Daily Pfennig : Canada

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

German Business Confidence Slides...

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

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

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

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

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

And Now... Today's Pfennig!

German Business Confidence Slides...

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

3rd QTR GDP To Lift Our Spirits?

Chuck Butler — Thu, 29 Oct 2009 14:08:00 GMT

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

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

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

In This Issue..

* Currencies rebound a bit VS the dollar..
* Bill Gross on the dollar...
* Norway raises rates!
* RBNZ lifts easing bias!

And Now... Today's Pfennig!

3rd QTR GDP To Lift Our Spirits?

Good day... And a Thunderin' Thursday to you once again! It's not raining at the moment, but rain is forecast for today, thus the Thunderin' Thursday name! Rain today, tomorrow and who knows when it will stop... I'm thinking of buying the blueprints to build an Ark!

Front and Center this morning, we have the non-dollar currencies showing some healing as stock futures are positive. What's driving this new found positive feeling in the risk assets? Well, it's all about the first reading of 3rd QTR GDP today, which... Is expected to show that the U.S. economy came out of the recession in the quarter. Of course, I'll be looking for the Gov't spending portion of the GDP, but other media outlets won't, and the markets will get back to looking for higher yields, which you can not get in the U.S.!

Speaking of higher yields... Norway's Norges Bank did indeedly do raise rates yesterday, making them the first European Central Bank to do so. The Norges Bank members chickened out and only opted for 25 Basis Points (BPS), when I thought they should go the full 50 BPS... But, hey! The Norges Bank is raising rates, right? Let's not get picky here! Is the European Central Bank raising rates? Is Sweden's Riksbank, or Switzerland's Central Bank raising rates? How about Canada? Or Japan? NO, NO, NO, NO, NO, NO and NO! Let's get to giving some love to the Norwegian krone!

So... Looking at the rate hike score card of major countries, we have Australia, and Norway... The exact two I told you months ago would be the first to raise rates this year, when most observers thought it would be in the first quarter of 2010... So, if the U.S. GDP is as strong as forecast (+3.2%) then investors and risk takers will be coming out of the walls again, and buying higher yielding assets... There's only a few places in the world they can go folks... Australia, New Zealand, Brazil, South Africa, the Eurozone, and Norway... The Euro wannabes of the Czech Republic, Poland and Hungary probably fall in there somewhere, but those countries are not at the top of the Hit Parade when people start looking for yield!

OK... So, the non-dollar currencies are seeing some healing this morning... The Big Dog, euro, had fallen to 1.4706 before the healing began, and is now 1.4750... The Aussie dollar (A$) had fallen to 89-cents and change, but has rebounded to .9055, as I write. And... If the trading theme remains in place, the dollar will get hammered on the positive GDP report this morning...

Well, yesterday it was PIMCO's Bill Gross's turn to give his thoughts about the dollar... Let's listen in... The dollar is an over-owned currency and likely to fall to an all-time low against major counterparts, Pacific Investment Management Co.'s Bill Gross said in an interview on CNBC.

"The Chinese, the Asians, have owned too many dollars for too long." The dollar becomes more and more owned and less and less desirable, so ultimately the direction is down. I don't sense stability in the dollar."

OK... Thanks Bill! Hey! Recall the other day when I gave you the list of "rumors" in the markets that deep-sixed the non-dollar currencies? One of the items on that list was the rumor that the tax credit for first time home buyers wouldn't be extended... Well, now there's a rumor going 'round that someone's underground, and she will rock, no wait! The rumor going around is that the tax credit will indeed by extended to April 2010... You heard it here first folks, remember that! HA!

And the folks over at the Royal Bank of Scotland (RBS) sent out a note to customers that "the euro remains in an uptrend, and investors should buy the currency when it weakens. It has dropped back to the middle of its last consolidation zone in late September and early August. In a bigger correction scenario it may make it down to 1.45-ish, but it is no longer a compelling sell, and medium term considerations favor buying dips."

Hmmm... Couldn't have said that better myself!

So... Let's get back to this thing with the risk assets... There must be quite a few of you missing class each day, for recently, there have been a ton of people telling me that I never talked about a risk asset sell off... WHAT? ARE YOU KIDDING ME? I've been talking about how stocks have been linked to currencies and commodities (the risk assets) for months now! And several months ago, I began to see the price to earnings ratios getting way out of whack (tech bubble like!) and began to talk about a stock market sell off that could adversely affect the price gains that the currencies and commodities had made since March...

I know that some of you believe that I only want to "talk up" the currencies to benefit me somehow... And would never write about a potential currency sell-off... Well I have written about it... And this isn't the first time either! I'm really pounding the keys right now, because the more I think about this, the more it ticks me off! I mean... Do these folks not recall my going through how to handle a currency sell-off? It went something like this...

If you bought currencies and precious metals to simply go with the flow and get out when the prices begin to decline to book your profits, then you simply want to watch the stocks to see if they put in a 4-day consecutive sell-off... That might be your indication... However, if you bought your currencies and precious metals to diversify your investment portfolio to: 1. not have just dollar denominated investments, 2. to provide a hedge against the potential of a further weakening in the dollar... Then you will simply want to batten down the hatches and ride this dollar strength out... And if you do anything, you might want to take this dollar strength as an opportunity to buy at cheaper levels!

Calm down, Chuck... Ok, I was gone for awhile but I'm back now... The real question is just why are stocks and currencies and commodities all being thrown into the same barrel marked Risk Assets? When fundamentals are in place, this isn't the case, for currencies and commodities have a low correlation with stocks, and they have different pricing mechanisms...

So, a return to fundamentals would be like manna from heaven for yours truly!

OK... Earlier this week I talked about the Bank of Canada officials jawboning the Canadian dollar / loonie lower... Well, they've done their job... The loonie is 2 full cents lower... I expect the markets to test the Bank of Canada (BOC) here, to see if they really want to keep the loonie from getting stronger...

The Reserve Bank of New Zealand (RBNZ) met last night, and while they officially removed their easing bias from their monetary statement, they did not come out and outright mention rate hikes.... In fact, the RBNZ said that there was "no urgency to begin withdrawing monetary policy stimulus" (low rates)... So, it was a two-handed monetary statement by the RBNZ... They removed the "easing bias" but didn't feel the urgency to move rates higher... But shoot Rudy! That's way better than the stuff they gave us at the last meeting, which was "we expect to keep the OCR (their Official Cash Rate / interest rate) at the current level until the second half of 2010"... Yes, Virginia, the RBNZ did improve their statement!

Yesterday, I talked about GMAC coming back to the well, and asking for more bailout money, to the tune of $12-15 Billion... This has some conspiracy undertones to it folks... You just have to think about GMAC and the bank they own, which in reality the taxpayers own! Well, the thoughts going around now is that GMAC, which has already gone to the well 2 times for bailout money, will get what they need, because the Gov't is "in too deep"... Oh great! Now we not only have the "too big to fail" thing, but the "in too deep" thing going for us taxpayers! Where do I sign up for more of this? I just can't get enough of Gov't owned former private sector businesses! NOT!

OK... So, like I said at the top, 3rd QTR GDP will print a preliminary figure this morning... And is expected to have gone from negative to +3.2%... That's quite a rise, don't you think? Personally, I think that it will be less than 3%, probably around 2.5%, and will have been made up of Government Sending... But don't let that get in the way of a feel good media blitz that will happen after the number is printed this morning!

U.S. New Home Sales declined in September for the first time since March... Does any one else feel that the best of the U.S economy during this recession / depression has passed us by, and that we'll be double dipping soon?

Well... With it being a Thursday, we will get the usual Weekly Initial Jobless Claims this morning... You know, this is some very disheartening data... The Weekly Initial Jobless Claims continue to remain above 500,000 each and every week! And the Continuing Claims continue near 6 million at 5.920 million! Who among us believes that the U.S. economy can REALLY recover as long as we have 16% unemployment rates?

To recap... The dollar rally continued throughout the day yesterday, but has stalled in the overnight markets, as the focus shifts to the U.S. 3rd QTR GDP, which is expected to be positive, thus technically taking the U.S. economy out of recession. This would bring the risk takers back into the markets, and thus the dollar would get hammered... The Reserve Bank of New Zealand lifted their "easing bias" but left rates unchanged, and U.S. New Homes Sales declined in September...

Gold is up $7 this morning, so it too is receiving some love, and healing!

Currencies today 10/29/09: A$ .9050, kiwi .7265, C$ .9280, euro 1.4750, sterling 1.6465, Swiss .9765, rand 7.8150, krone 5.7050, SEK 7.0170, forint 186, zloty 2.8880, koruna 17.92, RUB 29.27, yen 90.70, sing 1.3985, HKD 7.75, INR 47.21, China 6.8280, pesos 13.23, BRL 1.76, dollar index 76.26, Oil $77.83, 10-year 3.43%, Silver $16.33, and Gold... $1,035.50

That's it for today... Had a visitor yesterday... A very delightful person! It sure was nice to meet you Rebel! This past week has been the 80th anniversary of the 1929 stock market crash! I really am grateful for all of you readers that haven sent me notes this week with kind words... They are truly appreciated! A reader sent me a note yesterday giving me 3 cheers for not calling the Pay Guy a Czar... Yes, the Czars thing makes me ill! My trip to Cabo San Lucas might be nixed because of the blood clot they found in my leg... I hope not, I was really looking forward to going there! It's Thursday, so our little Christine will stop and bring us in breakfast sandwiches... Yeah for us! And on that note, I'll hit send... I hope it's dry where you are, but that your Thursday is still Thunderin'!

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

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

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

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

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

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

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

And Now... Today's Pfennig!

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Coinquidink? I don't think so!

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

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

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

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

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

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

Will History Repeat Itself?

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

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

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

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

In This Issue..

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

And Now... Today's Pfennig!

Will History Repeat Itself?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

RBA's Stevens Turns On The Green Light!

Chuck Butler — Fri, 16 Oct 2009 15:21:59 GMT

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

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

Don't miss this unique opportunity. Deadline to buy the BRIC MarketSafe CD is Nov. 5, 2009. Apply today or learn more at http://www.everbank.com/001CertificatesMSBRIC.aspx?referId=11808

In This Issue..

