Daily Pfennig : Citigroup

It's Cinco De Mayo!

Chuck Butler — Tue, 05 May 2009 14:27:14 GMT

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In This Issue..

* A Huge currency rally...
* The games people play now...
* RBA leaves rates unchanged...
* Brazilian real is the daily winner!

And Now... Today's Pfennig!

It's Cinco De Mayo!

Good day... Hola! And a Terrific Tuesday to you! Well, today is Cinco De Mayo... It's a fun day so go have some fun! A few years ago, I talked about Cinco De Mayo, and some guy took exception to it, and called me a really nasty name... So, I won't get all flowery about the day, except to say, go have some fun!

Of course, to me, the saying "go have some fun" is a staple of my being! Especially these days! I realize that I need to have "more fun", but work, and all that gets in the way, darn it! HA!

OK, enough of that! Well! You should have seen that currency rally yesterday! WOW! The Big Dog, euro, traded all the way to 1.34 and change, saw profit taking, which caused it to drop back down, only to end the day moving past 1.34 again... Overnight, the euro hit 1.3438, but once again, profits and the fact that stock futures are showing weakness have brought the Big Dog back under 1.34... Before I left for Bermuda, Chris mentioned that the euro was having a problem getting past 1.31... Well, that's in the rear view mirror now, eh? And I would like to think that eventually so would 1.34... Not that I'm rooting for the Big Dog... I say that, because then fundamentals would be in play once again... It's been a long time, now I'm, coming back home, I've been away now, oh how, I've been alone...

The Aussie dollar (A$) also saw a nice bid all day long yesterday, and moved past 74-cents, and remained there overnight! The Reserve Bank of Australia (RBA) left rates unchanged last night, and delivered a fairly balanced statement afterward... I like their approach, as they keep reminding the markets that they need to see what's in the pipeline after all the previous rate cuts! This non-move was very much what the A$ needed to continue its march higher!

Now... I don't like having to say this, but these strong currency moves were helped along by the strong performance (+214 points) in stocks yesterday... As we've been discussing for some time now, it's just like when one Emerging Markets currency gets whacked, all Emerging Markets end up getting whacked... Stocks and currencies are considered "risk assets", and have only on occasion over the years, been lock-step, with each other. So... When "risk assets" are going good, all "risk assets" get going... And vice versa... And... Like I keep saying, this is rare to see this, but we're seeing it anyway, and judging from the speakers at the Total Wealth Symposium in Bermuda last week, it had better end soon enough, for those speakers all believe this stock market rally is nothing more than a bear market rally, and doesn't have the legs to make us all forget the rot on the vine here in the U.S....

Whew! That was long run-on sentence, that I should go back and fix... But, hey! People talk like that, why not write like that! HA!

It looks like the European Central Bank (ECB) will meet this week, and some of thoughts in the markets here, is that the ECB will move rates lower. Those thoughts are also responsible for the drag on the euro to bring it below 1.34 this morning... You know what gets me though? Everyone in the world that follows these things has known since the Central Bank meetings were announced in December that the ECB would be meeting this week. And do you think they just had a V-8 moment this morning, and remembered the ECB might cut rates? This is all crazy! Yes, they know, and they did know, all the time the euro was rising like the Phoenix bird from the ashes the last 4 days.

Remember, a month or so ago, I told you about the games that people play now, every night and every day now? They have to do things like this to keep the euro from going off on a moon shot VS the dollar... The dollar's rally since July 2008, is looking very worn out... Shoot Rudy, even Treasury yields are rising, which indicates the unwinding of all those safe haven trades... Now, I'm not saying that this is in "full swing" but it sure is showing signs... So, as I've explained a few times in the past, if the "safe haven" buys get unwound, the pressure on the dollar will be fierce... So... If the ECB "remembers" to remind the media that they have a rate meeting this week, after it looks like the euro is going to the moon, then you can put that down to "managing the rise"...

