thursday to you! It's Thundering and raining here, so I felt that naming today a "Thunderin' Thursday" was bang on! We had a wild and wacky Wednesday yesterday, with the Fed Heads playing the part of the court jester... And... I want to know, right here, right now, why the media isn't blasting Fed Head Honcho Big Ben Bernanke! I'll tell you why they should be, in a minute...

OK... As I said, we had a wild and wacky Wednesday yesterday, as the non-dollar currencies went for a spin on Mr. Toad's Wild Ride, with Big Ben Bernanke in the role of Mr. Toad! HA! That makes me chuckle! Here's the skinny, and what everyone should be up in arms about...

The FOMC meeting concluded with interest rates remaining at near zero... But what happened next was, well, exactly as I said it would happen, but we'll get back to that in a minute... What I'm talking about here is that the Big Ben's band of merry men announced that the U.S. economy's return to growth was insufficient to withdraw stimulus, and that quantitative easing would remain until March next year... WHAT!

HEY BIG BEN! I read in the Financial Times the other day, yes, the Financial Times, that you said the recession was likely over! I also read in another publication that you said basically the same thing... So! If what you told these fine publications is true... Why then do we need stimulus in place along with Quantitative Easing until next March? You could almost hear Big Ben saying... "Oops, did I say that out loud?" HA!

Doesn't that just tick you off? Big Ben and the President going around telling people that it's all clear and consumers can come out now and resume their spending, only to find out it was nothing but "feel good" stuff... Yes, stuff to make us "feel good"... So we would take our eye off the ball... But not me! You can't fool a wiley old veteran like me, right Jack Milner? I'm not falling for that change-up... And it ticks me off that they thought I was so stupid to fall for that!

Ok... Let's take a trip back to Monday of this week, when I was trying to explain why the dollar had reversed the negativity toward it... I said this in the Pfennig on Monday... "Seriously though, the markets are of the belief that the Fed will keep rates near zero, but will announce that they will begin to remove stimulus, as Head Fed Honcho, Big Ben Bernanke, believes the recession is over...

I think this is wishful thinking on the markets' part, as I really don't see the Fed Heads doing anything, but talking about doing this, that and the other thing. You see, the Fed Heads know all too well that the Commercial Real Estate problems are just beginning and with Unemployment."

I've been more right about what the Fed Heads were going to do, for the last 2 years, than Big Ben!

OK... So, here's where the wild and wacky comes in... The non-dollar currencies were hanging around on a corner trading in a tight range, when the announcement of further stimulus and Quantitative Easing was made... You should have seen the non-dollar currencies begin to run up VS the dollar... It was crazy, I mean in a manner of minutes the euro traded from 1.4765, to 1.4850, and Gold? It was soaring too! But then it was one of those a-ha minutes, and no, I'm not talking about the 80's group singing Take Me On! No, it was one of those head slapping moments when you say... Wow, I could have had a V-8!

Basically, investors figured out that by leaving the stimulus in place longer than originally planned, the Cartel, I mean the Fed, is confirming that the U.S. economic recovery isn't nearly as robust as Big Ben and his compatriots have led everyone to believe. Stock markets fell, and the Treasury rates rose.

With the stocks backing off, the risk assets of currencies and precious metals backed off VS the dollar... And, we ended the day, where we started it... A wild and wacky Wednesday for sure!

The overnight markets were very confused as to what direction they should take... So, as I turn on the screens this morning, the euro is 1.4775, and Gold is $1,014... About the same as yesterday morning... If you weren't around for the spin on Mr. Toad's Wild Ride, then you would think... "How boring these currencies and metals are"... HA!

The thing that keeps haunting me here with yesterday's stock sell off... Could it be the next leg down that I keep warning you about? Could yesterday's sell off be the harbinger of more selling? We'll have to keep an eye on this, folks... If we see 3 or 4 days of consecutive selling, it could very well be the indication that the next leg down is here...

Well... The other day I mentioned that the dollar could very well be the last man standing when it comes to near zero interest rates, and that could lead to the dollar becoming the next funding currency for the Carry Trade...

Ty brought to my attention this fact that plays quite well with that thought... For the 1st time since 1933, 3 month LIBOR rates in the U.S. (.28563) are lower than Japanese Yen 3 month LIBOR rates (.34875)

And one wonders why, the dollar is getting beaten like a rented mule? (no animals were hurt!)

A reader called in yesterday and wanted to know what I thought regarding... how a new SDR would affect the currencies. (Specifically NOK, AUS, BRL, CHF)

Well... That's a tough one! Because if we do end up with a new SDR, no one knows what the makeup of that SDR will be... So, I can't say how it would affect any currency until we begin down that road to a new SDR... If the current makeup of an SDR is used, then euro, yen, sterling and dollars would benefit... But one has to think that if things come to pass and we start down that road of a new SDR (Special Drawing Rights) that the makeup would be quite different, and could possibly even have some Gold as a component!

So... Sorry, I can't really answer the question, because it's an unknown... I hope my beautiful bride reads this part, as she usually only reads the first and last paragraphs, because she always contends that if I don't know the answer to a question that I just make something up... See, dear? I said I couldn't answer the question!

Ok... G-20 begins today... Look for these knuckleheads to take a toughened stance on speculation, with Oil in mind... I think that all they will do is make things tough for the Commodity Currencies of Australia, New Zealand, Brazil, Canada, South Africa, and Norway... There's also an outside chance that these knuckleheads will attempt to do something to limit the rise in currencies VS the dollar... In other words, prop up the dollar... I'm not convinced they could do that, and I am convinced they shouldn't do that!

Speaking of Norway... The Norges Bank (Norway's Central Bank) did as I thought they would with rates, and what I hoped they would do with their statement... Here's the skinny... The Norges Bank left rates unchanged... But... Said after the rate announcement that "they were CONSIDERING a rate hike"... The Norwegian krone went on a moon shot immediately after that statement.

In the race between Norway and Australia as to which will be the first to hike rates, Norway takes the lead, with that announcement yesterday... But, it really doesn't matter, as no one will get the checkered flag or anything... The thing that makes the difference is that the yield differentials to the U.S. will begin to grow wider... And that, my friends, will go a long way toward currency strength for the currency that rewards investors with higher yields!

Speaking of Australia... The Reserve Bank of Australia's (RBA) semi-annual Financial Stability Review gave a generally clean bill of health to the banking system and noted sentiment among households and business had improved considerably in recent months... But... The RBA went on to caution that it was not strong enough yet... Which then puts the Aussie rate hike forecast further behind Norway's...

In New Zealand overnight... It's been a good week o' data for the Kiwis... Last night, it was the latest Consumer Confidence Index which jumped to a 4 - year high of 120.3 (previous reading was 106)! WOW! So... The highest Consumer Confidence in 4 years! This news helped kiwi to remain above 72-cents... Even with the risk assets sell off...

In Germany this morning... The Business Climate Index, as reported by the think tank IFO, disappointed a bit, as it came in (91.3) lower than forecast (92), but... The 91.3 marked the 6th consecutive monthly increase for the data... So, the trend is still in place...

And it's good to be the yen, eh? I mean, recently, we've seen yen rally when the other currencies rally VS the dollar... And before that, we've seen yen rally along with the dollar... Last night, yen rallied alongside the dollar, and is trading with a 90 handle this morning...

And then there was this... The Federal Reserve System has disclosed to the Gold Anti-Trust Action Committee Inc. (GATA) that it has gold swap arrangements with foreign banks that it does not want the public to know about. WOW! This is a BIG DEAL folks, as the Fed as recently as 2001 (Big Al Greenspan) denied that these swap arrangements existed...

GATA believes that this letter suggests that the Fed is indeed very much involved in the surreptitious international central bank manipulation of the gold price particularly and the currency markets generally.

So guess what I think regarding the Fed now? That Ron Paul's bill to audit the Fed needs to get on a roll! Remember, it comes before a committee tomorrow, I believe, where it will be decided to forward the bill on or kill it... So, call your representative and tell them you believe they should back Ron Paul's bill to audit the Fed! I've got a bag full of names to call these guys at the cartel, I mean Fed... But, those are verbally used only... Nothing in writing... Hey! This is a family safe letter!

OK... So, to recap... The Fed is leaving stimulus in place along with Quantitative Easing until next March. So much for Big Ben, and the President's claim that the recession is over, eh? The currencies rallied at first on the Fed's announcement, but later realized the rot on the economy's vine has been exposed by the Fed, and then the currencies sold off VS the dollar to end the day unchanged...

Currencies today 9/24/09: .8745, kiwi .7235, C$ .93, euro 1.4775, sterling 1.6220, Swiss .9770, rand 7.3850, krone 5.7630, SEK 6.8380, forint 183.15, zloty 2.82, koruna 17.04, RUB 29.99, yen 90.60, sing 1.4110, HKD 7.75, INR 48.03, China 6.8273, pesos 13.37, BRL 1.7980, dollar index 76.25, Oil $68.36, 10-year 3.41%, Silver $16.81, and Gold... $1,014.10

That's it for today... Cardinals missed a chance to clinch last night, but the magic number falls to 1... Today, our colleague, Don Ries, celebrates his birthday... Don and I have worked together, off and on since 1989... He's our "Bond Daddy"! Or, I guess I should say "Bond Granddaddy"! We had a MarketSafe CD mature this week. It was a 3 year CD in the AIG / Dow Jones Commodity Index, and it returned a little less than 2%... Which isn't anything to write home about, but, as I tell people these days, "it's better to have a return of capital than a return on capital! We're going to extend the BRIC MarketSafe to another funding date in November, but that will be the last funding for that CD. The BRIC has been quite popular, I must say... I have 3 hours of Continuing Education on the docket this morning... This is my 3 broker licenses... Oh boy! Talk about brain death! OK... I've got to get this out the door... I hope everyone arrives to work dry, as it's a Thunderin' Thursday!

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

Retail Sales Soar!

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

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In This Issue..

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

And Now... Today's Pfennig!

Retail Sales Soar!

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Bernanke sticks to his script...

Chuck Butler — Wed, 22 Jul 2009 14:19:15 GMT

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In This Issue..

* Bernanke sticks to the script...
* Pound sterling comes under pressure...
* China starts shopping for assets...
* BRIC MarketSafe lights up the phones...

And Now... Today's Pfennig!

Bernanke sticks to his script...

Good day... We had a very busy day on the desk yesterday, as our newest MarketSafe offering, based on the BRIC currencies, is making the phones ring off the hook. But while we were busy, the currency traders had another slow day as the dollar just drifted throughout the day. The return chart for the last 24 hours shows only one currency made more than a .5% move vs. the US$; and that was the South African Rand which increased .75%.

The markets were watching Ben Bernanke's congressional testimony through most of the day, but those waiting for a surprise were disappointed. Bernanke stuck to the script which he had laid out the day before in the Wall Street Journal, and the members of the House Financial Services Committee couldn't get him to commit to any 'new' stimulus programs. Bernanke said the economy is showing "tentative signs of stabilization" but the central bank intends to continue to maintain its "highly accommodative" monetary policy for "an extended period". He indicated that the Fed stands ready to tighten policy, but only after the economic recovery takes hold and pressures holding down inflation diminish.

The Fed Chairman also reiterated his desire to keep the Fed independent from additional congressional oversight. As Chuck reported a while back, 275 legislators sponsored a bill to repeal the immunity of the central bank from audits of monetary policy. Bernanke said the bill would "open a Pandora's box" for Congress's Government Accountability Office to probe monetary policy. While I don't necessarily think the folks in Congress are any more adept at handling the financial crisis (more on that later), I am a fan of opening up the books and letting the 'owners of the government', (the taxpayers) see just what all of their taxes are being spent on. Again, I'm not advocating that the Fed should seek congressional approval for every move they make, but I do think an after the fact audit is a good thing. I just get the feeling Bernanke and his pals are trying to hide something.

When pushed about this bill to audit the Fed, Bernanke pushed back at Congress and told them they need to cut the 'unsustainable' budget deficits. The Senate took a somewhat symbolic step toward this yesterday, by killing the F22 Raptor fighter jet program. If you hadn't been following this, it is an excellent example of how spending can spiral out of control. Back in April, Defense Secretary Robert Gates decided, with President Obama's backing, to scrap the program once it had delivered the 187 F-22s already in production. F-22 supporters in Congress ignored what the military wanted, and went ahead and budgeted another 2 billion dollars to continue production. I know 2 billion is next to nothing with the trillions that we have been talking about, but every little bit counts. If the US Government is going to get spending under control, they have to start somewhere; and killing a program that creates a plane that the military says they don't need, and don't want is a good first step.