* The dollar bounces back a bit...
* Euro retreats from highs...
* Is the economic recovery for real?
* Ignored data...

And Now... Today's Pfennig!

RBA's Stevens Turns On The Green Light!

Good day... And a Happy Friday to one and all! I believe it will be a Fantastico Friday as well, because when I go in my car this morning to come to work, the radio was playing, "It's a Beautiful Morning"... It had to be a sign, right? I certainly hope so any way!

Well, I'm back! I have to say that I've never been to the mountains of North Georgia before, and they are beautiful... Well, most of the parts of this great country are, when I come to think of it! Well, it was nice to walk in the door yesterday and sit down, close my eyes, and get work off my brain!

So... That lasted about 2 hours, and then it was back to the news wires to see what was going on with the currencies. So, now that we've got the housekeeping out of the way, we had better go Front and Center with the story o' the day... (Well, in my mind any way!)

So, Front and Center this morning, we've got the Aussie dollar (A$) rallying strongly, and a lot of that move is coming to us by way of an interview with Reserve Bank of Australia (RBA) Gov. Stevens...

Gov. Stevens when asked at a breakfast function in Perth whether the RBA had any tools to prevent speculators driving the A$ to US$ 1.10

Mr Stevens replied that, rather than speculators, there usually was a rational reason for big exchange rate movements... (Ok Mr Stevens I guess you are going to tell us what that rational reason is for the A$'s big move?)

"We've got one of the better-performing economies in the world. Even at very low interest rates, we still have a positive differential and we're a country where the people here are, I think, reasonably confident about the future and foreigners are fairly confident about our future, and it's not entirely surprising that they're a bit keen on the currency."

WOW! The RBA Gov. said that? That's amazing! Of course it's true, it's true, and I've told you that for months now, but to hear the RBA Gov. say it, now that's a horse of a different color, indeed!

OK... So... The RBA Gov. gave the green light to currency traders, investors, and whomever else to take the A$ to $1.10... Now, will it ever get there? Well, that's a different thing altogether! I remember last year, before the HUGE deleveraging that went on, and then the collapse of Lehman Brothers, that the A$ was marching toward parity to the U.S. dollar, and when the you know what hit the fan, the risk assets got the snot knocked out of them, including the A$... I had said that I thought the A$ could make it to parity, and when it got stopped at the border, and had only reached 98-cents, you should have seen the emails, accusing me of mis-leading people... Come on! 98-cents is so close to parity, it can taste it!

So, it is with a weariness in even reporting this story, that I will make this point... I DIDN'T SAY THE A$ WOULD GO TO $1.10!!!!! I JUST TOLD YOU WHAT THE RBA GOV. SAID WHEN ASKED ABOUT THE A$ GOING TO $1.10!

Well... The Big Dog, euro was really taking a shot at the dollar overnight, but has backed off in a bout of profit taking, I'm sure... The single unit went as high as 1.4970 overnight, but has backed off to 1.49 as I write... I got a kick out of a quote that I saw the other day by European Central Bank (ECB) President, Trichet, that..."The euro was not created as a reserve currency"... Oh! Come on Jean Claude! You know darn good and well that the euro was created to compete with the dollar! You guys in Euroland, were determined that a single unit covering several countries, could work... It was a precursor, if you will, to what we're hearing about more and more these days... A global currency... So... Call it what you want Jean Claude... I know, and now all of my readers know that the euro was created to be a reserve currency in waiting...

OK, maybe that wasn't really clear... I know, I hear you saying, yeah, Chuck, clear as mud! But, the point is simply that Trichet once again was trying to defend the dollar in a kind of back-handed way... By downplaying the euro's ability to be a reserve currency... The other stuff is just Chuck talking about his greatest fears... And we don't need to have him go any further there!

OK... I'm back, I was away for a minute, and I came back to consciousness and saw that two paragraphs had been typed... I had better go back to see what my alter-ego wrote, but, nah... We'll throw it out there anyway!

The news wires are filled with stories today about how the dollar is going to bounce here, because the selling has been too hot and heavy in recent days, and that the economic recovery is too strong to warrant a currency sell off like we've seen... Well, that's all good, as long as one truly believes that the economic recovery here in the U.S. is on the up and up...

Do you believe it to be? I don't! I wish I could... But I don't! Not when the unemployment is so bad, and the little pulse that we see in the economy is from the Gov't's efforts to pump life into the economy... But this unemployment thing is absolutely awful folks...

Alrighty then, let's go on to something else... The Canadian dollar / loonie has really been on a roll VS the green/peachback dollar... Canada will print their latest CPI (consumer inflation) this morning, and I think it will tell us a lot about loonie's ability to continue to move toward parity once again... The Bank of Canada (BOC) meets next week, and long time readers will recall that I've been pretty hard on the beaver (BOC) in recent months, as they kept saying that they would leave rates at current levels until the 2nd half of 2010... And they well should have been taken to the woodshed for those comments... Well, if Canadian CPI shows some inflation pressures, it will be down to the BOC's meeting next week, to see if they change their previous stance... I think they will, and thus the loonie will continue to move higher VS the dollar... But that's just my opinion, folks, I don't have a crystal ball, and I could very well be wrong! (That's for the legal beagles!)

Today's data cupboard here in the U.S. will be interesting in that the TIC's data will print, but for the most part, this VERY IMPORTANT PIECE OF DATA has been largely ignored by the markets... Why is that? Well, I don't really know, but if I were to put my conspiracy hat on, I would say something like that the markets have been directed by the Gov't NOT to make a big deal out of, to downplay the Gov't's inability to finance the deficit, for if that were to be the case, it would be curtains for the dollar!

We'll also see two of my faves... Industrial Production, and Capacity Utilization... For all the new readers to the Pfennig, I particularly like Capacity Utilization, and always have for that matter, because it's about the only "forward looking" piece of data (along with Leading Indicators)... So... Capacity Utilization is running around 69%... What does that tell us? It tells us the economy sucks! And don't believe those that keep telling you the coast is all clear!

And then since no one pays attention to those three pieces of data, the U of Michigan Consumer Confidence will print and THAT WILL catch everyone's attention! UGH! Even with a soaring stock market, I would have to think that Consumer Confidence would be taking a hit of sorts... It would be difficult at best to do a survey these days about Confidence and not run into quite a few negative thoughts from all the unemployed Americans!

And then there was this from the Wall Street Journal... "High unemployment in the U.S. has led to rising charge-offs and delinquencies at credit card companies. The firms are reacting by limiting credit, raising the bar on lending standards and cutting back on loan portfolios."

So... Again, this is just another reason why I don't believe the economic recovery campers!

And to add to that thought... Have you noticed the huge jump in the oil price? And have you been charting the rise in Treasury yields? Well... Either of these look good for the U.S. consumer... Oil has jumped to $77 a barrel, and the 10-year Treasury yield has really pushed higher to 3.47%! ( I guess it's time for the Fed to buy some more auctioned Treasuries to bring the yield back down, eh?) But... These two things are very good, when not manipulated by the Gov't at telling us about the future...

OK, to recap... The A$ is pushing higher toward parity with the dollar once again, and when asked about what the RBA can do to stop the A$ from going to $1.10, RBA Gov Stevens basically gave the all clear to traders to take it there! The euro had moved to 1.4970 overnight, but is seeing some profit taking this morning, and the data cupboard has some important data this morning, but for the most part the markets will ignore it...

Currencies today 10/16/09: A$ .9220, kiwi .7440, C$ .9685, euro 1.4915, sterling 1.63, Swiss .9830, rand 7.3420, krone 5.5915, SEK 6.95, forint 179.40, zloty 2.8220, koruna 17.2550, RUB 29.63, yen 91.10, sing 1.3940, HKD 7.75, INR 46.24, China 6.8267, pesos 13.05, BRL 1.70, dollar index 75.56, Oil $77.35, 10-year 3.47%, Silver $17.39, and Gold... $1,049.88

That's it for today... Well, I'm sure this come as a shock to the boys and girls here, but today is Boss's Day! I hear that it's been quite wild here since I left, that's a good thing! Hey! Our Ty Keough was named to the St. Louis University Billiken 50th year soccer team! Congrats Ty! The picture of you in college that the University posted is AWESOME! And then, I wanted to give my own congrats to our little Christine, for her performance in the Chicago marathon last weekend... Good show! Little Delaney Grace came over to try on her Dorothy dress for Halloween, and my beautiful bride made... She performed for us on the fireplace hearth, singing somewhere over the rainbow! What a CUTIE! And she's only 2! My little buddy, Alex, has two football games this weekend... So, I'll be doing a lot of sitting on bleachers this weekend! OK, I had better stop there, and get this out the door! I hope your Friday is Fantastico!

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

More Strong Data Sinks The Dollar...

Chuck Butler — Thu, 17 Sep 2009 14:37:00 GMT

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In This Issue..

* Currencies near 1-year levels...
* Canadian loonies are best performer!
* Dangling a carrot...
* Oil trades above $72...

And Now... Today's Pfennig!

More Strong Data Sinks The Dollar...

Good day... And a Tub Thumpin' Thursday to you! Why Tub Thumpin'? Why not? Besides, the non-dollar currencies are darn near where they were a year ago, having a good chunk of the ground they lost during the Financial Meltdown last fall and winter... Not that I'm a cheerleader, but more of a "this is what I believed would happen, and glad to see a plan come together" kind of guy!

And since I, unlike throngs of people that like to point out errors, put my beliefs in writing every day... Right out there / here, in the open, for anyone to take pot shots at... But, I learned long ago that there will always be those that disagree, and not to let it upset or change the things I believe...

OK... So... Here we are, one year later, having survived the Lehman Bros. collapse, and credit default swaps, and Gov't bail outs... According to Big Ben Bernanke, he saved the world... Hmmm... I'll save those words for my grandchildren, and their children... For what we're doing to them is immoral! But that's not what I was going to talk about with the one year later stuff, so, let's skip over to that!

A year ago, I was on the road with FX University, giving one-day instructional presentations on currencies... At the end of each day, all the "professors" HA! Would get in front of the "students" and it was time for them to question us... One day, we had a heated debate, among us, when one of the guys said that, "the euro would collapse" and that it was happening now... Hmmm, you know me, I couldn't let that pass, so I stood up, and said that may be true, one day, but not now, and not in the next year, and that the euro should bottom our around 1.25 (It was 1.47 at the time, having fallen from 1.60)... The euro bottomed out around 1.23, and hasn't seen those levels in over 10 months! I'm not gloating here, just putting this all into perspective...