So... Have you heard of the Chiang Mai Initiative? It's an agreement by Asian nations that will create a $120 Billion fund to serve as a "liquidity pool" by the end of the year. This money will be used to promote growth in the region and to defend currencies and guard against financial ills arising from the economic crisis.

I yelled across the desk yesterday when this news was announced, and Ty Keough said, "They've come a long way from a decade ago"... This was in reference to the Asian Crisis that did happen a decade ago, when all Asian countries melted down, led by Thailand... It's taken these Asian countries a decade to deal with this, but at least they have done so now! I like this idea... And on a side bar... About 5 years ago, the Big Boss, Frank Trotter, and I put our heads together on an idea for an Asian Currency Union (like the European Union) with a single currency we called the "pan"... Could this be the baby step in that direction?

Speaking of Ty... Did you know that he once played on the U.S. national team, and would have played in the Olympics, but President Carter boycotted those Olympics held in Russia because Russia had invaded Afghanistan?

OK... Ty also sent me a story from the Financial Times (FT) last night regarding China... You'll want to read these snippets closely...

"China and Argentina in Currency Swap"... OK, so what does that mean? Well here's the FT to explain... "China, which is pushing to end the dominance of the dollar as a worldwide reserve, has agreed a 70 Billion renminbi ($10.24 Billion worth in dollars) currency swap with Argentina that will allow it to receive renminbi instead of dollars for its exports to the Latin American country."

Folks... The Chinese are serious about ending the dollar's dominance as a reserve currency. They've proposed using a new SDR (Special Drawing Rights) basket consisting of a veritable Whitman's sampler of currencies... And now this... You've got to think that they are working on more of these types of currency swap agreements...

And then there was this... Still no "official" word on the results of the stress tests... Just news that Bank of America (BOA) and Citgroup will both have to raise $10 Billion in Capital... The Wall Street Journal reported that yesterday... The longer we wait, the more the rumors will circulate about the results... For instance, there's a rumor going 'round, that someone's underground, no wait! The rumor is that 10 of the 19 so-called Big Banks, that had to undergo the stress tests will be told they need to raise more capital... That number (10) has come down though, just yesterday the rumors had it at 14!

OK... The "winner" for yesterday's currency run VS the dollar, was the Brazilian real! I looked at the currency screen late in the day yesterday and saw the real had gained 2.76% VS the dollar in one day! Ok... That's a good day, but what about the recent performance of this once high flying currency (before the selling began in July last year)? Well... Not too shabby... The past 3 months has seen the real gain nearly 8% VS the dollar!

Another high yielder that had a strong performance yesterday was the Mexican peso... Just in time for Cinco De Mayo! Yes, the Mexican militia defeated the French... But it's not, as most people think, Mexico's Independence Day.. That's September 16... Oh No! I did it, I talked about Mexico... I can see the emails now! UGH! But the peso did have a strong performance yesterday!

The data cupboard is pretty empty today, after yesterday's second tier reports of Pending Home Sales, and Construction Spending printed, and left us guessing what really is happening in the economy... Today, though, we'll get a clear, concise, view of the economy from our Fed Chairman, Big Ben Bernanke! OK... I can wish can't I?

Norway's Norges Bank meets today... I'm not expecting a rate move here... But then, you never know for sure these days!

And finally... The price of Oil has really moved up in the past week... It's done this before a few times, only to fall back.