Budget deficits aren't the exclusive problem of the US. The Pound Sterling has been coming under some selling pressure lately as the UK budget deficit swelled to a record $21.4 billion in June. This was the largest monthly budget deficit ever recorded, and is increasing pressure on Prime Minister Gordon Brown to commit to a credible plan to cut spending. Recent data coming out of the UK doesn't paint a pretty picture of the economy. Yesterday data showed that UK house price declines will persist until 2012, and another report predicted gross domestic product will keep falling until the final quarter of this year. BOE policy makers voted unanimously to maintain their asset purchase program in July, another sign that they still feel the UK economy is on shaky ground.

While the BOE and the Fed continue to use their reserves to purchase their own debt, China announced it would be looking to use its huge stash of cash to make purchase assets which have a bit more intrinsic value. A story in the FT yesterday stated that Beijing will use its foreign exchange reserves, the largest in the world, to support and accelerate overseas expansion and acquisitions by Chinese companies, according to Wen Jiabao, the country's premier.

In an interview published in state-controlled media, the chairman of China Development Bank said Chinese outbound investment would accelerate but should focus on resource-rich developing economies. "Everyone is saying we should go to the western markets to scoop up [underpriced assets]," said Chen Yuan. "I think we should not go to America's Wall Street, but should look more to places with natural and energy resources."

This is a shot across the bow for the US, and a huge boost to countries which are commodity rich, including Australia, Brazil, and Africa. This is further evidence that China is looking to slow its purchases of US treasuries, and reduce its reliance on the US dollar as its reserve currency. Investments will focus not on monetary instruments, but on physical assets in resource rich developing economies.

This may account for some of the increase we saw in the South African rand yesterday. The South African rand is now the best performing currency vs. the US$ in 2009, with an increase of over 22.5%. The news will also benefit the Brazilian real which recently climbed to the highest in more than nine months as stronger earnings and higher metal prices bolstered the outlook for Latin America's largest economy. The Brazilian real is the number two performer year to date vs. the US$, with an increase of approx. 21.5%. Anyone want to guess at #3 on the list?

It is the Australian dollar which has gained just over 15% vs. the US$ in 2009. Australia's economy is performing better than expected, with GDP rising .4% in the first quarter, helped by consumer spending and increased commodity exports. Policy makers have left interest rates unchanged two weeks ago for a third month, but the bias seems to be shifting toward tightening rates. Australia could end up being the first of the major economies to start raising rates again, which would be a big boost for this currency.

The Bank of Canada will announce their rate policy today, and are expected to leave rates unchanged. Commodity price rebounds have helped push the Canadian dollar higher, and the loonie's strength could threaten Canada's nascent recovery. The big boss, Frank Trotter traveled out to Vancouver to join Chuck yesterday, and had this to report after his plane landed:

"Making the approach into Vancouver has always been a treat. This time, for my first time ever we landed to the west - drifting down down along the Fraser River Valley with Ranier on the left and the Olympic Peninsula in the distance affording a great view out to Vancouver Island across the straights. Once down I jumped in the cab and headed for the Agora Financial 'Decade of Reckoning' Conference.

"So are you guys picking up down south?" I was jolted out of my observation of the heavy traffic at 2pm. "Haven't hit bottom yet I suspect" I replied to the cabby with an understatement. He told me that business was down, but okay. That restaurants were not full but they weren't closing. That work continues for this winter's Olympics, but everyone wonders if people will have money to travel. I'll check in after hearing what some of the experts say at the conference over the next couple days; until then this is a pretty decent place to build a gulch."

I look forward to sharing both Frank and Chuck's views from the big Agora Financial Conference up in beautiful Vancouver.

As I mentioned in the opening paragraph, or new BRIC MarketSafe CD is proving to be extremely popular with investors. One reason is the tremendous upside potential of these 4 emerging market currencies without any downside risk. It also gives investors the opportunity to invest into the Russian ruble, a currency which we are not able to offer in any other investment. The ruble has shown some good strength vs. the US$ recently, gaining over 2% in the past 5 days. The ruble has rallied 16 percent in five months, as oil prices have climbed. While recent moves have been excellent, the Russian ruble continues to be a very volatile currency. The only way I would suggest individuals invest into this currency is with the downside protection provided by our MarketSafe CD.

Currencies today 7/22/09: A$ .8158, kiwi .6566, C$ .9064, euro 1.4216, sterling 1.6447, Swiss .9371, rand 7.7793, krone 6.2904, SEK 7.609, forint 191.15, zloty 2.9993, koruna 18.1720, yen 94.43, sing 1.4430, HKD 7.750, INR 48.5225, China 6.8313, pesos 13.286, BRL 1.8980, dollar index 78.897, Oil $64.80, 10-year 3.48%, Silver $13.475, and Gold... $947.40

That's it for today... And for me the rest of the week. I am heading out to San Diego tomorrow morning for a family reunion. Mike Meyer will be Pfilling in for me and Chuck for the next two mornings. The phone calls are already starting up again this morning, so I'll hit the send button and log into the phones. Hope everyone has a wonderful Wednesday!

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

US leading indicators push higher...

Chuck Butler — Tue, 21 Jul 2009 14:48:06 GMT

...But First, A Word From Our Sponsor...
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* Low $1,500 minimum deposit

In This Issue..

* US leading indicators push higher...
* Labor department admits errors...
* Ben Bernanke heads to the hill...
* PIMCO suggests buying emerging markets...

And Now... Today's Pfennig!

US leading indicators push higher...

Good day... A quiet trading day to start the week off yesterday. As I turn on the computers this morning the dollar index is trading right at the level it was yesterday morning. The currencies were up a bit through most of Monday's trading day, but the dollar came back in Asian trading leaving us right about back where we started.

The only data released yesterday was the index of US leading indicators which rose slightly in June for a third consecutive month. The numbers gave a bit of hope for all of the bulls, with many exclaiming that the US economy has turned a corner and the recession has ended. I am not so sure, as rising unemployment and continued weakness in the housing market will likely hold any recovery back.

Aaron Stevenson sent me a story he read on CNNMoney.com yesterday which highlighted the labor problems here in the US. The article states that more than 650,000 Americans will have used up all of their unemployment benefits by September, and the Labor Department is expecting the problem to accelerate. "In the next few weeks, the victims of the mass layoffs that happened six months ago - when the pace of layoffs was at its zenith - will start running out of their basic benefits. A total of 4.4 million people are expected to face this fate - or 65% of the entire filing population. And while they may have up to another year of unemployment insurance benefits - thanks to the confusing patchwork of extensions that were enacted last summer - they will soon be unaccounted for in government unemployment reports."

As Chuck has continually pointed out, the Labor Department doesn't track anyone who has been unemployed more than 26 weeks, and has no plans to adjust the way the report claims (even though they know they are under-reporting the actual unemployment rate!). As a result, the weekly jobs data will probably start showing declines in continuing filers later this year. But these declines won't be because of an improved job market, but instead will be because many of these filers will be falling off the Labor Department's radar.

Even the director of the White House's National Economic Council, Mr. Lawrence Summers, isn't feeling so rosy about the prospects for recovery. "I don't feel there's a basis for predicting that income growth is going to resume in the near term," Summers said in an interview yesterday. So while the US economy may not be sinking any more, Summers doesn't believe the economy will be able to quickly pull itself back up from the deepest recession in a half a century. "The pace of growth next year I think is very much in doubt, and difficult to predict, and will depend crucially on our effectiveness in implementing the programs that have been legislated and the kind of confidence that's provided by what Congress is able to do in crucial areas like health care and financial regulation and energy," Summers said.

The focus today will shift to Federal Reserve Chairman Ben S. Bernanke who will be giving his semiannual monetary policy testimony to Congress today. The markets are looking for Bernanke to map out an 'exit strategy' for the loose money policies which have been enacted over the past few years. Bernanke gave a sneak preview of his testimony in an opinion piece which he wrote for the Wall Street Journal yesterday. "When the economic outlook requires us to do so," the central bank will employ a series of tools to tighten policy, Bernanke said in the piece. He outlined five different ways the central bank will be able to prevent the record reserves that banks have accumulated from causing money supply and inflation to surge.

I don't doubt that Bernanke and the Fed have the means to pull liquidity out of the system. What I question is if they will have the cojones to use these methods when the time is right. In order to stem inflation, the Fed will be required to start tightening policy just as the economy is starting to recover. If they tighten too early, they could squash the recovery, and if they wait too long, inflation could spiral out of control. History has shown that the FOMC is typically late in their move to tighten.

And the likelihood of an anemic recovery heightens the risk that the Fed will be late in reacting. The recovery will be weak compared with historic recoveries from recession. I just can't imagine Bernanke stepping up and pushing rates higher in the face of a weak economic recovery. But we will see what he has to say to congress today. His testimony could be good for the dollar, if he is able to convince the markets that he and his compatriots will step up to the plate and keep inflation at bay. Again, I just don't believe he has the fortitude to time his move correctly.

Chuck sent me a note after reading a great piece by the Mogambo Monday.. The Mogambo doesn't think Bernanke will be able to rein in inflation, and believes investors should protect themselves by purchasing gold:

"And if you don't think that gold will shoot up when inflation starts roaring like that, then you are obviously new at this investing business and you haven't had time to look at what happened to the price of gold when it was $35 an ounce in 1970 and over $800 an ounce by 1980 when the inflation (from the vast expansions of the money supply needed to simultaneously finance the War on Poverty and the War in Vietnam) was rising along this same parabolic ride."

I love how you always know exactly where the Mogambo stands on things! I can't argue with his logic and agree that gold is a good hedge against rising inflation which I'm sure we will see on the other side of this recession/depression. Every investor should have a portion of their overall investment portfolio dedicated to precious metals, and our unallocated metal select accounts are one of the most efficient ways I know of to hold gold.

Speaking of the precious metal, gold held above $950 an ounce overnight, and seems to be on a fairly sharp upward path. Gold has gained just over $45 in the past two weeks and looks set to test resistance levels around $960. If it can push through these levels, the next resistance would be around $985. And just think what the price will do once we start seeing signs of inflation creeping back into the global economy.

So the dollar will likely move up today as long as Bernanke can 'deliver the goods' in his testimony to congress. But if the dollar does rally, I would take advantage and look at the move as an opportunity to purchase currencies at better levels. Some of the largest, and smartest investors are looking to do the same, and share our believe that Bernanke will be unable to turn the liquidity pump off in a timely fashion. PIMCO, the manager of the world's biggest bond fund, said it is looking to buy the Brazilian real as the dollar slumps and growth in emerging economies outpaces that of developed nations. According to a report published by PIMCO, investors should buy emerging market currencies to protect themselves against the risk that US policy makers will allow the dollar to slide should they lack the skill to "drain the system of emergency liquidity at the appropriate time." The report goes on to say "In light of an expected long-run erosion in the value of the US dollar, Pimco will look to take positions in select emerging market currencies that we believe have the most compelling appreciation potential."

Want to take a position in the emerging markets without the risk? Why not look at our new BRIC MarketSafe CD. It combines Brazil, India, Russia, and China into a 3 year CD which is protected against any downside risk. I think we came up with a real winner on our newest MarketSafe!

Currencies today 7/21/09: A$ .8132, kiwi .6548, C$ .9040, euro 1.4217, sterling 1.641, Swiss .9362, rand 7.8703, krone 6.2998, SEK 7.685, forint 191.68, zloty 2.9982, koruna 18.1561, yen 94.20, sing 1.4419, HKD 7.750, INR 48.4337, China 6.8305, pesos 13.2694, BRL 1.8987, dollar index 78.923, Oil $64.16, 10-year 3.61%, Silver $13.555, and Gold... $947.85

That's it for today... It is food day here today, as we celebrate everyone with July birthdays. The crew is coming in with food galore; Krispy Kremes, Cake, and every imaginable form of dip n chips. It is going to be a real challenge for me to stick to my diet today (but I guess I can have a free day every once in a while right!?!?) Hope everyone has a Terrific Tuesday, mine is sure shaping up to be one!