So... The euro isn't the only currency taking liberties with the dollar these days... And so, as I said above, they for the most part, all taking advantage of this dollar weakness and gaining back ground that was lost last year.

But as long as I was on the euro, I might as well stay there... BNP issued a report overnight that is calling for the euro to reach parity to the British pound sterling... In a combination of euro strength, and pound sterling weakness, this would be achieved, the report writer said... Hmmm... While this makes sense on one hand, it doesn't on the other hand... On the other hand.... How could the euro continue to gain VS the dollar, and not drag sterling along on the crosses? This would be a strange twist of fate for sterling should it find it trading at parity to the euro...

Tuesday it was the strong Retail Sales figure that dropped a bomb on the dollar... Yesterday, it was combo bombs of Strong Industrial Production, and a rising CPI... Holding with the trading pattern that has existed, except for rogue days, that whenever the data is strong in the U.S. the dollar gets hammered, this day was just like many others we've seen. The thought that is on every trader's minds, and investors, and hedge fund managers, and whomever else is out there participating in the markets, is... That what's good for the U.S. is good for the rest of the world, and they are spending money they don't have like there's no tomorrow!

My friend, Bill Bonner, of The Daily Reckoning fame (www.dailyreckoning.com) says it best... Bill was talking about how the Fed is desperately trying to get consumers to spend, and to that they will artificially inflate CPI... Here's Bill... "If they can successfully inflate consumer prices (not just producer prices) the whole picture might change. Then, we'd have an inflationary depression rather than a deflationary one."

He went on to make some very good comparisons of Japan's 20 lost years, and what's going on here... I've made a lot of these over the years... Remember when I would due the 80's song, I'm turning Japanese, yes, I'm turning Japanese I really think so... I'm sure you do... But it's important to revisit these things from time to time so that people don't forget...

Did you know that the Japanese introduced 11 different stimulus packages worth 30 Trillion yen? The Japanese thought that bailing out banks that should have been allowed to fail, was the way to go... And today? Well, the Gov't is saddled with a huge debt, and the banks are still wobbly... And when it you know what hit the fan in Japan, the Japanese began to save... They had always been savers... But now they were really saving! And thus the on again, off again deflation that has existed in Japan for 20 years...

Doesn't that sound like us? I mean the consumers... We used to spend, spend, spend, more than we made... But when the you know what hit the fan here, we began to hunker down and save again... Which is why I think the Retail Sales data the other day is nothing but Government spending programs, and cooked books... The U.S. Consumer looked spent! Oh, But looky here! They showed life when they saw the Cash for Clunkers program, and this is what the Gov't is licking their chops about... They dangled a carrot and U.S. consumers were led down the same debt taking road as before...

So, maybe this is where we don't follow the Japanese any longer... If the Gov't can get U.S. Consumers spending again, they can re-light the spending torch... There's one big problem though... Unemployment... All those millions of consumers that are unemployed! I'm sure the Gov't has a plan to deal with this though...

OK, I've got to stop here... I just get so darned ticked at this stuff, and really don't understand why U.S. citizens aren't just as ticked as I am... For if they were... Oh, forgetabout it Chuck... Go on to something else!

The best performing currency in the past 24-hours is the Canadian dollar / loonie... Yesterday, it was reported that: Manufacturing sales in Canada, rose by a stronger-than-expected 5.5% in July following June's revised 2.2% increase. So, loonies are being marked up VS the U.S. dollar... This was a good report for a recovering economy that I believe has exited their recession...

Speaking of Canada... The Canadian newspaper, The Globe and Mail carried an article written by Nassim Taleb on 9/15 that I think had some good thoughts... Here a couple of them...

"In the first place, the financial crisis was not a black swan. It was perfectly predictable. They ignored the phenomenal buildup in leverage since 1980. They acted like airline pilots who'd never heard of hurricanes!

Today we still have the same amount of debt, but it belongs to governments. Normally debt would get destroyed and turn to air. Debt is a mistake between lender and borrower, and both should suffer. But the government is socializing all these losses by transforming them into liabilities for your children and grandchildren and great-grandchildren."

Ok... Let's go to another country and see what we can find there!

Well...it's not another country, but a commodity! Don't look now, but Oil has pushed past $72 overnight... The price of Oil rose 2.2% yesterday and last night after a report showed that stockpiles in the U.S. had dropped to their lowest level in 9 months...

A strong Oil price, though not appreciated at the gas pump, does help push certain currencies higher, as they have a "petrol" component to them... Currencies from countries like: Norway, Brazil, Canada, Mexico, U.K., and Russia...

Speaking of Russia... Not that we can trade / offer this currency except in our BRIC MarketSafe CD, but the ruble has been on quite a tear in the past two weeks, gaining 11 of the past 12 days, VS the dollar... I talked to a lot of people when we first issued the BRIC MarketSafe CD, and they told me they wished we had made it a "BIC CD" and taken out the "R" for ruble, as they were very leery of Russia and the ruble... I would tell them, I understood, and the only way I would ever think of Russian rubles was in a "MarketSafe CD"... And... To think of rubles as an "Oil Play"... Let's hope that continues to be the case, eh?

Hey! Did you hear the President the other day talking about the $200 Billion Supplementary Financing Program (SFP)? He was happy that the Gov't was going to be able to remove it from the Budget, because Financial Institutions are getting healthy... Well... Not that I'm going to pull a Joe Wilson here, and call him a liar, but I am going to throw my 2-cents in here, and say that I believe removing the SFP $200 Billion from the Budget is due to the fact that Congress is having to raise the debt ceiling again, and this would give them some extra room...

So... I'm watching the currencies trade this morning, and ever since I came in the euro has been weakening VS the dollar... It has gone from 1.4755 when I came in, to 1.4715, and it doesn't look as though it will stop there! But... Before you panic, we've seen this a lot lately... Overnight, the euro gets traded upward, and then late in the European session (like now) it gets sold... Then the NY traders take it back up again... Looks like a classic example of profit taking in Europe to me!

Yesterday, I told you about the Japanese Finance Minister, Fujii, and his announcement that a strong currency was a good thing for the economy... Well, those words were echoed last night by Japan's Central Bank Chief, Shirakawa... Mr. Shirakawa said, "In the medium and long term, a strong yen can help push up the economy."

Hopefully, these two statements on consecutive nights will be enough to push the fears of traders, that the Bank of Japan would intervene to keep yen from getting too strong, into the back seat...

Gold was unable to add to yesterday's push up to $1,018. I'm convinced that Gold can go higher... But, it could very well go lower first! I've seen some calls for Gold to go to $3,000 and even higher! All I have to say whenever I see that, is simply... That would be nice for Gold holders (like me!), but I sure wouldn't want to see what the shape of the U.S. economy is in, if Gold is at $3,000! YIKES!

Geez Louise, I wrote all this, and haven't mentioned the data results from yesterday! UGH! OK... Real quick, because I'm running late... CPI was up .4% VS July... Industrial Production was strong, gaining .8% (VS .6% forecast), and Capacity Utilization edged higher to 69.6% (still a long ways to go to get back to the days of 85%!) And finally, the TIC's data... Total Net TIC Flows into the U.S. were a negative $97.5 Billion! OUCH! I'm going to spend a lot of time today trying to find out what China's purchases or lack of them were!

OK... To recap... The non-dollar currencies are close to their levels a year ago. Yesterday's move came as a result of strong data from Industrial Production and CPI. Canadian loonies were the best performer in the past 24-hours, and we had more jaw boning for a strong yen in Japan...

Currencies today 9/17/09: A$ .8720, kiwi .7110, C$ .9385, euro 1.4715, sterling 1.6520, Swiss .9675, rand 7.37, krone 5.8550, SEK 6.8650, forint 183.50, zloty 2.80, koruna 17, RUB 30.34, yen 91.40, sing 1.4150, HKD 7.75, INR 48.15, China 6.8266, pesos 13.16, BRL 1.8015, dollar index 76.25, Oil $72.49, 10-year 3.47%, Silver $17.37, and Gold... $1,016.50

That's it for today... Well, I just heard that Puff the Magic Dragon sings no more, as Mary Travers of Peter, Paul and Mary has died at 72 from leukemia... It's been a tough week for my beloved Cardinals, as they've backed off their strong showing of August and early Sept. I hope they can hold on for a couple more weeks! Another day, and less pain in my knee, although the swelling is a real problem, that won't seem to go away. Maybe this weekend, I can stay off it, and see if that works. Thanks to those who send me remedies for this swelling... I had better get going, people are streaming in, and it's not like me to be still typing when that happens! Well, so far today, it's a Tub Thumpin' Thursday... I hope it's Tub Thumpin' for you!

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

German ZEW Underpins The Euro...

Chuck Butler — Tue, 15 Sep 2009 14:29:18 GMT

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In This Issue..

* Currencies rally on tariff news...
* Norway's election doesn't move krone...
* Canada's Gov't problems to hurt loonies?
* 1-year since Lehman Bros...

And Now... Today's Pfennig!

German ZEW Underpins The Euro...

Good day... And a Terrific Tuesday to you! Well, just as I suspected yesterday in the Pfennig, when the U.S. traders came in and got word of the new Chinese tariffs on tires, the dollar got sold like re-mastered box sets of Beatles albums! So, we've got that to talk about, and some other items I'd like to discuss... So, here we come Terrific Tuesday!

OK... Well, just as I stated above, the U.S. traders didn't care for the new tariff, feeling that it would project a trade war, and therefore sold the dollar. The Big Dog, euro, traded to 1.4635 by mid-day... There was some profit taking late in the day, which brought the euro back to below 1.46, but then this morning, the euro got another boost from a report on German Investor Confidence, to bring it back to 1.46, as I write...

German Investor Confidence, as measured by the think tank ZEW, rose to the highest level in nearly three years this month... ZEW believes that their index predicts developments 6 months ahead... So... If that's true, then the German economy will be well on its way to a strong recovery!