Currencies today 5/5/09: A$ .7455, kiwi .5820, C$ .8540, euro 1.3390, sterling 1.5090, Swiss .8855, rand 8.2875, krone 6.5050, SEK 7.9175, forint 212, zloty 3.25, koruna 19.82, yen 99, sing 1.47, HKD 7.75, INR 49.43, China 6.8192, pesos 13.21, BRL 2.1125, dollar index 83.80, Oil $54.50, Silver $13.07, and Gold... $902.55

That's it for today... As if I don't get up early enough... I woke up for some unexplained reason 20 minutes before my alarm was to go off this morning... No sense trying to go back to sleep for 20 minutes! UGH! It's down to the last 3 hours for my fave show 24... We actually saw Chloe actually cry last night! (for 24 watchers you know that's a big deal!) I was way off yesterday in my thought that I had two weeks before traveling again... The Las Vegas Money Show is next week! UGH! I'll be doing a web-cast at that show on Gold... I've never done a talk strictly on Gold, so this should be interesting... Any way, I believe all you have to do is go to www.moneyshow.com and register for my web-cast, and then you'll be able to watch it "live" from Las Vegas! I had better get to work on that Gold presentation, so I don't look like a dork... No wait, no amount of work is going to help me with that! HA! Cardinals' centerfielder, Rick Ankiel had to be carted off the field last night after running into the outfield wall... Sure hope Rick is OK... All righty then... I hope your Cinco De Mayo is fun, and you have a Terrific Tuesday!

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

A building block...

Chuck Butler — Mon, 16 Mar 2009 13:57:08 GMT

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In This Issue..

* A quiet Friday...
* Euro hits 1.30...
* Chinese concern...
* This week in data...

And Now... Today's Pfennig!

A building block...

Good day...And a Marvelous Monday to you. Its hard to believe that Monday morning is already upon us, where does the time go? Just as the currency market took a breather, our cold weather from last week decided to follow suit as it turned out to be a nice late winter weekend. Friday was fairly uneventful as the currencies traded in a tight range throughout the course of the day so it will be interesting to see how this week shapes up. Let's see if the currencies can build from last week...

Volatility was basically non-existent during Friday trading with less than a .50% difference between the high and the low of the dollar index. The overall bias, however, was a weaker dollar and the euro held onto 1.29 for a majority of the day and was near 1.2920 as I left the desk. The pound and Swiss franc were the only two currencies left on the bench last week with losses of about 1% and 2.5% against the dollar respectively. The rest were able to turn in a decent week with the Swedish krona on top of the pile posting a 6.5% gain.

The SEK got beat up last month on concern of its lending exposure to the Baltic states but traders have come in not only on thoughts of it being oversold but also as risk aversion has eased a bit. We saw Swedish inflation fall to a 3 year low of .9% as rising unemployment and slower demand are keeping prices contained. Their central bank, the Riksbank, will meet on Friday and most are looking for a .25% cut to .75%, so we'll see if there are any surprises. The bottom line, not only with this currency but all of the other small European currencies, is that the euro needs to appreciate in order to provide any type of sustained traction.

I saw a report where Citigroup's technical analysis team said that if the euro trades above 1.2992, we could see sharp appreciation and a break out of this range bound trading pattern we have seen for a while now. They didn't provide any estimates as to how much but we did see he euro snap out of its 4 week decline last week. Its nice to see that we aren't the only ones out there taking notice that a turn in the currency market could be inching closer.

As I came in this morning, we had a sizable sell off in the dollar during overnight trading with the euro shooting up to 1.3040. It looks as though investors in Asia were feeling better after the results of the G-20 meeting. The Asian stock markets were up on the day as the G-20 finance ministers vowed to combat the global recession by working together to clean up the toxic assets and OPEC refraining from cutting output. We blew right past that 1.2992 figure here this morning so we should get a better idea of its staying power as the day progresses.

China threw a cat among the pigeons as they voiced concerns about their holdings of US Treasuries and wanted assurances their investments are safe. Premier Jiaboa said "We have lent a huge amount of money to the US and I request the US to maintain its good credit, to honor its promises, and to guarantee the safety of China's assets." A Chinese analyst commented that they are worried the US may solve its problems by printing money which would stoke inflation and if the US can make sure this won't happen, then China should continue to invest.