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

Desperately Seeking Yield...

Chuck Butler — Fri, 26 Jun 2009 15:27:32 GMT

.........But First, A Word From Our Sponsor..........
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In This Issue..

* Currencies rally...
* More on the BRIC's...
* New Zealand's GDP contracts..
* Bernanke gets grilled!

And Now... Today's Pfennig!

Desperately Seeking Yield...

Good day... And a Happy Friday to one and all! The end of what seemed to be a very long week... The last weekend in June, can you believe that? Next week, we'll be getting ready for the 4th of July celebrations! WOW!

Well... What a volatile week it has been in the currencies! Up, down, all around, and settling back to levels that we saw before the Fed's FOMC meeting earlier this week. Suddenly, investors are looking for yield again... Looks like they are "Desperately Seeking (not Susan) Yield! And why not? The Fed, and the Bank of Canada (BOC) have come out and said that there will be no interest rate hikes until we've turned quite a few pages on the 2010 calendar.

So, with investors clamoring for yield, the dollar gets taken to the woodshed... As I said earlier this week, one of these probes above 1.40, need to take hold of the figure and build on it, otherwise we're doomed to remain in the 1.35-1.40 range, and range trading is for the birds! Talk about counting flowers on the wall, and watching paint dry! UGH!

I was shocked yesterday to see but a few emails asking me more about the SDR's story that I talked about... Men, women, boys and girls, all... This is important stuff! Don't take it lightly! There's a movement underway that could end up costing you dearly, if you do not take the diversification steps...

I think it is important to know that the BRIC countries (Brazil, Russia, India, and China) are serious about replacing the dollar with a "global currency" i.e. the IMF's SDR's... And... That the BRIC's want more power on the World's stage... And why not? These countries currently have almost 3 Trillion in foreign reserves... And... A very large piece of the world's population... (Thanks for that fodder, Kevin!)

OH! And guess who was banging the drum for a "super-sovereign" currency overnight? China, that's who! So... They're Baaaaaaaaccccckkkkk! OK... This was the People's Bank of China (the Central Bank), that made this statement, along with a call for the IMF to manage part of member's foreign exchange reserves... Hmmm... OK, I just said that China wants more power on the world stage, and here they are saying that their puppet will be the IMF! OK, I took some liberty with that, but it's the way I see it!

OK... Back to what's going on in the currencies today... Hmmm... The dollar is getting taken to the woodshed to end the week, that's what's happening! And the currency leading the pack with regards to performance VS the dollar, drum roll please.... The Brazilian real... A 3 day "winning streak" has the real back to levels it saw before the Brazilian Central Bank (BCB) cut rates about 10 days ago...

The way I see it, and long time readers know this will be interesting in the least, is that investors want to invest in the BRIC countries, but there's very little liquidity there in each of those currencies, along with very little yield, except... In Brazil... Liquidity isn't what the majors enjoy, in fact it's still traded on what's called a "non-deliverable forward", which means it can only settle in dollars, with no deliverability, but... It's traded easier and less costly than the other BRIC's and... It has the highest interest rate available... So... You can see why investors are buying reals...

Having said that though... You must know about the volatility... Look at what happened this week... On Monday, we started the week with the real at 1.9750, only to see it rocket to 2.0326 in one day's trading, a near 3% move / loss in one day! Then we saw it rally back to 1.9795 the next day, and after 3 days of gains the real sits at 1.9420 this morning, thus generating a "gain" for the week! And... The other thing, is that Brazil is considered an Emerging Market... And long time readers have learned over the years that when one Emerging Market gets slammed, they all get taken to the woodshed... So... Be careful out there!

A high yield currency that far removed from the early days of trading like Brazil, but offers yield, is the New Zealand dollar / kiwi... And kiwi has been held back, although still posting a gain VS the dollar, overnight as 1st QTR GDP printed at a negative -1%, thus marking the 5th consecutive quarter of negative growth in New Zealand...

I'm probably out there on the big fat limb (to hold me up, of course!) by myself on this one, but... I personally believe that both the Reserve Bank of New Zealand (RBNZ) and the Reserve Bank of Australia (RBA) have seen the lows in their interest rates, and no further rate cuts will come from these respective Central Banks. I know, that last week, we were all hyped up about future rate hikes from the RBA in 2010, and we probably got a little ahead of ourselves with that thought... I'm probably ahead of the curve on the "end of rate cuts" talk... But that's where I like to be!

So... When the world's investors are looking for yield, they don't have to go to Brazil, or India... They can go to the old reliables... Australia and New Zealand, with a reduced fear of further rate cuts... At least that's they way I see it! And yes, I could be wrong...

And how about Gold and Silver this week? What a week on Mr. Toad's Wild Ride for precious metals... The main thing though is that they are finishing the week with a rally, and Gold which was trading at $922 on Monday, is $944.85!

And how about that grilling that Big Ben Bernanke received yesterday by legislators over the Fed's conduct in the Bank of America (BOA) takeover of Merrill Lynch... You may recall that BOA's CEO, Ken Lewis said he was "bullied" into taking over Merrill and not disclosing to his shareholder all of Merrill's losses that were on the books... Big Ben denies that he participated in any bullying... (doesn't that lead to Paulson then? Did Big Ben just throw Paulson under the bus?)... Any way... Big Ben did little to convince the legislators that the Fed didn't keep their hands out of the cookie jar... And that, my friends, may be the foot in the door that we've been looking for... Maybe, just maybe, because you never know, but with the legislators having questions about the Fed and Big Ben, they probably aren't in any mood to hand over the regulatory powers that the President wants to give them...

And... My old fave Central Banker, NOT! Big Al Greenspan was back in the news last night... I'm trying to figure out how he and I got on the same side of the ship... But, here was Big Al, my nemesis for years, talking about inflation being a concern... Let's listen in to Big Al... Alan Greenspan, former chairman of the Federal Reserve, said the threat of inflation needs to be confronted because it poses a threat to economic recovery. "Excess capacity is temporarily suppressing global prices. But I see inflation as the greater future challenge," Greenspan said. "If political pressures prevent central banks from reining in their inflated balance sheets in a timely manner, statistical analysis suggests the emergence of inflation by 2012."

Of course, I think inflation will be showing its ugly face next year, not 3 years from now!

And on the data front... The Weekly Initial Jobless Claims "surprised" economists by moving back up, after falling last week... 627,000 unemployed Americans filed for unemployment claims last week... No "green shoots" here! In fact... We need to see if we can use these so-called Green Shoots that the President and Big Ben keep talking about, for ethanol... They've got to be good for something! HAHAHAHAHAHAHAHA! I must say that a reader gave me that line!

And here's Warren Buffett on Green Shoots... "I had a cataract operation on my left eye about a month ago and I thought maybe now I'll be able to see green shoots. We're not seeing them. Whether it's retailing, manufacturing, wherever. We have a big utility operation. Industrial demand is down like we've never seen it for a simple thing like electricity. So it hasn't happened yet. It will happen. I want to emphasize that. But it hasn't happened yet."

And... Then... There was this... A good story to end the week and head to the Big Finish with...

Barclays Capital Inc. (Barclays) the world's third largest currency trader, have lowered their one-year forecast for the dollar, saying foreign investors will reduce their purchases of U.S. assets... Barclays referred to the dollar's status as "safe-haven paradise lost", due to the ballooning fiscal deficit and the printing of money by the Central Bank... Barclays believes that the euro will be trading at 1.50 in a year...

Hmmm... Nothing new there for Pfennig readers, but, I always find it to be good to see others with their BIG research departments, no divisions, yeah, divisions, that's bigger than a department! Wait, get back on track, here Chuck! Yes, the Big research divisions, that finally come around to what little old me has been saying for months now... Oh! And that "little old me" has just got to crack up any one that knows me, and have seen me lately!

And one more thing... Oil is back to $71 this morning, as there has been more problems in Nigeria... Let's hope these problems go away!

Currencies today 6/26/09: A$ .8055, kiwi .6450, C$ .8710, euro 1.4085, sterling 1.6490, Swiss .9210, rand 7.9680, krone 6.4250, SEK 7.8125, forint 196.20, zloty 3.1975, koruna 18.50, yen 95.40, sing 1.4540, HKD 7.75, INR 48.21, China 6.8338, pesos 13.18, BRL 1.9420, dollar index 79.86, Oil $71.07, 10-year 3.55%, Silver $14.25, and Gold... $945.65

That's it for today... Well... Today marks the 2-year anniversary of the surgery that removed my cancer ridden femur, and replaced it with a prosthetic. Quite an ordeal, but... Here I am! Rock you like a hurricane! Oops, sorry, got carried away there! I'm so happy that's behind me now! Well... Michael Jackson has died at 50 years old... When I think of Michael Jackson, I just remember my two oldest kids, playing that Thriller album over and over again. The heat wave over us continues, but is expected to back off next week... My little buddy, Alex, turns 14 on Sunday. WOW! We began a tradition when he was quite young, of the two of us going to breakfast on his birthday. Two years ago, when I was in the hospital, my darling daughter, Dawn, brought Alex to the hospital with breakfast, so we could continue the tradition. I hope I can continue celebrating with him for many years to come. So... Happy Birthday Alex! Real long time readers might recall when Alex was 3, and would sit on my lap as I wrote the Pfennig from home, and every once in awhile the text would look like this... 9087lkndy7, and I would say, "sorry, Alex is helping me again"... Alex has already made me aware that he can get his drivers permit next year... YIKES! OK, time to head off into the sunrise... (not sunset, as I'm writing at daybreak, HAHAHAHA) The currencies are having a Fantastico Friday, so why don't we joining them?

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

Increasing SDR Issuance...

Chuck Butler — Thu, 25 Jun 2009 15:17:40 GMT

.........But First, A Word From Our Sponsor..........
The Ultra Resource Index CD: 6 foreign currencies, 1 unique opportunity

The Ultra Resource currencies (each is equally represented in the CD):

*Australian dollar
*Canadian dollar
*Hong Kong dollar
*New Zealand dollar
*Norwegian krone
*Singapore dollar

EverBank is a Member FDIC and Equal Housing Lender.
......................................................

In This Issue..

* Fed confuses markets, risk assets get sold...
* SNB intervenes to stop franc's rise
* ECB issues 12-month liquidity...
* Bernanke to get grilled?

And Now... Today's Pfennig!

Increasing SDR Issuance...

Good day... And a Tub Thumpin' Thursday to you! Yes, I know the currencies and commodities got whipsawed yesterday, and my Cardinals got spanked, but that's no reason for us to not enjoy a Tub Thumpin' Thursday! Every day is a gift, and it has nothing to do with stocks, bonds, currencies, and commodities!

OK... Not that I try to be philosophical, sometimes it just comes out that way! Besides, you don't want to think that I'm just a smart *** all the time! HAHAHAHAHAHA!

Well, as I said in the open, the currencies and commodities got whipsawed yesterday, and the culprit was the FOMC minutes... You see, the Fed Reserve met to discuss rates, and other items. And what they said just blew away the bond vigilantes, and really ticked off the Hawks, but in the end, what they said, was really that things will remain status quo...

Their announcement of bond buying didn't measure up to what the bond folks wanted to see, and their announcement that interest rates won't be going up for some time, didn't measure up to the inflation Hawks, who wanted a comment about fighting inflation. Instead, what they received was more Alfred E. Newman on inflation... "What, me worry?" That's how ridiculous their statement was folks... The Fed still looks for inflation to "remain subdued for some time"... Although... Their outlook for the economy was slightly upbeat...

So... If your confused about what the Fed is thinking... Then join the rest of us! The markets spent the day trying to sort it out, and when it was all said and done, they couldn't, so they sold risk assets... So... The 1.41 level the euro enjoyed yesterday morning when I signed off, is now 1.3945...

On top of all this, the Swiss National Bank (SNB) has issued a communiqué' that talks about their "new aggressiveness" toward Swiss franc strength. Now, isn't that just one of the most ridiculous things for a Central Bank to say about it's currency! Would someone over there at the SNB, please think about what you're saying!

Oh well... This is all I'll say about the SNB... It's hard to soar with the eagles when you have to work with a bunch of turkeys! OH! And it's also reported that this "aggressiveness" showed up as intervention by the SNB yesterday... They sold francs in the markets... UGH!