So... Traders backed up the truck and bought euros this morning... I look at 1.46 like the deal we went through when the euro was 1.43... It went back and forth from 1.4150 to 1.43 for a couple of weeks, before finally breaking out to 1.45, and then 1.46... With the single unit going back and forth over and under the 1.46 figure, it's quite similar. And these are good things for buyers!

It allows buyers to buy on dips, before the assets finally breaks out... I sure hope you all are paying attention here... Sorry, don't mean to lecture... But that was an important point!

AT one point yesterday all the little dogs (non-euro currencies) were off the porch, and chasing the dollar down the street. But overnight, we've seen some news in parts of the world that haven't been of the "pro-currency" nature!

One piece of which I am talking about, is in Australia, where the Reserve Bank of Australia (RBA) issued a communiqué' stressing that it (The RBA) was seeking to avoid "premature tightening" monetary policy... Hmmm... You can look at this two ways... You can say that the RBA is just trying to get everyone to calm down, and prepare them to wait longer for rate hikes... OR... You can say that the RBA is trying to throw the dogs off the scent of a rate hike, so things don't get too heated before they actually do the deed.

I'm going to pin my colors to the mast of the second thought... I think the first rate hike is still in the cards for the 4th QTR of this year, and not 1st QTR of next year...

Unfortunately, the market participants in Aussie dollars (A$) didn't take it that way, and decided that they had run up the A$ too far, too fast... But just like we saw with Brazil, and Canada, when the "fickle traders" sold when they got scared, the A$ should come back from this, and I would look to use this as a buying the currency cheaper opportunity...

The President was out to drum up enthusiasm for the economy yesterday... He said that job losses were ending... However, I guess he didn't get the memo from Eli Lilly, that they will be laying off 5,500 jobs in the next 2 years... So... They're not ending... They're just not the same number of people working these days to lay off! So, I guess if you start out with let's say 5 million people working, and 4 million of them get laid off, then you've only got 1 million more to lay off, that's less than 4 million, and therefore the layoffs end...

OK, let's not go down that road this morning...

I've got something that is quite interesting to discuss this morning... OK, did you hear about Germany issuing "dollar denominated bonds"? What's up with that? I hear you asking... Well... There are a number of schools of thought here, but I think what we have here is a green light from Big Ben Bernanke to other countries to carry the flag of dollar destruction, that the Fed has carried since 1913...

Now, those that pay attention in class, might be saying, but Chuck! If Germany per se is issuing dollar denominated bonds, wouldn't that be good for the dollar, as dollars have to be bought by the Germans... Ahhh... But maybe, dollars don't have to be bought... Maybe dollars are already in reserves? Lots of dollars in the reserves of Central Banks all over the world!

OK, here are the scary things about this to me... 1. further dissolution of the dollar's value, 2. alternative bonds to buy other than Treasuries! 3. The dollar becomes de factor the new funding currency for the Carry Trade

When I think of all the reasons to NOT own the dollar, I'm reminded of a great song... All in all it's just another brick in the wall! With the "it's" being the reasons to NOT own the dollar!

Whew! My fingers feel like they had to type a marathon! HA!

OK... Like that one? I've got another one in my back pocket to talk to you about, but I think I'll hold it for tomorrow's Pfennig...

I received an email from a reader that explained how auto tires are made, and how the U.S. has had to import rubber for these tires from Brazil, China and Europe any way! So, tire makers won't be home free with the tariff that the President slapped on the Chinese...

I did see an article that hangs with my thought yesterday that these tariffs are "no good" for the global recovery... Nice to see others that see things like I do... I don't like being out on the limb, albeit a nice strong fat one, by myself all the time!

The Norwegian krone is trading about in at the same level as yesterday morning, which is a good thing, considering that Norway had an election that totally slipped by my radar, yesterday... There was no real change to the center-left government, but there were some thoughts yesterday that a change could take place... You have to like the krone going forward based on the government basically remaining the same, with the same monetary policies, etc. that have guided Norway's economy and banks through the stormy waters that have existed the last 2 years!

British pound sterling is weaker this morning as Bank of England Gov. King, brought to light 3 areas of concern in the U.K. economy... I've never bought into the sterling strength, so maybe this corrects some of this overbought currency.

And the Japanese yen gave up some of its recently gained ground VS the dollar overnight... The new Gov't in Japan, issued a report that calls for an increased participation in the intervention market to keep yen from getting too strong... Great! That's just what we need... NOT! The Bank of Japan already had their hands in the intervention cookie jar enough! Now, the new Gov't is calling for more participation?

I think the Canadian dollar / loonie might see some weakness in the near term, due to a development in the Parliament... The coalition Gov't that exists in Canada, is being threatened. The Liberal party, has withdrawn its support for the Conservative party vowing to bring them down... Whenever you have questions like this in Government or leadership, the currency will suffer...

Did you see that the judge residing over the Bank of America (BOA) settlement with the SEC rejected the fine of $33 million, that BOA and the SEC had agreed on? The Wall Street Journal reported yesterday that: Federal district Judge Jed S. Rakoff rejected a proposed $33 million settlement of allegations by the Securities and Exchange Commission that Bank of America "materially lied" in shareholder communications about bonuses to employees of Merrill Lynch.

The Data Cupboard gets restocked today with Retail Sales for August. I talked about this yesterday, and nothing has changed, so expect Retail Sales to have been strong in August on the Cash for Clunkers program, and back to school purchasing... And we'll see the stupid PPI for August... PPI is wholesale inflation, and is at least a bit better than the manipulated CPI version, which we'll be so lucky to see tomorrow!

Today, marks the 1-year anniversary of the Lehman Bros. collapse... What have we learned from that meltdown? Not a darn thing! We're still spending like there's no tomorrow, and we're still willing to bail out some and not others... In the past year though, Gold is up 30%... That says it all to me!

So... To recap today, ZEW says German Investor Confidence is strong, and that has helped to underpin the euro. Aussie dollars got sold after the RBA tried to calm the markets down regarding the timing of a rate hike, and Retail Sales headlines the data releases today.

Currencies today 9/15/09: A$ .8580, kiwi .70, C$ .92, euro 1.46, sterling 1.6475, Swiss .9630, rand 7.4150, krone 5.92, SEK 7.0150, forint 186.50, zloty 2.8550, koruna 17.38, RUB 30.88, yen 91.20, sing 1.4230, HKD 7.75, INR 48.65, China 6.8289, pesos 13.32, BRL 1.8125, dollar index 76.85, Oil $69.18, 10-year 3.41%, Silver $16.52, and Gold... $997.75

That's it for today... I do believe, if I remember correctly, that this is the 20th anniversary of what was once our "new house"... Can't believe that 20 years has gone by in that house... Well, that was pretty cool seeing NFL football on the tellie again this past weekend, eh? College football, and baseball going on too... And can't forget to mention that our hockey Blues started training on Saturday for the upcoming season! WOW! Overload, Will Simpson, Overload! It's going to be a looooonnnnngggg season for our Rams... Gone are the days of the greatest show on turf... Now it's more like a comedic tragedy! I heard from someone that attended the To The Point News Rendezvous this weekend that I had to back out of... I'm really upset now that I wasn't able to go! UGH! Time to get going... I've got a ton of stuff to get done this morning... So, let's get working on making this Tuesday Terrific!

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

Yet Another Jobs Jamboree Friday!

Chuck Butler — Fri, 04 Sep 2009 16:04:00 GMT

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In This Issue..

* Currencies trade in a tight range...
* G-20 to shun an exit from stimulus?
* Gold and Silver and Oil... A new trend?
* Loonies follow the commodities higher...

And Now... Today's Pfennig!

A Jobs Jamboree Friday!

Good day... And a Happy Friday to one and all! Well... Once again, my day didn't turn out exactly as planned, but as they say... A bad day at the ballpark is better than a good day and then you plug in the place... It could be work... It could be cutting the grass... Etc..

OK... I heard a great song on the radio this morning on my way to work... And I said to myself... Chuck, now that's a great song to start a day with, that everyone should hear each day! It's a song from the 60's (of course!), by the Rascals, called... It's a Beautiful Morning... Here's the first verse, and if you know the song, I'm sure you'll want to sing along, but if not... Look it up, I'm sure, you'll agree that it's a great way to start a day!

It's a beautiful mornin' Ahhh
I think I'll go outside a while
An jus' smile
Just take in some clean fresh air boy
Ain't no sense in stayin' inside
If the weather's fine an' you got the time
It's your chance to wake up and plan another brand new day
Either way
It's a beautiful mornin' Ahhh

OK... I know, some of you are getting ticked right now, because you remind me all the time, you don't read this to sing songs, etc. But hey! You've got to have a song in your heart, I truly believe that!

One of the reasons I thought it to be OK to go off on that tangent was the fact that the currencies remain in a range... The euro's range has been between 1.41 and 1.43... One day up a bit, the next day down... No direction... I think the culprit behind this is that there are so many people on each side of the fence right now, claiming that they know what is going to happen to the economy... I, for one, still believe that we're going to experience a "W" affect...

Joseph Stiglitz, the Nobel Prize-winning economist (and don't get me started on the questionable people that have won Nobel Prizes), believes there is a "significant" chance of a "W"... "it's not inevitable, but there's a "significant chance of a "W"..." he went on to say... "It's not clear that the U.S. is recovering in a sustainable way."

So... There you go... In the past two days, you've heard me, Bill Gross, and now Joseph Stiglitz, all talk about a "W", which in it's simplistic form is double dipping for the economy...

As I said yesterday morning... The real winners of the day were the Precious Metals... It could be repeated this morning too! And most likely Monday morning too! Gold is taking off in flight right now, and if you blinked the last two days, you've missed it! It's off about $3 bucks this morning, but give it a chance to have investors see it heading to $1,000 again!

The thing I think you need to think about here is the fact that there are tons, and tons of money sitting in bank accounts right now, and I wouldn't be surprised to see that money begin to make its way toward Gold purchases! This is normal isn't it? I mean, an asset class, like Precious Metals / Gold, begins to move higher, and then the money begins chasing the price higher and higher... There's an old saying about how you can lead a horse to water, but you can't make it drink... That's how I feel about Gold... I've have given the wink and nod for so many years about Gold... But I can't make you buy it!

Ok... Enough... Let's go to the Eurozone and see what's up there! The European Central Bank (ECB) met yesterday, and you may recall that I said that the markets were looking for ECB President, Trichet to get them "pumped up" on economic growth expectations... I said the risk for the euro yesterday was that Trichet disappoints the markets expectations... Well, I believe that's one of the reasons for the move down from 1.4330 yesterday to the low 1.42 handle...

Trichet basically told the markets that it's premature to call the financial crisis over... And that was enough for the markets... But in reality, Trichet did the right thing... The ECB does not, bow to the markets! If it wasn't the right time to talk about growth expectations, then don't do it! I raise a glass to Claude Trichet this morning...

I mentioned that the Trichet statement was one of the reasons the euro had a tough row to hoe yesterday, the other reason was the Weekly Initial Jobless Claims... Weekly Initial Jobless Claims printed at 570,000 (last month was revised up to 574,000), and the Continuing Claims continue to be quite the heavy load for this economy. Continuing Claims hit 6234K! People who know that these things don't stack up when talking about a strong economy, took money off the risk assets table...

Yesterday, I talked about how the Fed officials had begun to talk about exiting the stimulus measures, or monetary candy, as I prefer to call it, but Treasury Sec. Geithner, spoke out against that. Well, we have a G-20 meeting that begins today in London... I suspect that G-20 will issue a communiqué that basically said that the members do not believe that now is the time to exit the monetary candy...

The price of Oil rebounded yesterday for the first time in a week... I would have to think that with the price of Gold heading toward $1,000 again, it's taking Oil along for the ride! The weak dollar, feeds higher Oil prices... I would think that we all would recall that to be the case, from the spring and early summer of 2008! The euro was 1.60, Gold was near $1,000, and Oil was $140+!

With both Gold and Oil prices percolating... The Canadian dollar / loonie gets to get in the game! The loonie is so dependent on commodity prices, but especially those of Oil and Gold. So... If this rise of Oil and Gold becomes a trend, I think you could look for loonies to make a run at parity again... But, only if, the rise in prices of Oil and Gold become a trend...

Well... All eyes are focused on the Jobs Jamboree this morning. Hmmm... The ridiculous Bureau of Labor Statistics (BLS) will print their adjusted nonfarm Payrolls this morning... It is forecast to show job losses of 230,000... I know, you're saying but Chuck, just earlier you told us the Job Claims filed just last week was 570,000, how do we only show 230,000 for the month? Ahhh grasshopper... It's two different methods of reporting... The Jobless Claims is a "real" number... They have the claims and all they have to do is add them up! So... In my mind wouldn't it make sense to just add up 4 of these for the monthly total? Unfortunately, that's not what the BLS does... Instead they do a "survey"... And then make adjustments where they believe they need to be made, because they're so smart and know all these things... NOT! Geez Louise, even though I was being facetious I still can't believe my fingers would allow me to write that the BLS was smart!

So... We get stuck with a massaged survey... But, it is what it is, and nothing more... So... I guess we carry on despite the dolts we have to deal with and their cooked books! But, be it as may be, the 230,000 job losses is still bad... Let's go back a year ago, before we had the eye-opening 600,000 job loss months... If the BLS had printed a 230,000 job loss month, the Chicken Littles of the world would have been screaming that the sky was falling, for crying out loud! But now? The dolts will be spouting off about how that's a "good number"!

I had better stop there, I was really beginning to pound on the keys! Speaking of which, we were talking the other day, and saying that keyboards some day, will be able to describe the emotion of the person typing! Wouldn't that be cool?

I'm working on a report about what the IMF did last weekend that most people don't even know about... But, I've got more research to do, so, hopefully I can have that ready for the Review & Focus monthly letter that goes to customers of EverBank World Markets.

I just did a video the other day on a brief but chock-full-0-information history of the dollar. You all know that I write another monthly letter for my friends over at the Sovereign Society, called... The Currency Capitalist. You actually have to pay to receive that letter, but as a subscriber you not only get the letter, but weekly videos of me, answering questions that readers send in... Pretty cool, eh? You can subscribe here... https://www.web-purchases.com/CUC/WCUCJ900/landing

OK... That was a shameless plug... But I couldn't pass it up! Besides this I my letter, I can talk about anything I want!

The Chinese renminbi finally moved below 6.83, which it held for months! It will be interesting to see if this move higher VS the dollar continues, or if the renminbi pops back over 6.83 next week... I'll keep an eye out for that!

Well... We went through yesterday, and touched on what's going on today... (Jobs Jamboree and G-20), and spent a lot of time talking about Gold... It's a Beautiful Morning isn't it?

Currencies today 9/4/09: A$ .8430, kiwi .6845, C$ .9150, euro 1.4270, sterling 1.6365, Swiss .9415, rand 7.6775, krone 6.0450, SEK 7.2120, forint 192, zloty 2.8850, koruna 17.90, RUB 31.65, yen 92.80, sing 1.4380, HKD 7.75, INR 48.88, China 6.8299, pesos 13.55, BRL 1.8590, dollar index 78.34, Oil $68.50, 10-year 3.37%, Silver $16.07, and Gold... $990.75

That's it for today... It's a Friday before a 3-day holiday weekend! YAHOO! Tomorrow, my beloved Missouri Tigers start their football season VS Illinois... M-I-Z! (you're supposed to come back with Z-O-U!) The Butler family is going to the game (except darling daughter Dawn and beautiful Delaney Grace). Sunday is the annual Butler House end of summer bar-b-que with neighbors, family and friends. It's always a good day! And Monday I'll try to relax and recharge the batteries, for I'm dragging the line today! Next week, the NFL season begins... WOW! All these sports going on at one time is too much excitement for me! HA! Well, I guess I'll end this here, and hope you have a beautiful morning... And a Fantastico Friday!

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

More Baby Steps For A German Economic Recovery...

Chuck Butler — Tue, 01 Sep 2009 12:28:00 GMT

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In This Issue..

* German unemployment falls!
* RBA disappoints the markets...
* China to buy Canadian company...
* ISM to print positive?

And Now... Today's Pfennig!

More Baby Steps For A German Economic Recovery...

Good day... And a Terrific Tuesday to you! And Welcome to September! Well... Here's a thought to get our engines started this morning... Bill Bonner of the Daily Reckoning ( www.dailyreckoning.com )had this to add to my ranting about our National Debt going to over $20 Trillion in the next 10 years, due to deficit spending...

"The Obama administration, for example, expects to run $9 trillion in deficits over the next 10 years - and that number is based on a recovery! Imagine what will happen if the economy doesn't recover?"

Now, that's a nice comforting thought to start our day right? NOT! WAKE UP! Morning has broken, and the coffee is on... If you are still of the thought that this is all going to end up seashells and balloons, then you need to stop and smell that coffee!

Oh brother! Looks like I'm full of you know what and vinegar this morning! Let's try to calm down, Chuck, you've only just begun to write, you don't want to peak so soon!

OK... Yesterday, I told you that the Asian stocks had sold off and that risk assets were being taken off the table. But that didn't last long, and by mid-morning, I witnessed a nice currency rally, that wiped out the overnight selling. At one point during the morning a customer called to buy some euros, and when the sales person asked me for a price, I said, "you know, they may want to come back tomorrow morning, after the overnight markets beat the euro up, like we've so many times lately."

But wait! That did not happen last night! So, I was wrong! The euro is getting some real love this morning after German unemployment fell in August, which was totally unsuspected. Euros and Swiss francs are the only currencies I see that have gained on the news this morning. So the Big Dog, euro, must have told the other little dogs to "stay on the porch"... Stay Rex!

German unemployment fell by 1,000... OK, now I know that this has the same feeling as removing a bucket of sand from a beach, when unemployment in Germany is 3.46 million! But, I never said that Germany's economic recovery was a tidal wave! It's smoking embers, that are in need of stirring, some small twigs, and leaves... My beautiful bride is an "expert" and getting a fire started like that, I should send her over to Germany, that would really kick the domestic demand to another level! HA!

Baby steps... That's the way we're going here... So, we've had IFO and ZEW think tank reports on Confidence all print stronger... We had the GDP surprise on the upside... And there was something else last week, but it slips my mind right now. The point here is that the Eurozone's largest economy is waking up... We just have to hope it doesn't hit the "snooze" button, now!

A reader sent me a note yesterday asking if I thought there would be a collapse of the Eurozone and thus the euro... If I had $5 for each time these stories have hit the streets, I would be sipping on a multi-colored drink in a tall glass with one of those tiny umbrellas, in a tropical setting... The point I'm making here is that on the outside Spain and Italy have problems... But what's changed? These two had problems before they joined the Eurozone, and have had problems since joining the Eurozone... Me? I totally believe that these two get down on their knees each night and give thanks for being allowed to join the Eurozone!

So... In case you missed my answer in there... I don't see that happening, at least not in the near future...

OK... Enough of that! The Reserve Bank of Australia ( RBA )met last night, and left rates unchanged, as suspected they would, and the following statement regarding their thoughts on the economy was relatively upbeat... However, the markets were looking for an indication of "when" the RBA would hike rates, and that didn't happen... So... The markets were disappointed, and when they are disappointed with a Central Bank, they take it out on the currency! So the A$ got pounded overnight.

Now... Aussie GDP for the 2nd QTR is going to print tonight, I would have to think that the RBA maybe had a peek at the report, and thus their gearing down the interest rate hike talk... So... We could be looking at even weaker A$ prices tomorrow morning... Unless, that is, 2nd QTR GDP is as strong as it was once believed it would be!

Did you see where Canada printed a HUGE Deficit last week? Not a good thing... But, the Canadian balance position has teetered back and forth between Surplus and Deficit, but recently has remained in the red... You know me and deficits, so, I put a red mark next to the Canadian dollar / loonie... But then, you hear news like last night... Get this! PetroChina has agreed to pay C$ 1.9 Billion for a stake in a Canadian oil sands project. PetroChina will buy 60% of Athabasca Oil Sands Corp.'s MacKay River and Dover oil-sands projects.

That's 1.9 Billion Canadian dollars / loonies that will have to be purchased... And You would have to think that China will be spending the "few loose dollars" they have in their pockets, which would put pressure on the green/peachback!