OK, let's get back to the Fed, and their bond purchase program / Quantitative Easing / monetizing the debt / money printing... It's all the same... Oh, one more thing, it's the road to ruins, but don't let that get in the way of the Fed Party! You see, the Fed didn't announce anything this time, because all the world was watching and waiting for them to announce a "mega-buying program"... I told you earlier in the week to NOT expect the Fed to announce any changes to their road to ruins at this meeting, but instead the August meeting, when during the dog days of summer, when almost every #1 trader on earth is on vacation...

So... The bond vigilantes who want bond yields low realize, with the amount of supply that the Treasury is issuing these days, that the only way to get those lower yields is to have the Gov't buying bonds!

I came across something yesterday, that I yelled across the desk to make certain everyone knew... Recall at least a month or so ago, I told you how China had called for a new reserve currency, replacing the dollar with SDR's (special drawing rights), which would be a basket of currencies. This news received a ton of publicity... But one thing that didn't receive a ton of publicity was the fact that President Obama agreed at an economic summit in London that SDR's should now be used to help stabilize the balance sheets of nations struggling to combat the current crisis.

Now... On the outside that looks harmless right? Just helping these struggling nations... But! Could this also be a baby step toward a global currency? Could this be a baby step toward a further devaluation of the dollar, and it's signed off on by the President?

OK, now here's the thing that really caught my eye... The IMF is going to issued $300 Billion worth of SDR's. That's 10 Times... That's right, I said 10 Times the amount of SDR's that CURRENTLY EXIST!

Could this be the facility for China to quietly exchange dollar reserves for SDR's? Come on! Somebody has got to see this the same way I do!

I mean, it was just LAST WEEK, that the countries of Brazil, Russia, India and China (BRIC's) called for a "more diversified international monetary system?" Why, yes, Chuck, it was... Just last week! And then this week, the IMF "just happens" to be issuing 10-TIMES the amount of SDR's that CURRENTLY EXIST! Hmmmm...

I probably should stop there... I'll be accusing people of all sorts of things if I continue on this path... But there's some food for thought, eh? You won't see this on TV... They have more important things to show you and talk about, like... The President killing a fly! That's a really sad thing, to think that our news has come to that!

OK... New Home Sales for May dipped lower, but the inventory of homes for sales also dipped... And, we got the surprise of year when Durable Orders for May showed an unexpected and very strong gain of 1.8%... While I think this is wonderful news, I have to question it... I mean, with the automobile industry basically shut-down, one would think this number to be quite lower... However, I'm told... That non-defense aircraft orders more than offset the auto losses. OK, so, this is NOT a green-shoot folks... This is a One-and-done!

OH! And to follow up on yesterday report regarding Existing Home Sales... I totally forgot to mention that Foreclosure Sales are soaring, and thus a big part of the rise in Existing Home Sales... So, no green-shoot here either!

Today, we'll see the Weekly Initial Jobless Claims, and... The Final print of 1st QTR GDP, which will remain at -5.7%...

So, once again, not much on the data watch for today.

Before I go to the Big Finish... I want to follow up on the news I wrote about yesterday regarding the European Central Bank's (ECB) EUR 300 Billion injection of liquidity out 12-months... The total came in at a higher figure than that, at EUR 442 Billion... Still, much lower than the forecasts, which had seen some call for a number as high as EUR 1 Trillion! And... This morning, the Eurozone announced that Industrial Orders fell 1% in April... So that data isn't helping the euro any either!

And then there was this from the NY Times this morning... "The U.S. House Oversight and Government Reform Committee will question Federal Reserve Chairman Ben Bernanke about his role in Bank of America's acquisition of Merrill Lynch. While Republican lawmakers are launching an attack on Bernanke, who is Republican, Democrats are defending him."

Man, is that all mixed up! But... A week ago or so, we were getting reports about the Bank of America (BOA) purchase of Merrill Lynch... And now, nothing, absolutely nothing, say it again! Any wonder why? Well, maybe it will come out in the U.S. House Oversight and Government Reform Committee questioning, although I doubt it...

And the State of California... The largest economy in the U.S. and in the top 7 economies of the world (used to be 7th, but with their recession, who knows?), announced that they were going to pay their bills with IOU's... The state's controller said. "Next Wednesday, we start a fiscal year with a massively unbalanced spending plan and a cash shortfall not seen since the Great Depression."

And... The Fed believes the recession is easing? Hmmm... Maybe they are too far away from the California books and records!

I'm on a roll here, somebody stop me! OK, I'm stopped!

The Treasury will auction $27 Billion of 7-year Treasuries today... Just keep the supply spigot open must be the Treasury's motto these days!

Currencies today 6/25/09: A$ .7955, kiwi .6360, C$ .8605, euro 1.3940, sterling 1.6280, Swiss .9095, rand 8.0775, krone 6.5170, SEK 7.9350, forint 199, zloty 3.24, koruna 18.72, yen 96.40, sing 1.4575, HKD 7.75, INR 48.65, China 6.8345, pesos 13.27, BRL 1.9705, dollar index 80.78, Oil $69.05, 10-year 3.69%, Silver $13.86, and Gold... $934.20

That's it for today... Draggin' the line today, late night with my little buddy Alex's baseball game. A ringing double and single with two RBI for Alex last night, in his last game of the year. HEY! How about the U.S. National Team, beating Spain in soccer / football? WOW! It's been a while since the U.S. beat a ranked national team. So good for them! No breakfast sandwiches today for the boys and girls, as out little Christine is on holiday... Yay for her! She normally picks them up and I buy, but I forgot to do both this morning! UGH! 11-0 spanking by the Mets last night, leaves the Cardinals only 1 game in front in their division... Well... I'm going to attempt to have a Tub Thumpin' Thursday, I hope you do too!

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

More Stimulus On The Way?

Chuck Butler — Wed, 24 Jun 2009 14:53:55 GMT

.........But First, A Word From Our Sponsor..........
The Ultra Resource Index CD: 6 foreign currencies, 1 unique opportunity

The Ultra Resource currencies (each is equally represented in the CD):

*Australian dollar
*Canadian dollar
*Hong Kong dollar
*New Zealand dollar
*Norwegian krone
*Singapore dollar

EverBank is a Member FDIC and Equal Housing Lender.
......................................................

In This Issue..

* Euro leads currencies higher...
* Commodities rally back on FOMC thoughts...
* FOMC meeting today...
* NZ Consumer Confidence on the rise...

And Now... Today's Pfennig!

More Stimulus On The Way?

Good day... And a Wonderful Wednesday to you! Well... Yesterday, the title of The Pfennig was: So Far... It's A Turn Around Tuesday! And... That theme played well throughout the day, and by day's end, it had been quite the Turn Around Tuesday! Now, we have to see what's in store for us today, as the last couple of weeks have seen the Wednesday trading quite the opposite of Tuesday's trading! Strange trading pattern don't you agree?

Overnight, the euro climbed as high as 1.4140, only to sit at the cusp of 1.41 as I begin to write this morning. Of course 1.41 certainly looks a lot different from the 1.35-1.40 range we've seen in recent days. But then, we've seen these probes above 1.40 before only end with the euro falling back to the 1.35-1.40 range again...

I would imagine that the thing weighing heavily on the euro to bring it back to 1.41 and now a little below that figure is the news that the European Central Bank (ECB) had allocated EURO 300 Billion in 12 month funds for liquidity... I think any sell off from this announcement is strictly a knee-jerk reaction to the announcement. But when the dust settles and the traders / investors realize that EU 300 Billion is far less than the numbers that were rumored (some as high as 1 Trillion euros), this knee-jerk reaction will slow...

One of these times it will shake the cobwebs off, and proceed to either move higher, or lower than the established range... For now, I would have to think that given the sentiment in the market that's growing toward anger with the U.S. deficit spending tactics, the move would look to go higher... But, who knows? I can only look at things from a fundamentals viewpoint and from 17 years experience trading currencies...

Once the euro got going, or the Big Dog got off the porch, the other currencies (little dogs) were also on the rise VS the dollar... And Commodities, after spending Monday circling the bowl, came back with a vengeance! And we all know that when the Commodities rally, so do the Commodity currencies of Aussie, kiwi, Canada, Brazil, and South Africa!

Speaking of Brazil... Recall when I told you that this currency can give you whiplash? The volatile, wild swings in the currency are enough to make someone request oxygen! So, after a day (Monday) that saw the Brazilian real move back above "2", it was posted the best performance of any currency on earth, on Tuesday!

Brazil's real had its biggest gain in more than a month, as Commodities rallied, and... The currency also bounced back after investors "overreacted" yesterday to speculation the Central Bank will intervene to keep the real at "2"... The real gained 2.7 percent, the best performer in the world and its biggest gain since May 4, to 1.9794 per U.S. dollar.

The real has gained 17 percent this year, the best performance among the 16 most-traded currencies, as commodities rallied.

One thing that helped the Commodities rally yesterday was the fact that it finally "occurred" to traders and investors that the Fed's FOMC meets today, and will probably signal that interest rates will be held to near zero in the U.S. for the rest of the year.

Now... Why would that be a feather in Commodities' hat? Ahhh, grasshopper... You have to remember that the underlying fear in the markets is that the Fed will NOT be pro-active in removing their stimulus when inflation begins to knock at the door... And making a statement that interest rates will remain near zero for the rest of the year, simply makes those fears even stronger... And what will people flock to when inflation is racing toward double digits?... Commodities...

Of course, tomorrow will be a different story should the Fed not make an interest statement like that!

I listening to the radio, while I write... And the song that's playing is Elton John's "Friends", which was the theme song of my senior prom! Now, that's a really old song!

OK, I'm back now... See how my fat fingers decide to start typing things that pop into my mind?

So, the Fed's FOMC is today... I just can't see them doing anything but trying to calm the markets' fears about inflation, while keeping rates Steady Eddie. You all know that I'm not a fan of the Fed... I just don't see how a entity, who's main job is to protect the value of our currency, could keep their job, given the fact that the dollar has lost over 90% of its value since they took over! I mean, the Fed is NOT a Gov't Agency, folks... It's supposed to be an independent entity... But now, it's got it's hands in all kinds of things that aren't on their job description, and they are in cahoots with the U.S. Treasury, and before we know it they will be regulating all the banks and financial institutions... All, from doing such a good job at protecting the value of the dollar! I shake my head in disgust... And I should NOT be the only one doing so!

So... While I'm on my soapbox, and ranting at the Fed, and the people making the decisions... Big Ben Bernanke is up for reappointment... I think the thing I would like to see from Big Ben before I would reappoint him is for Big Ben to come out and say... "I'm in favor of Ron Paul's Bill to audit the Fed" Now, that would cause me to fall out of my chair from the shock of disbelief!

Speaking of the bill to "audit the Fed" I believe every voting citizen should contact their representative and let them know you support the bill to "audit the Fed"...

And... While I'm up here on the soapbox, I might as well get this rant off my chest too... Well folks... I think we're in for yet another stimulus package... yesterday, during a press conference the president was asked about that very thing, and his reply was not a resounding "NO"... it was a "not yet"...

Now you know me... I said after the first $150 Billion in the spring of 2008, that there would be more... and I said after the $787 Billion this past winter, that there would be more... and does a "not yet" from the Gov't that loves to spend money, give you a warm and fuzzy that there won't be another one? I didn't think so!

Yesterday, the data cupboard gave us Existing Home Sales data... For the second consecutive month, sales of previously owned homes in the U.S. increased, but the improvement was less than expected, further fueling fears of a slow, weak recovery for the economy as a whole... And the most important thing from the report is that the Home Sales were driven by two things... A drop in home prices... The median price for an existing home last month was $173,000, down 16.8% from $207,900 in May 2008. And... The low mortgage rates that existed up until about 3 weeks ago... Mortgage rates have climbed back above 5% (remember when we thought that was a low rate?) and the message that I'm getting is that mortgage lending is drying up once again... Most of the lending had centered on re-fi's any way, not Home Sales...

Hey! Remember earlier this month when the Jobs Jamboree number printed and everyone (except those that knew better because of the BLS) was celebrating? Well... I saw a piece on Reuters last night that caught my attention... Mass layoffs -- at least 50 job losses by a single employer -- grew to 2,933 last month, from April's 2,712, the U.S. Labor Department reported. That is practically a tie with March's figure, which set a record. Hmmm... That certainly paints a different picture of the labor market than the BLS Jobs Jamboree now doesn't it?