Canada is still in a recession, here folks... But... Could these be cheaper levels given the merger and acquisition activity? Only the shadow knows!

OK... So, here I am, 1 hour from when I began writing this morning, and all that glossy and shiny talk about the euro's rally is fading... The Big Dog has lost 1/4 euro in the past hour... So... I wasn't wrong after all!

OK, you'll love this, or maybe you won't, but I do, and since I'm writing this letter, I get to talk about it! HA!

Here's the title of the story that flashed across the screen, and of course, caught my attention... "Goldman Sachs Wrong on Economic Recover, Macro Hedge Funds Say"

You've got me on this one! I've got to read on... "Paul Tudor Jones, the billionaire hedge-fund manager, who outperformed peers last year, is wagering that Goldman Sachs Group, Inc. and Morgan Stanley to it wrong in declaring the start of an economic recovery."

"If we have a recovery at all, it isn't sustainable." One Hedge Fund Manager said... Calling this a "ski-jump recession, with short-term stimulus creating a bump that will ultimately lead to a more precipitous decline later."

WOW! These guys must be reading the Pfennig! OK, I kid, because these guys would never bet caught with the Pfennig in their hands... They probably put it between the pages of the "Economist" so that others think they're reading the Economist! HAHAHAHAHAHAHA!

Speaking of "must be reading the Pfennig"... I saw a thing that came across my desk yesterday that 57% of Americans would vote out every politician if the vote were taken right now! WOW! I didn't know the Pfennig was read by so many people! Recall, I said weeks ago, to "fire them all"... Well, let's hope that 57% grows to 95%, and Americans really do go through with their threat to vote them all out, if they continue to take us down the road to socialism / fascism / collectivism...

OK... You may recall a couple of weeks ago, I started asking you questions about the stock market rally, and it's ability to continue on... I truly believed that the stocks were overbought, and the P/E ratios were out of control... Now, I see quite a few jumping on that bandwagon, and calling for a stock market reversal.

Do we really think the Gov't will allow that to happen? Didn't the President himself, say that he thought it to be a good time to buy stocks... Isn't that sort of like a wink and a nod from the President that everything will be OK?

Beyond those conspiracy thoughts, let's just say the markets get to go where the participants take them ( I know, it's not reality, but let's just play along ), and stocks begin to reverse their gains from March... I would think it to take an adverse affect on the currencies and their gains since March too... Throw Commodities in there too!

Now, in the old days, I would look at a stock sell off and say, currencies will rise... "Honey, put on the red dress tonight, we're going out on the town!" but... These aren't the old days... This is the new improved way of throwing all risk assets into the same barrel! And I don't like it at all!

Ok... The Norwegian krone, traded with a 5 handle yesterday for the first time in a month of Sundays! It has traded back over 6 overnight... But, it was a good strong move from the krone yesterday nonetheless!

Well, today, we'll see the ISM Index (Manufacturing) from August, and for the first time in 19 months, it is expected to be above 50! New readers might wonder what I'm talking about here... But it's simple... 50 is a line in the sand that says any number below it represents contraction of manufacturing, and any number above it represents expansion of manufacturing... So, if it prints above 50 as expected one would say that manufacturing must be recovering...

Let's look at that closer... Come on, closer, closer, closer! We're experiencing a global recession, and global trade has been sketchy at best... But here's U.S. manufacturing showing expansion... And... The rise has been quite steady since March... With March printing at 36.3, April 40.1, May 42.8, June 44.8, and July 48.9... See the steady rise?

What else has happened since March? That's right, thank you for paying attention there in the back of the class! Yes, the currencies have been rallying VS the dollar... So, the dollar is much weaker than it was in March... The dollar index was 89.05 on March 5th, and today it is around 78... So... How did manufacturing / exports rise during this period of time? Because the dollar was weaker!

Let's keep that in mind, eh? For if we get an adverse affect on the currencies from a stock sell off, this recovery in manufacturing could go kaput!

We'll also see Pending Home Sales for July, and Vehicle Sales for August... Cash for Clunkers will push up the Vehicle Sales... But what happens next month?

Gold has backed off by about $8 in the past two days... It's a dip... Therefore it must be an opportunity to buy at a cheaper price! I was reminding all my friends that we spent the weekend together at a lake, that I had told them to buy Gold $400 dollars in price ago... I was booed out of the room at that point, because you see, they didn't buy it $400 dollars in price ago!

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

Currencies today 9/1/09: A$ .8355, kiwi .6820, C$ .9125, euro 1.4295, sterling 1.6220, Swiss .9440, rand 7.7975, krone 6.0275, SEK 7.15, forint 192, zloty 2.8780, koruna 17.9110, RUB 31.8325, yen 93.10, sing 1.4430, HKD 7.75, INR 49, China 6.8303, pesos 13.44, BRL 1.88, dollar index 78.35, Oil $69.69, 10-year 3.38%, Silver $14.75, and Gold... $949.50

That's it for today... Well, it's been an unusually cool summer here in St. Louis... We had two separate weeks of hot weather, and that was it! It normally is much hotter, with very high humidity... I wonder what that means for this coming winter! UGH! Just found out yesterday that I won't be going to Marco Island this December to speak like I had the previous two years... UGH! September is the last full month of baseball, and with the Cardinals in first place in their division, this should be a good month! There are two middle of the week day games in September, and I always enjoy those! So... Summer may be coming to an end, as along as September takes a long time to work through, I'll be OK! All righty then, let's get going on this Terrific Tuesday, the first day of September!

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

Spending More Than We (the U.S.) Make...

Chuck Butler — Thu, 06 Aug 2009 14:49:00 GMT

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In This Issue..

* Currencies trade in a tight range
* Pesos, loonies and reals in the spotlight...
* The Mogambo on a Thursday! YAHOO!
* Jobs reports dominate today & tomorrow...

And Now... Today's Pfennig!

Spending More Than We (the U.S.) Make...

Good day... And a Tub Thumpin' Thursday to you! Once again yesterday, we traded all day in a very tight range with the currencies. The ADP/Challenger data didn't give anyone a warm and fuzzy about the labor picture, and tax receipts are in the news... So, let's go to the tape!

OK, front and center this morning, I have to talk about this deal with tax receipts in this country. So, I've chronicled the April and June debacles for tax receipts, but just in case someone is new to class, and missed that, let's review... The U.S. used to count on the months of April and June for HUGE cash receipts from tax returns, but this year, both April and June's tax receipts were so bad, the expenditures were greater than the receipts! I highlight these two months because, they should have been positive months for the budget balance... If we can't post a positive balance in April and June, what's the rest of the year going to look like?

Well... Just for starters, tax receipts in the U.S. are the worst since the Great Depression, and if they continue on this path, could pass that awful period of time for the top spot! My friend, the Mogambo Guru, had this to say, in that "special" Mogambo way of describing something... Let's listen in...

"In fact, speaking of taxes, it makes your hat fly up comically off your head in astonishment when you realize that total income and corporate taxes are less than this year's federal budget deficit alone! And then you really start screaming your guts out in anger when you then realize that the total federal budget is 400% of total federal revenues! They are spending four times as much as they take in! Four times as much!"

You can read the Mogambo Guru on the Daily Reckoning... www.dailyreckoning.com

OK... Now that I've sufficiently raised my blood pressure talking about the fact that in a time when tax receipts are down because of the depression, the Gov't is spending more and more and more and more. I'll stop there, even though the Gov't isn't stopping their spending! And just like I used to bang on consumers for spending more than they made... The U.S. Gov't continues to do so... Consumers have gone to saving (YAY!), but the Gov't has not! As we all found out, you can't continue to spend more than you make forever... I wonder when the Gov't will figure this out... (probably when foreigners say "no mas" on financing the deficit spending!)

Well... The currencies, like I said at the top, remain in a very tight trading range... Three currencies stick out above the others though in the overnight trading...
1. Mexican pesos... Moodys affirmed Mexico's credit rating, which was thought might be revised lower, and the peso rallied on the news...
2. Canadian dollars/ loonies... After a day of consolidation trades due to the Central Bank Gov. once again threatening the markets if they take the loonie higher, the loonie went higher! Look for the Bank of Canada (BOC) to come out and make a statement, something to the tune of they are going to extend their interest rate pledge for a longer period. They will do this to once again attempt to keep a lid on the loonie...
3. Brazilian real... Oh brother! Somebody put a leash on this puppy! The real continues to edge higher and higher, and now is close to move past the 1.80 level.. The real has posted a better than 27% gain VS the dollar this year, with most of that move coming in the past 3 months!

Yesterday, there was a story in China Daily, that China was going to switch from Australian Iron Ore to Brazilian Iron Ore... Now... On the outside this looks bad for A$'s and good fro reals, right? Well... As I told the boys and girls on the trading desk yesterday, I think this is more posturing by China, after some of their businessmen were arrested in Australia and charged with espionage. We'll have to keep an eye on this, to see if there's more to this than posturing...

The news didn't hurt the A$ yesterday... In fact the A$ is trading near a 10-month high this morning, after posting a surprising jobs report for July last night... Australian employers added jobs in July. Once again, the jobs markets sparks the A$ higher, just like in the go-go days before the deleveraging meltdown last year.

I'll tell you what this report does do more than anything... It gives the markets the idea that the Reserve Bank of Australia (RBA) is definitely on track to raise interest rates next year... And some traders are now thinking that the RBA moves rates higher before we turn the calendar page on 2009! WOW! Now that's aggressive thinking! So, you can see why the A$ took the news in China Daily, and let it roll off its back like water on a duck's back!

In the U.S. yesterday... The ISM Index for Services (non-manufacturing) printed, and fell unexpectedly in July... The ISM Services Index printed at 46.4 following the prior month's 47.0 reading. The weakening was broad-based amongst the sub-indices. New orders declined to 48.1 from 48.6, business activity fell to 46.1 from 49.8 and employment softened to 41.5 from 43.4.

But... To offset the ISM we saw Factory Orders rise, but that data was for June... I really don't understand why it takes two months to get data like this to the markets!

Today, we'll see the Weekly Initial Jobless Claims, which have fallen below 600,000 each week, but remain very high at 580,000, so nothing to get the "recovery is here campers" all excited... Today's report is just an appetizer for tomorrow's Big Jobs Jamboree...

Economists are expected a HUGE drop in the jobs lost figure for July, dropping to 327,000 from June's 467,000 (after BLS adjustments, of course!) I really don't know where they think the jobs came from, but if they're right, then good for the U.S. worker! And, that kind of number, although it will seem strange to say this, and for you to hear it when you read it, but... A good Jobs Jamboree number will be negative for the dollar...

Why? Because... As I've been telling you over and over again, like a broken record, or for you youngsters, a scratched CD... The dollar was a safe haven last fall and winter with U.S. Treasury purchases... As the losses mount on those "safe haven" purchases of Treasuries, and things begin to look brighter those "safe haven" trades are reversed, and than means the dollar gets sold...

You know for some time now I've written about the Treasury Bubble popping... And those darn Fed Reserve purchases of Treasuries kept a lid on the losses mounting... But, it appears that the cartel, I mean Fed Reserve has backed off their purchases... And Treasury yields are once again on the rise... And for those of you new to bonds, they work like this... As a bond's yield goes up, the price goes down, and vice versa... So... In January this year, the 10-yr Treasury yield was 2%... In June it reached 3.80%, then the cartel, I mean Fed Reserve bought Treasuries, and the yield on the 10-yr fell to 3.12%... But in the past three weeks, those yields have risen once again to 3.73%... Looks like the Bubble popping is once again on the table, eh?

You've got the U.S. issuing more and more Treasuries to finance their deficit spending, and on the other side you've got Treasury holders unloading them on the markets... That looks like a perfect storm brewing, folks...

The Bank of England (BOE) and The European Central Bank (ECB) are meeting as I write... Don't expect anything earth shattering from either meeting... There is hope that the BOE will announce an end to their Quantitative Easing (QE), which I talked about yesterday. Now that would be earth shattering, but... There's no guarantee that the BOE sees things the way the markets want them to be seen!

Gold backed off yesterday as it saw profit taking. The shiny metal had traded over $670 yesterday before seeing the profit taking. I would think that the inflation hedging buying of Gold would really be strong for the remainder of this year, as my inflation fears really begin to grow stronger every day, you know I'm alright now... HA!

Currencies today 8/6/09: A$ .8410, kiwi .6705, C$ .9320, euro 1.4390, sterling 1.6975, Swiss .94, rand 8.05, krone 6.02, SEK 7.1350, forint 187, zloty 2.8825, koruna 18.04, yen 95.50, sing 1.4350, HKD 7.75, INR 47.73, China 6.8312, pesos 13.04, BRL 1.8130, dollar index 77.79, Oil $71.56, 10-year 3.73%, Silver $14.69, and Gold... $961.05

That's it for today... The boys and girls in the office here are participating in a huge fund raiser tonight, and I have to say I'm impressed with their attention to detail. You see, the fund raiser is around a pinewood derby. Last year, they won all the trophies for designing their car like the one in Animal House, and dressing in togas... This year, they designed a car to look just like the one in the Flintstones, and they are all dressing like the characters from the cartoon! I bet they win again! Can you believe that NFL teams are in training camps? WOW! OK... Time to get this Tub Thumpin' Thursday going!
Chuck Butler
President
EverBank World Markets
1-800-926-4922
1-314-647-3837

Home sales improve...

Chuck Butler — Fri, 24 Jul 2009 14:29:00 GMT

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In This Issue..

* Home sales improve...
* Are we there yet...
* Intervention talks...
* Buying on dips...

And Now... Today's Pfennig!

Good day...and a Fabulous Friday to you. As I was sitting here this morning collecting my thoughts, it just hit me like a ton of bricks that we're already towards the end of July and next weekend brings us into August...where's the pause button when you need it. Anyway, yesterday started out like any other quiet morning so far this week but we did see a nice little run in the currencies only to see profit taking as we moved into the late afternoon. As I turned the computer screens on this morning, I see where the overnight markets brought us right back up to the levels we began with this time yesterday. The big story that moved the markets was the better than expected housing numbers that, again, gave investors that warm and fuzzy feeling that I touched on yesterday. Since I already let the cat out of the bag, I'll jump right in...

Sales of existing homes rose for a third consecutive month in June to an annual rate of 4.89 million, which was better than the forecast of 4.84 million that most economists were expecting. May's figure was actually revised down to 4.72 million from the original posting of 4.77, so the month on month rise came in much higher at 3.6% than the expected 1.5% increase. June is traditionally seen as one of the busiest months in the real estate market as families try to make the adjustment in between school years so it wasn't exactly a surprise to see better than expected numbers.

Lower borrowing costs, foreclosure driven price declines, and tax incentives also contributed to these higher numbers. This is certainly good news to hear and I hope the bottom has already passed us by or is near, but as I mentioned yesterday, I won't get too excited until unemployment gets back to a supportive level and the full backing of the consumer underpins this move. If anything, this may end up being a protracted bottom and a slow road to normalized levels.

We also had the weekly initial jobless and continuing claims released yesterday but was overshadowed by the positive housing numbers that came out. The initial jobless figure came in 30,000 higher than last week to 554k but continuing claims backed off a bit to 6.23 million from last week's revision up to 6.31 million. Bernanke said earlier this week that job insecurity, together with declines in home values and tight credit, is likely to limit gains in consumer spending. With that being said, it still looks like we have plenty of breakers to get through before we reach the safety of calmer waters.

Today doesn't bring us much in the way of reporting as the only data due out is the final printing of the U. of Michigan consumer confidence number for July. The preliminary figure was released a couple of weeks ago and fell more than forecast to 64.6 from June's 70.8 reading. This generally isn't a big market mover but its expected to settle in a tad higher at 65. This one is a tough call as the stock market has risen quite a bit in that time period but we'll see if job and income concerns keep this month's number grounded. Since this is all we get today, it will be interesting to see how much attention the markets give this report.

Just as we saw the Dow hit the 9000 mark for the first time since January and the euphoria of the housing market has gained momentum, well respected economist Nouriel Roubini, had a different take on things. In a report released today, concern was expressed that a perfect storm of fiscal deficits, rising bond yields, soaring oil prices, weak profits, and a stagnant labor market could blow the recovering world economy back into a double dip recession. He went on the to say that its getting more likely unless a clear exit strategy from the massive monetary and fiscal stimulus is outlined even before it is implemented. I guess the moral of the story here is to proceed with caution and buckle your seat belt because the ride could get bumpy.

Moving on to currencies, the Swedish krona and the Canadian dollar both posted 1% gains yesterday while the Japanese yen, New Zealand dollar, and Swiss franc rounded out the bottom. The two currencies at the top of the list had much different reasons for ending the day where they did as the krona traded higher primarily on the back of risk appetite. As investors feel more comfortable with buying riskier assets, the thinner traded currencies like the krona, benefit even though Sweden's unemployment rate rose for a second month in June to 9.8%.

The Canadian dollar, on the other hand, rose to a 7 week high as the central bank said the recession is nearing an end brought on by higher commodity prices and consumer confidence. The central bank kept rates at the record low of .25% a couple of days ago and reiterated they will stay there for a while unless inflation becomes a problem. Since Chuck is across the border in Canada right now, it's a perfect time to get our daily dose:

"I was reading the local paper the other day, and the business section had a big story on the Bank of Canada's (BOC) Gov. Carney and how he vows he will intervene to keep the loonie from going higher... In the last two days since that story appeared, the loonie has done nothing but gain vs. the green/peachback... 91-cents it traded through yesterday! I can't help but think that traders are beginning to believe that Central Bankers are imitating the boy who cried wolf... We had the Brazilian Central Bank, the Swiss National Bank, and now the BOC... They all are giving verbal warnings about traders taking their currencies higher...

The Central Bankers do this under the disguise of "we don't want deflation in our economy" opting for the weaker currency to introduce inflation... I think this is all a smokescreen! I think this is a coordinated effort to keep their currencies from going hog-wild VS the dollar... The Central Bankers all know that the dollar is teetering, and without speed bumps we could see a mad exit for the door for dollar holders... Just what I think... Nothing more, nothing less... Just my thoughts... "

Thanks again Chuck, its always great to get your insight. Since we're already talking about central bank intervention, I saw a report today that has some looking for the Swiss National Bank getting back into the game. According to the Big Mac index, which is a purchasing power parity figure using the cost of a Big Mac as the measure, the Swiss franc is the second most expensive in Europe. Its just a fun little tid bit I thought would be good to break the monotony. Anyway, the Swiss franc is largely influenced by the euro and risk appetite so while the SNB may step in, there's really no way to stop the moving train. As Chuck has said many times before, the markets have much deeper pockets than a central bank.

As I got to the office yesterday, the euro was hovering around 1.42 and climbed just shy of 1.43 to 1.4291 before we saw the profit taking drag it down to 1.4150 on my out the door. I saw a report where the euro had established a base at 1.4050 and calls to buy on dips, which is certainly a strategy that would be consistent with our views. As I touched on above, the Asian and overnight markets have run things right back to the levels from yesterday but as the European traders hand the books to those in New York before heading out for the weekend, the dollar is still getting sold. Don't look now, but I see the euro at 1.4250...hopefully we can hold on to this and finish the week on a positive note. It looks like the euro is also getting some help from within as reports showed the contraction in European manufacturing and services slowed more than expected and German business confidence improved.

While I'm talking about Europe, we had some positive new come out of the UK as retail sales quadrupled the estimate and surprised the markets with a June gain of 1.2%. Year over year sales are actually up 2.9% and has economists looking for a near zero GDP figure in the second quarter. HSBC actually raised their forecast for the pound from 1.60 to 1.75 by year end 2010 and justified the call by saying the likelihood of an interruption in the asset buying program from the BOE could be as soon as next month. They also feel rates will rise before the Fed but this is a long way off and a lot can happen. Just like the US, I don't see enough at this point to be comfortable buying this currency, but hey, we've been early on some calls too.

One of our newest multi-currency CDs, the Global Power Shift CD, has also been keeping the phones busy lately. With commodities and commodity based currencies leading the charge, it seems like we talk about at least one of them everyday, so I thought I would give it a mention. This CD combines the Australian dollar, the Brazilian real, the Canadian dollar, and the Norwegian krone into one instrument and just provides you with a little bit of everything...not a bad way to provide that hedge against a weakening dollar and gain exposure to commodities at the same time. Well, its about that time and I need to wrap it up so on to the big finish...