The Data cupboard will also give us the latest readings on Durable Goods (don't expect miracles here!) New Home Sales (no miracles here either!) and then the FOMC... The U.S. Treasury will also be auctioning $37 Billion of 5-year Notes today... Good luck!

Down in New Zealand... Consumer Confidence surprised to the upside, and is helping to boost the kiwi performance this morning... These are "index" numbers so they probably don't make much sense on the outside... Just look at them as "better"... New Zealand Consumer Confidence rose to an 18 month high in 2nd QTR from 96.0 to 106. Optimism about near term prospects improved from -57 to -28.

And finally... Gold and Silver have taken some tough shots to their respective mid-sections this week... I even said to Chris Gaffney yesterday... "Silver sure is tempting below $14, isn't it?" I'm reminded of an old saying we use to have on the Margin Desk in my early years in the brokerage business... Just input the asset and price to make this saying work... For instance, we'll use Silver... "Hey! If you liked Silver enough to buy it at $15, you'll Love it at $13.98!"

Of course, I personally don't expect Gold and Silver to remain at these bargain basement prices too long, but then that's just my opinion, and according to the Legal Beagles, I have to say that I could be wrong!

Currencies today 6/24/09: A$ .8010, kiwi .6435, C$ .8740, euro 1.4085, sterling 1.6585, Swiss .9320, rand 8.0830, krone 6.4120, SEK 7.85, forint 197.30, zloty 3.2180, koruna 18.56, yen 95, sing 1.4525, HKD 7.75, INR 48.52, China 6.8330, pesos 13.28, BRL 1.9790, dollar index 78.75, Oil $68.77, 10-year 3.64%, Silver $13.92, and Gold... $928.40

That's it for today... The Heat Wave continues here... But, like I told someone yesterday... Hey! It's summer, it's supposed to be hot! When I was a young man playing my guitar around the country out of VW micro-bus, I built in-ground swimming pools as a day job. In Oklahoma! Now talk about a HOT job! YIKES! I know there are hotter jobs, but that was the worst for me! Nice game last night for my beloved Cardinals... And, my little buddy, Alex, has his last baseball game of the year tonight. At least it is an 8:15 game! Well, the doctor visit yesterday was interesting... He's happy that I've done so well... But the honeymoon on the weight is over according to him! Of course, I have no idea what's he's talking about! HAHAHAHAHA! Let's get this going... I hope you have a Wonderful Wednesday!

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

Magical Currency Tours!

Chuck Butler — Thu, 04 Jun 2009 15:26:08 GMT

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In This Issue..

* Currencies get whacked by Geithner!
* Big Ben wants the budget deficit cut!
* BOE and ECB meetings today...
* I told you this was going to get ugly...

And Now... Today's Pfennig!

Magical Currency Tours!

Good day... And a Tub Thumpin' Thursday to you! Yes... Tub Thumpin' because I said so! Yesterday was absolutely a 10 on the crazy meter, and We the People, just continue to sit and take whatever the Government and media tell us is "best for us in these uncommon times"... I've got some interesting words on this later in the letter... It's time for me to get on my soap box once again, so... At least I've prepared you! But first... Some currency news!

Well... Yesterday, I left you with the thought that the currencies were selling off, after the Asian Central Banks all made statements regarding their support of the dollar as the world's reserve currency... Here are some further thoughts on that...

Roll up, roll up to the Mystery Tour... The Magical Mystery Tour is waiting to take you away, Waiting to take you away.

Yes... U.S. Treasury Sec. Geithner's Magical Mystery Tour, which should be re-named the Magical Currency Tour! OK... Remember yesterday I told you about the Asian countries of S. Korea, India and Japan all made comments regarding the U.S. dollar as the world's reserve currency, etc, etc. Well... Now we know more about why they all decided to make favorable comments about the dollar on the same night! They were behooved to do so by Geithner!

Well, at least the dollar bulls have a someone that they can get all excited about! But, the jury is still out on whether or not Geithner's Magical Currency Tour, will last very long... But yesterday, it carried a lot of weight! The currencies lost some major ground yesterday, as it certainly looked like a coordinated effort to pick the dollar up from the canvas, after spending 3 months in the ring with Rocky Marciano!

Because... In addition to Geithner's Magical Currency Tour, we had Big Ben Bernanke on "the hill" telling lawmakers to "cut the budget deficit"... And the markets reacted as if... As if the lawmakers could do something about the budget deficit train that has already left the station! But the markets did react, and react favorably for the dollar...

Hmmm... You don't think that... Nah... I don't want to say it, because the last time I did, I got ambushed on that cable station that I refuse to mention by name! But this all smells of yesterday's fish! So, I'll just keep it as I said... That it was a coordinated effort to pick the dollar up from the canvas...

So... The Big Dog, euro, was sent back to the porch, and chained to the porch column. The euro, which had traded up to 1.4320 on Tuesday, saw those gains and previous gains wiped out yesterday, as the single unit was pushed back to 1.41 and change... The rest of the little dogs followed the Big Dog back to the porch, and their kissin' cousins Gold and Silver got taken to the woodshed!

But if you think that the move in euro was wild... You should have been in the driver's seat here on the currency desk to witness the move in the Emerging and Commodity currencies! (Aussie, Brazil, South Africa, kiwi, Canada) Yes, they outperformed every other currency on the way up, and when the tables were turned, they led the way to underperform / lose more ground than every other currency! UGH! But... Hey! Didn't I warn about these Emerging Markets as being volatile? You have to strap yourself in, and remember to keep your arms and legs inside the car at all times!

The euro had recovered a bit overnight, moving back to a 1.42 handle, but once again has given that up, as the European Central Bank (ECB) is meeting as I write. The inner struggles at the ECB have really weighed on the euro the past two days... In Blue corner, we have the likes of Spain and Italy that want, and think they need, Quantitative Easing, along with further rate cuts. In the Red corner, we have Germany's central bank, the Bundesbank, and they want neither! Let the markets be! Is their mantra... And I have to say, that I agree with the Bundesbank!

The ECB President, Trichet, has his hands full of Big Babies, whining about this, that, and the other thing, but mostly about how the "other Central Banks are doing Quantitative Easing." If I were Trichet, I would use the line I've always used with my kids, when they would tell me that the other kids were doing something... "But don't you want to be better than the other kids?"...

And, so... Trichet should tell the likes of Spain and Italy that the ECB wants to be better than the rest of the kids / Central Banks!

Unfortunately, I'm not convinced that Trichet has the intestinal fortitude to do that... So... The Quantitative Easing question hangs over the euro like the Sword of Damocles this morning... What's it gonna be boy? Spain and Italy or Germany's Bundesbank that wins this tug-o-war!

The Reserve Bank of Australia (RBA), who earlier this week, kept their interest rates steady as she goes, warned the other central banks that cutting rates too low was dangerous... RBA Gov. Stevens said, "policy makers must be cautious about lowering borrowing costs too far. Cutting interest rates further may be counterproductive as that might encourage some borrowers to take on debt they can't afford."

The Bank of England (BOE) is also meeting this morning... Not much can come out that meeting, as they've already cut interest rates to the bone, and implemented Quantitative Easing measures.

Getting back to the ECB meeting... I think the markets are going to be looking for any indication from Trichet that the ECB is "uneasy" with the recent upward moves of the euro. If he doesn't mention it, the euro gets to go past "Go" and collect its $200... If he does mention it, the euro will not get to pass "Go" , not get to collect its $200, and go straight to jail... Let's hope it has a Get Out Of Jail Free Card!

I think it does, and it's called being the offset currency to the dollar... But some pain will have to come before it gets played...

And here's one of the reasons I think the Get Out Of Jail Free Card will get played is the fact that the deficit spending in the U.S. recently got some very bad news, that you won't hear on the TV news... Here's the skinny...

The budget Deficit this April was $20.9 Billion, the first deficit in this "tax-paying" month in 26 years! Can you imagine that? In April when taxes are paid, we recorded a deficit? That's pretty amazing folks... April 2009 tax receipts dropped 44% compared with those in April 2008. OK... I also read where the money collected by taxes is only going to cover half of the fiscal 2009 federal budget, requiring the government to borrow and print more than $1.8 Trillion to fund it. And that's not the end of it... There are equal-sized deficits looming for fiscal year 2010 onward. (read entitlement programs) Tax receipts fell 50% during the Great Depression. Now eight months old, this depression is already rivaling that drop!

Did you know that we as a country were in the red during April? Do I have to tell you what's next for Jean and Joan and who knows who? Higher Taxes! You won't hear the lawmakers running around screaming that they need to cut Government spending! Instead, you'll hear them screaming that they need to increase revenue! HEY! Cut the spending Jack!

Bill Gross, founder of Pacific Investment Management Co (PIMCO), is advising holders of U.S. dollars to diversify before Central Banks and sovereign wealth funds ultimately do the same amid concern about surging deficits!

You know... Bill Gross is like the old E.F. Hutton commercials (sorry youngsters, this will go right over your heads!) When Bill Gross talks... People listen! I suggest you do too! Here's more, from Bill Gross speaking about Geithner's statement to the Chinese about shrinking the budget deficit... "I think he'll (Geithner) fail at pulling a balanced rabbit out of a hat. They are talking about, once the economy in the U.S. renormalizes, the move back toward balance or much less of a deficit. I suspect that will be hard to do."

Big Ben Bernanke was right on one thing he talked about yesterday... And that is "a prolonged deficit will choke economic growth"... He said it! But, that's almost like me saying it... He can't do a think about the deficit, and neither can I! He can try to be influential, I can't even do that! So... I just think Big Ben is seeing the writing on the wall, and wants to be able to point out in a few years, that he "told lawmakers to cut the budget deficit, and they didn't listen to him, see how smart I was!"

OK... Now, I saw some news flash across the TV yesterday that just made my blood pressure rise quickly... OK... Remember when I told you that the Gov't owning banks was a baaaaaaaaaddddddd thing? Recall me telling you how banks would be directed by lawmakers to make loans in the lawmaker's districts, when it would not meet the Bank's requirements for a loan? This among other things would be very bad...
Well... Skip ahead to the Gov't bailout of carmakers... Guess what? The lawmakers are going after the carmakers for closing dealerships in the lawmaker's districts! That's right... It's happening right now! Let the Gov't put their foot in the door, and, the next thing you know, the Gov't is making out your grocery list and telling you where you can shop!

Well... As usual, I hold the Pfennig from going out on these first Thursdays of a month, to see if I can include the results of the BOE And ECB meetings. I usually get the BOE in before hitting send, but being an hour later, the ECB meeting get left out until tomorrow. And... Here it is! Talk about timing! The BOE kept rates unchanged and refrained from expanding their Quantitative Easing, like the Fed Reserve did at their last meeting. This should be constructive to sterling... But you never know with these crazy markets these days! OK... So onto the Big Finish!

Currencies today 6/4/09: A$ .8025, kiwi .6325, C$ .9020, euro 1.4140, sterling 1.6350, Swiss .9340, rand 8.0775, krone 6.2925, SEK 7.6320, forint 203.40, zloty 3.1960, koruna 19.05, yen 96.60, sing 1.4430, HKD 7.7515, INR 47.17, China 6.8336, pesos 13.35, BRL 1.9645, dollar index 79.43, Oil $67.15, Silver $15.32, and Gold... $968.60

That's it for today... A wild day yesterday, let's hope for some semblance of calm today! I forgot to tell you yesterday about my time with my beautiful granddaughter on Tuesday night... Her and I sang "you are my sunshine" together... Just like her momma used to do when she was a little girl. I would pull out my guitar, and Dawn would immediately want to sing with me. She liked "sunshine", but her favorite was an old Hank Williams song, Hey Good Lookin'! Sappy stuff, I know... But after all the hootin' and hollerin' I do about things, this is the stuff I do when I get home! No one there wants to hear me talk about this stuff, as they've heard it for years! And the neighbors? They all change the subject as fast as lightening! So... My dear readers get all my thoughts, aren't you lucky? HAHAHAHAHAHAHA! OK... Gotta go... I hope your Thursday is Tub Thumpin'!

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

May Day empties the trade desks...