Currencies today 7/24/2009: A$ .8170, kiwi .6573, C$ .9214, euro 1.4230, sterling 1.6462, Swiss .9353, rand 7.7236, krone 6.2308, SEK 7.4710, forint 188.04, zloty 2.9538, koruna 17.9280, yen 94.86, sing 1.4407, HKD 7.7500, INR 48.2750, China 6.8316, pesos 13.1903, BRL 1.8991, dollar index 78.686, Oil $67.25, Silver $13.7850, and Gold... 952.86

That's it for today...its your Friday!! I just wanted to send congrats toward St. Louis native Mark Buehrle, pitcher for the Chicago White Sox, as he became the 18th player to throw a perfect game...truly a remarkable feat. Our office has a team in a local kickball league so I wonder if our pitcher, Tim Smith, was able to match that performance...lol. It was a rough go this morning as the words just didn't come all that easy for me but hopefully I was able to make some sense of it all. Alright, its really getting late so I need to get going here. Have a great Friday and a wonderful weekend...Until next time
Mike Meyer
Assistant Vice 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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* 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

A Dollar Roadblock!

Chuck Butler — Tue, 02 Jun 2009 15:43:11 GMT

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In This Issue..

* Euro goes back and forth over 1.42...
* Geithner make another promise to China...
* RBA leaves rates unchanged...
* The Mogambo on a Tuesday!

And Now... Today's Pfennig!

A Dollar Roadblock!

Good day... And a Terrific Tuesday to you! Well... The currencies, led by the euro, ran into a dollar road block yesterday, not once, not twice, but three times... The first two times the euro traded over the 1.42 figure, it fell back, but recovered to again try to remain over 1.42... It was a classic case of profit taking at a line of resistance... But the third time, was no charm for the euro, and thus it ended the day and night sessions below 1.42... But hey! Has this run from 1.2578 on March 1st, been something or what?

I see where UBS believes this is it for the euro... Sort of like the thought that a star burns the brightest right before it burns out... Hmmm... I guess they believe that the U.S. deficit problems are going to go away... Apparently, they drank the kool-aid from U.S. Treasury Sec. Geithner, who told the Chinese that the U.S. was going to shrink the deficit... He also told them that their assets were "safe"... Ty sent me something on this that he found yesterday...

"Chinese assets are very safe," Geithner said in response to a question after a speech at Peking University, where he studied Chinese as a student in the 1980s.

His answer drew loud laughter from his student audience, reflecting skepticism in China about the wisdom of a developing country accumulating a vast stockpile of foreign reserves instead of spending the money to raise living standards at home.

I guess I have more in common with a Chinese student than you would have thought, because I would have been laughing out loud too!

There's a story running on the news wires this morning that the U.S. recession ended in May... Wait a minute! Did the ISM Manufacturing Index soar back to the expansion number of 50 in May? No... How does 42.8 sound? Now... We have to go back to January of 2008, when I kept writing about how the U.S. had entered a recession, although the Gov. officials (read dolts), and the NBER, the official recession caller, said otherwise... The reason I was so adamant about the recession at that time is that the ISM Manufacturing Index number slipped below 45, for the second consecutive month... My research over the years showed that any time that happened, the NBER would follow it up months later with a call that we had entered a recession!

So... "is this time going to be different?" I think NOT! And... By the by... That saying really gets my blood boiling, as it reminds of the dolts that kept saying that about 8 years ago!

And here's how I view this manufacturing thing... First of all you have to deal with delays and such, but in a simplistic view... The dollar was strong through February, and the ISM Manufacturing Index was in a free fall... That makes sense, right? The cost of exports was increased, thus it affects manufacturing... But... The dollar began its current decline on March 1st... And by May, the ISM is recovering... Dollar down, manufacturing up... Want to have manufacturing a part of an economic recovery? Guess what needs to happen... Awww... You know the answer!

OK... Back to "other stuff"... My friend, Ian Mathias over at the 5-minute Forecast, which I've told you numerous times is an excellent read each day, said two things yesterday that really caught my attention...
1. Your family's share of the government debt is now over half a million dollars. A record $546,668, to be exact.

That cheery Monday stat comes courtesy of a USA Today study, which claims that each American family's share rose 12% in 2008. That's $55,000 in new government debt last year for every US household - thousands more than the median household annual income.

And 2. He quoted me in the "5" and introduced me as "Chuck Butler, the man, the myth, the legend."

That Ian... What a guy!

OK, now that you've stopped laughing hysterically, I'll get back to the task at hand! But... Is that debt number not staggering? And just wait folks... Just wait until the baby boomers begin to retire in huge numbers, and begin drawing on Social Security and Medicare...

U.S. stocks were up 221 points yesterday, and the euro and other currencies backed off... Hmmm, another sign that the link has been broken? I would say yes... But I think today could be a real indicator, in that stock futures are down right now... But the euro is rising, at least it's higher than it was when I first came in this morning. (over an hour ago!) In fact, the single unit just touched 1.42 once again, after sitting at 1.4123 when I came in!

Down Under... The Reserve Bank of Australia (RBA) left rates unchanged (good for them!) and there was some good news for the economy too, so... The A$ has been underpinned, and poised for a renewed attack on the green/peachback! (for new readers, when I say green/peachback I'm talking about the U.S. dollar, who has changed its color to peach and you can't just refer to it as the greenback any longer... At least I can't! HA!)

Australia's Current Account Deficit narrowed in April to A$4.6 Billion, or 5% of GDP... Still too high for my liking, but, with China pushing the envelope on commodities, investors can look beyond just the deficit in Australia, as long as it keeps narrowing, which it has overall in the past year!

The RBA's statement following the meeting was a bit cautious, and leads me to believe they're leaving the door open to a rate cut in the future... I guess they wouldn't be prudent if they just closed the door! So... When this was first announced the A$ took a hit... But has recovered from that initial hit, and like I said above, poised for a renewed attack on the green/peachback...

The Canadian dollar / loonie continues to bask in the rising crude oil price, which reached $68 yesterday. But there's more to the loonie than crude oil... For instance, yesterday, the 1st QTR GDP printed and was pretty bad at -5.4%... However, it was widely expected that the number would be much worse...(-7.3%!!!!) Now, I know this doesn't sound like a huge endorsement for Canada, saying their GDP was a -5.4% in the 1st QTR, but... The economy WAS stronger than expected!

Yesterday, I talked about the commodity currencies of Australia, New Zealand and Canada, and unfortunately, I left out Brazil! UGH! How could I do that? In this month's Review and Focus newsletter (available to World Markets clients only) I spent about a full page on talking up Brazil... Remember though... Brazil is considered an Emerging Market, and therefore requires an additional disclosure to buy it... And... Just because I like Brazil, it doesn't mean it can't post losses! The markets will do what the markets want, folks...

Speaking of Emerging Markets... Recall last week I talked about the Emerging Markets soaring and the amount of money flowing into these markets? Well... Yesterday it was reported that in the past 4 weeks, over $12 Billion has flowed into Emerging Markets, pushing the MSCI Emerging Markets Index (that tracks Emerging Markets) to a 19-month high!

Yesterday, the data cupboard produced the ISM Index that we talked about earlier, and one of my faves... Personal Income and Spending... Remember when every month you could count on these two to show that U.S. consumers outspent what they made... But those are days gone past... These days, it's all about recovery for personal balance sheets... And while Income isn't going higher, spending is going down... Oh, and the rise in Personal Income in April showed a .5% rise (consensus was for a drop of -.2%)... Turns out to be nothing more than increased payments to unemployed workers... Spending did fall -.1% in April, and the deflation people are all over that... But deflation is going out the door folks... Inflation, while probably a little too early to call is now on everyone's minds...

Today's data is somewhat secondary with Pending Home Sales for April, and Vehicle Sales for May... Not much to draw from there... So... As they say in Star Wars... Nothing to see here, move along...

Gold lost some ground yesterday... I guess $985 was just too pricy, eh? Well, in my mind, that's nothing more than yet another opportunity to buy at cheaper levels! But... Remember last week when I told you about how Silver had it's best month (May) in 22 years? Well, Silver is still outperforming Gold... I saw in the Daily Reckoning (www.dailyreckoning) yesterday that Byron King said that he believed we would see $20 in Silver before we saw $1,200 in Gold... Hmmm... Hey! Either one or both is just peachy with me!

And then my friend, the Mogambo Guru, had this to say about owning Gold and Silver... "Of course, if you have gold, silver and oil, then the "we" in "we're freaking doomed," doesn't actually include "you" - as in "if you are the owner of gold, silver and oil, then you are indeed fortunate, as they are the only things upon which you can rely during the coming economic cataclysm which won't sell you out and stab you in the back, unlike your family and co-workers, which you always suspected, so don't act surprised."

Ahhh, the Mogambo on a Tuesday... Sure makes it Terrific!

Currencies today 6/2/09: A$ .8140, kiwi .6530, C$ .9210, euro 1.4220, sterling 1.6440, Swiss .94, rand 8.05, krone 6.17, SEK 7.47, forint 197.70, zloty 3.1510, koruna 18.83, yen 95.75, sing 1.4380, HKD 7.7520, INR 47.01, China 6.8307, pesos 13.25, BRL 1.9511, dollar index 78.79, Oil $67.85, Silver $15.67, and Gold... $977.02

That's it for today... A good game by little buddy Alex last night, as he got two hits, one of them a double... As slow as he runs, you have to understand how far he hit a ball to get him to second! (that's why he plays center in football!) But two hits... Good game! Too bad the Cardinals couldn't muster up enough hits to win! That was awful news wasn't it, about the Plane going down in the Atlantic? If there are no survivors found, it would be the biggest air disaster since 2001... The All-Star Game in baseball is going to be here in St. Louis this summer (next month)... What a huge deal for baseball's best fans! I can't wait! That's about all I can think of to talk about today... Unless... You want to hear my thoughts on how History recalls how great the fall can be...While everybody's sleeping...Nah, that would take too long! never mind! I hope you have a Terrific Tuesday!

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