Chuck Butler — Fri, 01 May 2009 15:27:48 GMT

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In This Issue..

* May Day empties trade desks...
* Chrysler declares bankruptcy...
* SEC to investigate Paulson and Bernanke??
* China continues to grow...

And Now... Today's Pfennig!

May Day empties the trade desks...

Good day...and Happy May Day to everyone. Most associate May Day with the Soviet Union, where the communists turned it into a 'celebration of the worker'. But its origins are actually in central Europe where it developed from a combination of several pagan holidays celebrating the end of winter in the Northern Hemisphere. It never really took flight in the US, but is still a popular holiday in most other parts of the globe. With the way our government has been using tax payer funds to take over struggling companies, May Day could become a larger holiday here in the US also! Most of the trade desks throughout Europe are closed today, and many of the traders left early yesterday, so the currency and metals markets were pretty quiet.

The big news in the US yesterday was the announcement that Chrysler had filed for a 'precision' bankruptcy and would be shutting down all of its plants temporarily in order to reduce an inventory overhang. Unfortunately, I heard this morning that both Chrysler plants here in St. Louis would be closing for good, with Chrysler looking to sell them off to pay down debt. It is definitely a sad day for the thousand Chrysler workers here in St. Louis. I received a call from a reporter from Reuters shortly after the announcement, asking me how it was affecting the currency markets. In short, it had no impact whatsoever, as traders were already shutting down for the holiday, and the news has been pretty much baked into the market for some time.

The closing of the Chrysler plants will add to the already large number of unemployed workers here in the US. The weekly jobless data, released yesterday morning showed a slight improvement in weekly claims from an adjusted 645k to 631k. But the continuing claims just kept on growing with close to 6.3 million 'officially' out of work. Other numbers released yesterday included the Personal income and spending data which both dropped slightly more than economists' estimates. This was the first drop in purchases this year, and offsets the big jump in consumer confidence which we saw at the beginning of the week. Employment continues to be a drag on the US economy, and with yesterday's announcement by Chrysler, bad news just keeps rolling in for US workers.

The one positive out of yesterday's data is that the savings rate improved again and not stands at 4.2%. This number won't be welcomed by the administration, who would much rather see consumers borrow and spend to pull us out of recession; but I think the increasing savings figure is just what the US economy needs. While still a long way from the double digit savings rates in Asia, the 4.2% is a huge improvement from a year ago, when the US savings rates was zero. Again, an increase in the savings rate won't speed up the recovery (in fact it will probably slow it down a bit), but it is vital to the long term health of the US economy. Now if we could just get our government to start tightening their belts.

The Federal Reserve announced that it would be postponing the release of stress tests on the biggest US banks, originally scheduled for May 4th. I have been meaning to write about these stress tests the past few days, but have run out of room. With the holiday in Europe, today is a perfect day to dig into the subject.

There have several leaks of the results which apparently illustrate a shortfall of capital for both Bank of America and Citigroup. The Wall Street Journal ran an article on Tuesday which indicated BOA was looking at a shortfall in the billions of dollars. Now the results of these stress tests are being withheld from the public while executives at each of the banks debate the findings with examiners. The fear is that the stock prices will fall dramatically if the results are made public. But wait a second, aren't the US taxpayers major investors in all of these banks now? Don't you think we have a right to see the results before executives get a chance to 'dress them up'?

The additional capital will likely come in the form of converting preferred shares held by the US government into common shares. This will allow the administration to avoid going back to congress to ask for additional funding for these institutions. US taxpayers are in no mood to continue to throw money down the bottomless pits of these failed institutions, so the administration will look for ways to support them without having to go back to Congress for approval. This is just further proof of the cozy relationship between Wall Street and the Treasury department.

Chuck wrote about this cozy relationship last week when he pointed out the questionable tactics former Treasury Secretary Paulson used to force the Bank of America to merge with Merrill Lynch. The Securities and Exchange Commission Chairman Mary Schapiro called the decision by Paulson to exclude the SEC from the talks 'troubling'. According to then BOA Chairman Ken Lewis, the Treasury and Fed pressured him to complete the deal for Merrill, and to withhold details about surging losses from BOA stockholders. The SEC is now investigating whether those involved violated laws by not being truthful and transparent. Sure seems like a clear case of wrongdoing to me!! But does anyone really think the SEC will go after Paulson and Bernanke? Nope, they will claim that they kept everything hush hush for the benefit of the country, and the whole affair will likely be swept under the rug.

For his involvement in this sordid affair, Ken Lewis was ousted from his duties as chairman of BOA at the annual meeting on Wednesday. I guess he just didn't have enough friends on Wall Street! The Chairman of Citigroup, Bikram Pandit, sure did. He was compensated $38.2 million in 2008 according to a report from the AP. Unbelievable!

The Japanese yen continued to drop yesterday as investors moved back into higher yielding currencies. The Japanese jobless rate surged to a four year high in March, and consumer prices fell for the first time in 18 months indicating the Japanese economy is continuing to wallow in a state of stagflation. Japan's economy won't recover anytime soon, and when it does start growing, the recovery will likely be weak.

China, on the other hand, looks like it is headed for a much faster recovery. Manufacturing in China expanded for a second month as the government stimulus spending seems to have kicked in. Stronger Chinese demand is helping the exporting nations of Australia, Canada, and South Korea. Goldman Sachs now predicts China's economy will grow 8.3% in 2009, just above the government's target of 8%. It certainly looks like China will lead the world out of this recession, with internal demand in China taking the place of lost demand in the US and Europe. All data indicate China's economy will continue to recover, as the economy appears to have bottomed last last quarter with a 6.1% growth in GDP.

The Australian dollar gained again overnight, and headed for its ninth weekly gain vs. the US$ on the good news out of China. The New Zealand dollar also rose, reversing its recent losses after Central Bank Governor Bollard said he will keep rates low for an extended period. Both of these currencies are somewhat dependent on a recovery in the Chinese economy, and the increase in demand for commodities which will accompany it. These two currencies continue to be popular choices with our investors, as they combine a decent interest rate with the possibility of positive currency gains.

This morning we will get an indication of the state of US manufacturing, with the release of Factory orders for March and the ISM numbers for April along with April's vehicle sales numbers. I don't expect any of this data to surprise on the upside, and with trading desks lightly staffed, I wouldn't look for any major swings in the currency markets. Should be a pretty quiet Friday, so with that I will head into the currency wrap-up:

Currencies today 5/1/09: A$ .7318, kiwi .5717, C$ .8423, euro 1.3277, sterling 1.4895, Swiss .8791, rand 8.4208, krone 6.5399, SEK 8.0449, forint 216.83, zloty 3.3035, koruna 20.1634, yen 99.34, sing 1.4797, HKD 7.75, INR 50.09, China 6.8210, pesos 13.80, BRL 2.1904, dollar index 84.45, Oil $50.92, Silver $12.15, and Gold... $881.91

That's it for today... Looking forward to this weekend, as I am heading out to a friend's farm with my teenage son to see if we can get him his first turkey. Turkeys are a real challenge, as they have incredible eyesight and always seem to spot you before you see them. They say if a turkey could smell, you would never be able to get near them. Brendan is convinced this is the year he gets his first gobbler. It is supposed to rain most of the weekend, but the weather predictions haven't put a damper on my son's excitement. I just hope the turkeys show up! 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

High yeilders continue to rally...

Chuck Butler — Mon, 23 Mar 2009 13:47:52 GMT

In This Issue..

* High yeilders continue to rally...
* Quantitative easing drives the markets...
* Inventories to drive inflation...
* Happy Birthday Chuck...

And Now... Today's Pfennig!

High yeilders continue to rally...

Good day... I'm back from a long vacation with the family down in Florida, I had a great time but it actually feels good to get back to work. But before I get started this morning, I want to compliment Mike on what a fantastic job he did on the Pfennigs while Chuck and I were in Florida. Mike jumped right in and cranked out some great information, setting the bar rather high for me. We have a busy week ahead of us, so better get right to it.

Currency investors continued to pull out of the dollar and move funds back into higher yielding currencies on Friday. The best performing currencies on Friday were the higher yielding commodity based currencies of Australia, New Zealand, and South Africa. Investors were eager to move money back into the higher interest rates available in these currencies as markets began to stabilize. With the Feds announcement last week that it will buy $300 billion of US government bonds, deflation is now a thing of the past. This purchase by the Fed monetizes the debt, basically pumping the cash directly into the markets. It is the most inflationary action the Fed can take, Bernanke has now put the printing presses in high gear. With deflation no longer a worry, commodity currencies have begun to look attractive again.

The Norwegian Krone was one of the top performers last week with investors looking to move funds back into this country which should benefit from the rising inflation. With oil moving back up, investors began to move back into the Norwegian Krone. But the Norwegian Krone has more than just oil going for it. Norway has solid economic fundamentals and a fully funded pension system, two of the main reasons it continues to be a currency which should be in everyone's portfolio.

Quantitative easing is what drove the currency markets at the end of last week, as Federal Reserve Chairman Ben Bernanke continues to try and drive down interest rates here in the US. As Mike wrote last week, Bernanke continues to do everything he can to drive interest rates down.

Today US Treasury Secretary Timothy Geithner will announce details of his plan to buy up to $1 trillion dollars worth of toxic assets from the banks who own them. His plan is to form a private/public joint venture to bid on these toxic mortgage assets, creating a 'market' for them and getting them off of bank's balance sheets. His hope is that with these assets removed, the banks will be able to start lending again. "By providing a market for these assets that does not now exist, this program will help improve asset values, increase lending capacity by banks, and reduce uncertainty about the scale of losses on bank balance sheets," Geithner said in an op-ed piece published in today's Wall Street Journal. "The ability to sell assets to this fund will make it easier for banks to raise private capital."

But I still question just how effective his plan will be. After all, many of the same guys who decided to buy these toxic assets are still running these banks. Will private capital rush back into these banks whose management made these incredibly bad investment decisions? And removing the toxic assets from bank's balance sheets won't help the housing market, so homeowners who are upside down in their home loans still aren't going to qualify for new loans.

But Bernanke is going to try his best to 'manufacture' a refinance boom; hoping to help homeowners pull any equity left in their homes back out and get them to start spending again. But with home prices falling in the double digits across most of the nation, homeowners who are refinancing don't have much equity left in their homes. The ATM which was the American Home has run out of cash. And doesn't Bernanke realize that this is exactly what put us into this mess? Trying to hold down interest rates at abnormally low levels sure doesn't sound like an intelligent way to get us back out of this mess.

I spoke to a reporter from the WSJ last week regarding what both Chuck and Mike wrote about the decline in inventories and the inflationary impact these declines could have. I guess my quotes hit the edit room floor, as nothing ever showed up in print, but I read another story over the weekend regarding these inventories. The story said the news about global manufacturing was so bad, it might actually be good. You see, inventories serve as a cushion between demand and production. The theory is that with inventories down, as the recovery begins, there will be immediate demand on manufacturers to crank up production.

But as I pointed out to the Wall Street Journal reporter, production will undoubtedly lag demand. While many plants are sitting idle, some of the companies who operated them are now out of business. And those manufacturers who were smart enough to weather this economic storm are going to wait to make sure demand is here to stay before ramping up production again. Also, the record unemployment means many of the workers who will be needed to ramp up this production will have to be re-hired. Some will be able to walk right back into their old positions, but many will have to be trained. Also, the supply chain for raw materials and the shipment of finished goods will take time to get back to normal. All of these delays in production meeting demand will be inflationary, as more consumers will be chasing fewer goods on the shelves. So while I agree that the low inventory levels could allow manufacturing to recover more quickly, they also increase the likelihood of a jump in inflation as the recovery begins.

China helped to ease pressure on the US Treasuries after a Top Foreign-Exchange official said they will continue to purchase US Treasuries. "Treasuries form an important element of China's investment strategy for its foreign currency reserves," Hu Xiaolian said at a briefing today. "We will continue this practice". The announcement was undoubtedly aimed at stabilizing the US Treasury market, which faced selling pressure after Premier Wen Jiabal said he was "worried" about the safety of US Treasuries last week. As we have repeatedly warned our readers, the US is dependent on China's continued purchasing of our Treasuries. Without Chinese buying, rates here in the US would move up, and the currency would drop dramatically. While the pressure may be off for the short term, China will undoubtedly look to continue to reduce their purchases of US assets, and continue to diversify their reserves.

China isn't the only country which will be looking to diversify their currency reserves out of the dollar. Chuck spotted the following story on Reuter's over the weekend, and sent it to me to include in the Pfennig. It calls into question the status of the US$ as the world's reserve currency:

'A U.N. panel will next week recommend that the world ditch the dollar as its reserve currency in favor of a shared basket of currencies, a member of the panel said on Wednesday, adding to pressure on the dollar.

Currency specialist Avinash Persaud, a member of the panel of experts, told a Reuters Funds Summit in Luxembourg that the proposal was to create something like the old Ecu, or European currency unit, that was a hard-traded, weighted basket.

Persaud, chairman of consultants Intelligence Capital and a former currency chief at JPMorgan, said the recommendation would be one of a number delivered to the United Nations on March 25 by the U.N. Commission of Experts on International Financial Reform.

"It is a good moment to move to a shared reserve currency," he said.

Central banks hold their reserves in a variety of currencies and gold, but the dollar has dominated as the most convincing store of value -- though its rate has wavered in recent years as the United States ran up huge twin budget and external deficits.

Some analysts said news of the U.N. panel's recommendation extended dollar losses because it fed into concerns about the future of the greenback as the main global reserve currency, raising the chances of central bank sales of dollar holdings.'

While we don't necessarily believe this move will happen overnight, I agree that countries will be looking to diversify their reserves.

It was Chuck's birthday yesterday, and he asked me to share the following paragraph with all of his readers:

Well, I'm sending this along to Chris on Sunday night. It's my birthday today... And I got to spend my day in the beautiful Florida sun, watching my beloved Cardinals play baseball, with my little buddy Alex, and my beautiful bride. My older kids went home on Saturday. All I'll add is that birthdays didn't used to mean too much to me, except when I was 16, and 21... But after my scare of almost 2 years ago, these birthdays mean so much more to me now, and to get to spend them the way I did today, I can only say, that I have been blessed. I thank you dear reader for another year, and will leave you with some words that my long time friend, Ed Bonawitz sent me today... "Remember, a birthday is Nature's way of telling you to eat more cake."

Currencies today 3/23/2009: A$ .6988, kiwi .5676, C$ .8105, euro 1.3642, sterling 1.4588, Swiss .8882, rand 9.4566, krone 6.3181, SEK 8.0676, forint 222.56, zloty 3.3463, koruna 19.601, yen 96.38, sing 1.5098, HKD 7.7502, INR 50.42, China 6.8332, pesos 14.083, BRL 2.27, dollar index 83.325, Oil $52.50, Silver $13.86, and Gold... 951.63

That's it for today... What a birthday present the Mizzou Tigers gave Chuck yesterday, hanging on to make it to the Sweet 16 for the first time in several years. I also want to congratulate my alma mater's basketball team, the Washington University Bears, as they repeated as NCAA Division 3 Men's basketball champions. The head coach, Mark Edwards, was my fraternity's faculty advisor during my undergraduate years at Wash. U and it is great to see his team so successful. The lady bears also made it to the finals but came up just short. Christine just came in and told me it is Chachi's birthday, so Happy Birthday to you Chachi!! Hope everyone has a Marvelous Monday!!

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

Another day for the currencies...

Chuck Butler — Tue, 17 Mar 2009 13:48:03 GMT

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In This Issue..

* Disappointing data...
* Euro held ground...
* Down under...

And Now... Today's Pfennig!

Another day for the currencies...

Good day...And a Terrific Tuesday to you. Another Monday morning has come and gone but not before confirming the US economy is still heading down the wrong side of the slippery slope. The uneventful trading day from Friday certainly didn't carry over as we saw a sizeable run up in currencies along with equities during the morning session. As the day progressed, the equity markets shed their gains but most of the currencies remained resilient and held on. I guess I'll stop beating around the bush and get right to it...

It seems that Bernanke's calming approach during his interview with 60 Minutes gave investors the feeling that we are not as bad off saying the risk of a depression has been averted. He went on to say if the government succeeds in calming financial markets, the recession will probably end this year and the economy will expand in 2010.

It might be a bit early to make that call especially amid economic data that hasn't found a bottom yet. I understand the need for some type of positive news in order to boost fragile confidence, but I don't see much in the way of a foundation to provide longer term support.

The TIC flows, or foreign demand of US assets, were absolutely terrible as foreign investors ran for the hills taking their money with them in January. Net sales of long term equities, notes and bonds totaled $43 billion in January compared with a positive $34.8 billion in December. If you bring short term securities into the picture, foreigners sold a net $148.9 billion. All of this combined with China's concern about safety of their capital does not paint a rosy picture for funding the stimulus measures here in the US. The two largest holders of US Treasuries, China and Japan, did increase holdings but no where near previous figures.

Industrial production fell for the 4th consecutive month with its 11% year over year contraction marking the most since 1975. We saw a more than expected fall of 1.4% from January and capacity utilization, which measures the amount of factory capacity in use, falling to the lowest level on record. We have PPI, some housing numbers, and a measure of consumer confidence out today so maybe these figures will give us something to be hopeful about as yesterday's numbers were making me want to pull a Rip Van Winkle and wake up when its all over.

The euro had a nice little day as it shot up to 1.3072 on the back of the equity markets morning rally and G-20 policy makers saying they would double the IMF's resources. Monday marked the 5th day of gains against the dollar and is the longest such run we have seen in the past three months. One of the biggest concerns about the euro recently has been its exposure to eastern Europe but if the IMF has the ammo to step in, those worries should begin to subside.

The euro broke through a key resistance level of 1.2990 yesterday and has some technical traders looking to 1.31 and 1.3325 as possible destinations for the currency down the road. If investor risk tolerances continue to inch upward or if inflation shows any signs of going higher, the incentive to hold dollars at virtually zero yields will begin to fade. Risk aversion, at this point, continues to be the overall market mover. As we continue to say, the euro is the offset currency to the US dollar so any movement one way or the other will appear directly in the euro.

The Australian dollar and New Zealand dollar were both trading a little higher on the day as commodities held their own providing some support for the resource rich countries. The minutes of the RBA are due out today and could provide some insight into their decision to keep rates on hold earlier in the month. The odds of a .50% cut resulting from their April meeting have gone down a bit but still remain very high. An increased degree of apprehension still exists because of the poor GDP and employment numbers that came out after the last rate decision.

The Japanese yen has remained under pressure as it sold off and was contained within the 98 handle by the end of the day. As Chuck has pointed out several times in the past, the prospects of higher appreciation to the low 90s or high 80s are wearing off and has found a home near 100 for the time being. On the flip side of the risk barometer coin, the Brazilian real rose to a one month high of 2.2565 and has become the second best performing currency so far this year. Even though we like their commodity rich attributes, the fact that it remains an emerging market commands a higher tolerance for risk.

As I came in this morning, the euro was back up to 1.30 as German investor confidence unexpectedly rose but we are starting to see some signs of profit taking from US traders first thing here today. We'll see if that trend continues as the day wears on and how the dollar reacts to the results of today's numbers right out of the gate. Its on to the Big Finish...

Currencies today 3/17/09: A$ .6598, kiwi .5288, C$ .7885, euro 1.3017, sterling 1.4078, Swiss .8463, rand 9.8865, krone 6.7922, SEK 8.4556, forint 228.54, zloty 3.4267, koruna 20.3095, yen 98.63, sing 1.5328, HKD 7.7521, INR 51.3950, China 6.8370, pesos 14.0730, BRL 2.2842, dollar index 86.85, Oil $46.92, Silver $12.91, and Gold... 919.05

That's it for today...I almost forgot that it was St. Patrick's Day so needless to say I forgot to wear my green today. Its supposed to be a picture perfect day, pushing 80 degrees here in St. Louis, so that is welcomed news for those who are going to enjoy our parade and other St. Paddy's Day activities. Anyway, I'm running a little behind schedule today so top o' the morning to you on this fine day and have a Terrific Tuesday!

Mike Meyer
Assistant Vice President
EverBank World Markets
1-800-926-4922
1-314-647-3837

A Eurozone Bond To Compete With Treasuries?

Chuck Butler — Mon, 23 Feb 2009 16:32:58 GMT

In This Issue..

* The euro gets some wind in its sails...
* Citigroup is seeking more bailout funds?
* Gold hits $1,000!
* The ghost of Humphrey-Hawkins...

And Now... Today's Pfennig!

A Eurozone Bond To Compete With Treasuries?

Good day... And a Marvelous Monday to you! Sure seems as though I went from Friday to Monday, as I went out of town this past weekend, and before I knew it, I was driving to work this morning! UGH! There was a rumor on Friday that really sent the euro higher, and there was another rumor this past weekend about the Asian currencies... So... Let's look at those two items and more of course, as we begin the last week of February!

Well... On Friday, the euro finally caught some wind its sails after being pummeled all week by the dollar in response to the St. Valentine's Day massacre that took place the previous weekend. In case you had forgotten what I'm talking about here... I'm talking about the news that the Eastern European loan losses had grown to a point that they were causing major problems for Western European Banks that had extended the loans. There were calls for the "end of the euro" and all that... Yes, it's a very serious thing, but not the cause of a collapse of the euro!

OK... You may recall me saying that as much as I hated saying it, the IMF and Bundesbank needed to come to the rescue... Germany's Chancellor Merkel, was all "show and no go" in her press conference, and that all left the euro without a bid... But then along came John, Tall walking John, slow talking John... Well, no "John" in particular is involved, but I always got a kick out of that song! Any way... There was a story on Friday mid-day, that a "Eurozone bond" could be used to ease the turmoil on the financial institutions... Here's a snippet from Reuters...

"The Chairman of euro zone finance ministers Jean-Claude Juncker has proposed that the common euro zone bond should cover the first 40 percent of the overall euro zone government debt, sources familiar with the work of the Eurogroup said.
   This would be senior debt, guaranteed by the whole euro area, which now has 16 members. Anything above the 40 percent would be junior debt that would be issued by the individual governments.
   The junior debt would most likely be more costly for the government to issue, therefore encouraging a reduction of debt towards the common euro zone level of 40 percent, sources said.
   If agreed on, common euro zone bonds would in a matter of a few years create a highly liquid bond market of some 4 trillion euros which could successfully compete with a similar size U.S.
treasuries market for large investors like China."

That's HUGE folks! However, before we all go out to celebrate... There's opposition to this plan by Germany, who already has about 1 Trillion euros worth of German bonds issued... And if Germany balks, this plan will not get off the floor. But, for now, it has put some wind in the euro's sails...

You have to give the Eurozone ministers some credit for creating something that the likes of China could use as an "alternative" to Treasuries, as Treasuries have long been the only game in town for countries like China and Japan that have tons of cash to invest...

There was another story out this past weekend that I read about last night, that tells of the Asian countries pooling together reserves to back their currencies against speculators. The report called for around $30 Billion to be pooled by the Asian countries...

Now, that may or may not be true, but the point here is that this kind of smoke comes from the fire of protectionism... These are baby steps to a full blown protectionism plan... And you know me, there's no smoke without a fire, there's no heat without a flame...

The BIG news this morning though is the one that's going around about Citigroup... Let's see what the Wall Street Journal has to say about this... "Citigroup is in talks with federal officials that could result in the U.S. government substantially expanding its ownership of the struggling bank, according to people familiar with the situation.

While the discussions could fall apart, the government could wind up holding as much as 40% of Citigroup's common stock. Bank executives hope the stake will be closer to 25%, these people said.

Any such move would give federal officials far greater influence over one of the world's largest financial institutions. The proposal was made by Citigroup to its regulators."

Oh great, I can the dolts on Capitol Hill all screaming about how this is proof that the U.S. needs to nationalize banks... Well, let's see... If they hadn't already put tens of Billions into this bank, maybe they wouldn't be so ready to try and save it! See? This is what I was talking about months ago, when I said that the Gov. bailing out banks was a very bad thing... But, do you think these guys on Capitol Hill cared to listen then? And they are still not listening... They are dolts! When former Treasury Sec. Paulson, came to them and said he needed $750 Billion to make things right, these lawmakers didn't bat an eye, they didn't question where he got the $750 Billion figure, they didn't ask him how he would account for the spending, or how it would be paid back and when... No, they just followed him like ducklings crossing the road with their mother...

OK... This week... Hmmm... Well, tomorrow and Wednesday we get a double dose of Big Ben Bernanke speaking on Capitol Hill... This is the semi-annual testimony on the economy, which used to be required by the Humphrey-Hawkins bill that expired some time ago, but is still followed by Fed Chairmen. What's going on nowadays makes a joke out of Humphrey-Hawkins... You may recall the Humphrey-Hawkins Full Employment and Balanced Budget Act, which was put in place in 1978... I'd say the Fed has to do a Lucy... They got some 'xplainin' to do!

Tomorrow, we will see the S&P/Case-Shiller Home Price Index, which I'm sure will show that the home prices continue to fall here in the U.S. Tuesday also brings us Consumer Confidence. Wednesday will bring us Existing Home Sales followed by New Home Sales on Thursday, and we finish the week and month with a revision to the preliminary 4th QTR GDP, and the Chicago Purchasing Managers Index (manufacturing)...

So, we've got a boat load of data to go through this week, but the Big items are... 1. is the Eurozone going to issue a bond to rival Treasuries? 2. Is Citigroup going to seek additional bailout funds from the Gov.? 3. Big Ben's testimony this week 4. An Asian currency fund? 5. Data...

Gold traded above $1,000 on Friday! I saw it trade there with my own 1 eye! $1,002... But, you may recall me telling you either last week or the week before that I was sure Gold would trade to $1,000, but getting there and staying there would be difficult for the shiny metal, as profit taking would push it back down every time it gained ground to $1,000... And... That's exactly what happened late Friday, and in the overnight markets last night. Gold saw a ton of profit taking, and has been pushed down to $986... But, I look at like this... "it's cheaper today than Friday!"

The Citigroup story has the "risk takers" dipping their toes back into the water... As the "risk takers" aren't really taking risk these days... They only come out when there are stories about how banks being bailed out... But any way, that's what they are called, and when they come out to play, the high-yielders like Aussie, kiwi, Brazil, South Africa, get to join in and play too... And all of these are stronger VS the dollar this morning than they were all last week...

The Swiss franc hung on to the euro's coattails and moved higher even in the face of their banking problems, as they would not be a part of the Eurozone bond idea...

Time to head to the Big Finish... Lots of stuff to deal with this, the final week of February! And Oil is back above $40... Hmmm....

Currencies today 2/23/09: A$ .6495, kiwi .5155, C$ .8040, euro 1.2840, sterling 1.4635, Swiss .8615, rand 9.99, krone 6.7980, SEK 8.6650, forint 232.40, zloty 3.6550, koruna 22.30, yen 94.70, sing 1.5250, HKD 7.7525, INR 49.68, China 6.8390, pesos 14.76, BRL 2.38, dollar index 86.51, Oil $40.52, Silver $14.35, and Gold... $987.50

That's it for today... Yesterday morning, my beautiful bride and I had breakfast outside next to the ocean with a bright sun beaming warmth down on us... 4 hours later we were back in St. Louis, and 20 degrees! UGH! I made the trek to Jacksonville for the memorial service of our colleague John Kimsey, who would have celebrated a birthday today. I met John's wife, who said to me..."you must be Chuck, I read your letter every day"... I was also stopped in the hallway by a fellow that said, "are you Chuck Butler?, I read your newsletter every day", So... John must have converted quite a few people to be Pfennig readers! But really... I must be easy to spot, as how many bald, overweight guys are there walking around with a cane, and a beautiful bride? It was good to see a lot of EverBankers that I don't normally get to see, too bad it was for that reason... And special thanks to Diane Russell, the dinner was magnificent! OK... Mike Meyer's here, time to go! I hope your Monday is Marvelous!

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

Talking Stimulus...

Chuck Butler — Tue, 03 Feb 2009 15:38:56 GMT

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In This Issue..

* A very tight range for currencies...
* RBA cuts rates to historic low!
* Spending that doesn't create jobs...
* Gold see profit taking...

And Now... Today's Pfennig!

Talking Stimulus...

Good day... And a Terrific Tuesday to you! On the road again, I just can't wait to get on the road again... Yes, all my bags are packed and I'm ready to go! Won't be back until late Saturday night, and back in the saddle next Monday. And I'm leaving just in time, as yet another cold front has moved into St. Louis! UGH!

Well... Let's see... What to talk about today? I could talk about the Aussie rate cut and stimulus package... I could talk about the "new and improved" stimulus package and all the "non-stimulus spending attached to it... I could talk about how it sure seems as though the euro, and then the other currencies, are taking their cues to rally from equities... Now, this is certainly a short term phenomenon because we all know that currencies have different pricing mechanisms than stocks, and a very low correlation to stocks, which is why they make excellent diversification assets, along with Gold and Silver.

Well... What's it going to be boy? Oh, Shoot Rudy, I'll just talk about all of them, and probably more, you never know what's going to come to me, as I start typing!

OK... Front and center this morning... The euro is a bit higher than yesterday, having climbed to 1.28 and change. But, actually, this figure is a bit lower than the high yesterday. At one point the euro was within spittin' distance of 1.29... The trading range has been tight, like Tupperware! That reminds me of... No... Not today, Chuck!

The Reserve Bank of Australia (RBA) did cut rates 100 BPS last night, to the lowest internal rate of all time... (3.25%) The RBA issued a statement that said something about future rate cuts not being as aggressive as those across the last 4 months. Now, that's a good sign, but it's also a bad sign, as it suggests that the RBA isn't finished cutting rates. Right before the rate announcement, the Gov't announced a stimulus package. Now, I don't like this, as it puts the RBA, which I've always held in high regard, in the same boat as all the other countries doing stimulus packages... birds do it, bees do it, Even educated fleas do it... And I'm not talking about falling in love... I'm talking about stimulus packages... The RBA believes that with a combination of fiscal and monetary stimulus, they can kick start their economy...

Memo to the RBA... While domestic demand is a good thing to have... You need China to grow again... Any way... The news of the combination of fiscal and monetary stimulus, has lifted the A$ up off the mat... But I doubt it will have much follow through... Not without a euro rally to 1.30 and higher...

OK, speaking of stimulus... I'm very upset with the "new and Improved" stimulus package. I'm sure you've figured this out already from previous rants. However, now... I'm even more ticked off! Oh, and the TV / Cable media are swallowing the propaganda from the White House, hook, line and sinker! Here's what I'm talking about folks...

The package has a "buy American" portion in the package... This is protectionism folks... And here's what gets my goat the most about protectionism at this stage of the recession... Fed Chairman, Big Ben Bernanke, is supposedly a "U.S. depression guru"... Well, Big Ben, wasn't the protectionism of the 1930's one of the reasons for the Great Depression? And is just so happens that now we've had "the cheater's" confirmation, calling China "currency manipulators", and that was followed up with the "buy American" portion of the package...

Look... There's nothing wrong with the slogan, Buy American... In fact, I think it would be a great thing to go around saying and doing, based on our manufacturing prowess... But, that's not what I'm talking about here... I'm talking about protectionism, at a time when the global economies are hurting and need to export to us... I'm really surprised that the currency traders haven't seen this and taken the dollar to the woodshed... But then, maybe they're getting the wool pulled over their eyes...

The other thing that ticks me off on the "new and improved" stimulus package is the fact that a very small piece of the $816 Billion (before the Senate adds their pork!), stimulus is for the infrastructure projects that have been billed as a "major piece" of this plan! HOGWASH! Now, I'm not going to sit here and pass judgment on all the "items" that are being allocated Billions of dollars, like $1 Billion to deal with the census problems, and $88 Billion to help move the Public Health Service into a new building next year, and $650 million for TV Converter boxes. The list of items like this goes on and on... And all worthy items, I'm sure... But none of these types of spending allocations, and I repeat this so you get the full force of this statement... None of these types of spending allocations are doing anything to create jobs. Oh... And just for those of you keeping score at home... $50 Billion is allocated to bricks and mortar... Infrastructure... Which has had "top billing" on this package... Well, the truth is out... I sure hope someone takes their lawmakers to the woodshed for this!

And... One more thing that's really ticking me off about how we're going about "attempting to stop the correction" , which in my mind should NEVER have been done in the first place, and that is this creation of a "bad bank"... Again... And I really want to stress this point... Why not focus on creating a "good bank"? Because creating a "bad bank" has all kinds of problems attached to it, and IT DOES NOTHING TO CREATE JOBS!

OK... Enough! You are quite full of you know what and vinegar this morning, Chuck... Yes, I know, maybe I'm excited about traveling to Orlando! And maybe not... Who knows?

The Trading Theme is back in place, big time, these days. And with the Trading Theme right now, and short-term I'm sure, is this connection between equities and currencies... And currencies had better break that connection in a New York Minute, because I don't see any good times ahead for stocks... I really thought they would experience an Obama bounce, but not so... The DOW sold off to the tune of -9.5% in January! OUCH! But you never know with these markets... If they are left alone, they will work through good times and bad times, based on fundamentals... If they have the Gov't sticking their hands in there, acting like they know what they're doing, messing with the fundamentals Gods... Then... We get bubbles...

But... Like I said above, currencies are a different bird than equities, and have different pricing mechanisms, so this association can't last too long...

I saw this story, and had to talk about it... Well, everyone knows how I have beaten the U.K. pound sterling around the head and shoulders for months now... And the currency has responded losing 27% in the past 6 months... Well... There's someone beating the drum for the pound sterling these days... Let's listen in... Jim O'Neill, chief economist at Goldman Sachs Group, Inc. had this to say... "the U.K. is no Reykjavik-on-Thames" (referring of course to the meltdown / collapse of the Iceland economy, Gov't, and currency) Mr. O'Neill, also had this to say... "The pound is very cheap for the first time in our professional history. You need to make sure that the U.K. is Reykjavik-on-Thames before you bet against the pound."

Hmmm... I guess he means now... Don't bet against it now... Because betting against it since August has been quite profitable!

The Swiss franc continues to get dragged through the mud by the bank scandal that I talked about last month, between UBS and Italian municipalities... There's been some new rot found on UBS's vine, and since UBS is such a large piece of Switzerland... The franc gets hammered... What the franc needs right now is a rally by the euro, so it can grab hold of the euro's coattails!

Oh... And before I head to the Big Finish... I want to tell you that next week, we get "the plan"... Treasury Secretary Timothy Geithner will give a speech next week in which he will outline the Obama administration's financial-rescue plans. Whew! I feel so much better now! NOT!

Oh, and one more thing... The count is now two tax cheaters found in the new administration... First we had "the cheater" Treasury Sec. Geithner, and now we have Tom Daschle... Oh brother! Now... Where's the change? Wouldn't it be a huge stance that this kind of scandal and bad press on his administration will not be tolerated, if Obama asked these two to fall on sword?

I know, I keep saying one more thing, but this time I really mean it! After talking up Gold yesterday, it sold off $20! UGH! Profit taking, I have to believe, as there's nothing to show me that Gold should have been sold!

Currencies today 2/3/09: A$ .6390, kiwi .5055, C$ .8040, euro 1.2875, sterling 1.4260, Swiss .8640, rand 10.13, krone 7.0425, SEK 8.35, forint 232.65, zloty 3.5425, koruna 22.07, yen 89.50, sing 1.5150, HKD 7.7535, INR 48.82, China 6.8402, pesos 14.48, BRL 2.3175, dollar index 85.89, Oil $40.20, Silver $12.37, and Gold... $906

That's it for today... I noticed the other day, as I passed by a gas station, that the price of gas had jumped 20-cents in one day, while the price of oil has remained constant, if not cheaper... Oh the games people play now, every night and every day now... This will be my first trip with Chris, since last May. He's a busy guy, and doesn't have time for me to be dragging him around the country! Hey! This is exciting too! We're currently working on a new way of bringing me to you! Each working day, (that I'm here, which won't be very often in March!) Kristin will sit down with me, and do a quick overview of the Pfennig, and ask me to further explain a couple of things I talked about in the Pfennig each day. This will all be a video (in our cool studio) and placed on our website... Now, how cool is that? We're practicing now, and hope to be "live from St. Louis" no, wait! That would "taped from St. Louis" on the website soon... I will, of course, let you know more, when we're ready! Well, people are arriving, I must be late! I hope your Tuesday is terrific!

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