President Obama quickly responded to ease those concerns by saying in a press conference "Not just the Chinese government, but every investor can have absolute confidence in the soundness of investments in the US." Continued Chinese investment in Treasuries are crucial in financing the stimulus packages. I wouldn't think any type of a major sell off is likely but I could see them backing off a bit if they don't feel comfortable. It will be interesting to see if anything changes going forward, but I don't blame them for wanting some type of re-assurance.

With not much to report on from Friday, we can look at what is due out here in the US this week. This morning we have Empire manufacturing, TIC flows data from January, and February industrial production along with capacity utilization. The TIC figures are going to be a big one, which are supposed to show an increase, and will tell us for sure if foreigners were still buying up US financial assets. The rest of the data out today is expected to disappoint.

Tuesday brings us supply side inflation with the producer price index and Wednesday will give us CPI along with the 4th quarter current account balance. The Fed meets on Wednesday as well and are expected to keep rates unchanged but any comments or statements that result could be market movers. We round out the week with jobs numbers and leading indicators, both of which are expected to be worse than previous figures.

All in all, the data out this week points toward a continuation of the recessionary pressures and not much in the way of good news. Lawrence Summers cautioned that monthly job losses of 600k+ are unlikely to end soon and job cuts are probably not going to stop imminently. Consumer spending is the back bone of our economy so as job losses continue to mount, its difficult to see any type of sustained improvement.

I'll finish up with gold today as it continues to quickly bounce off of the minor sell offs we have seen. The actions taken by the Swiss National Bank last week have tarnished its view as a safe haven investment in some eyes, so gold would seem to be one of the few assets left classified as such. UBS said a couple of weeks ago they see gold trading as high as $1,100 within the next three months, which doesn't seem too far fetched especially as support levels continue ratcheting upward. We've seen a small pullback so far with the risk takers out in the markets this morning but its still holding onto $920 as I write. Until tomorrow...

Currencies today 3/16/09: A$ .66.19, kiwi .5309, C$ .7900, euro 1.3027, sterling 1.4221, Swiss .8452, rand 9.9158, krone 6.7672, SEK 8.4452, forint 227.89, zloty 3.4308, koruna 20.4326, yen 98.26, sing 1.5329, HKD 7.7528, INR 51.3350, China 6.8382, pesos 14.5153, BRL 2.3051, dollar index 86.667, Oil $44.24, Silver $13.0750, and Gold... 924.52

That's it for today...Hopefully everyone was able to enjoy their weekend, I know I did. We have March Madness to look forward to, so get your brackets filled out and the best of luck to you. It was a good weekend for our Missouri Tigers as they won the Big 12 championship for the first time and pulled a number 3 seed in the tournament. Anyway, we have a busy week ahead of us so I had better get to work. Have a Marvelous Monday!

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

A Day Of Healing...

Chuck Butler — Thu, 12 Mar 2009 14:54:08 GMT

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In This Issue..

* Currencies have a mini-rally...
* Only to see profit taking overnight...
* Gold rebounds too!
* Retail Sales on board today...

And Now... Today's Pfennig!

A Day Of Healing...

Good day... And a Thunderin' Thursday to you! It was a Tub Thumpin' Wednesday yesterday for the currencies and Gold, after seeing them back off earlier this week! I'm in Jacksonville for a company event, and then on Friday morning, I head south to start my spring vacation! But first, some work to do here, and then on to the south!

It was 29 degrees when I got in the car to leave for the airport yesterday morning... And it was 77 degrees when I finally arrived in Jacksonville! YAHOO! But even as loud as I can say YAHOO for the warm weather, which I've said over and over again, I've got to go where it's warm, it wasn't as loud as a the YAHOO yelped by currency owners as the euro led the currencies higher and higher all day long!

And the Gold holders weren't far behind, as the shiny metal got back to $900, after seeing 3 days of selling in a row! A lot of the people here asked me about Gold, and I had to tell them the same thing I've told you dear readers for some time... These are uncertain times, and in uncertain times, it calls for the "uncertainty hedge"! And that's what happened today... Stocks, which had rallied on the Citicorp news the day before, failed to follow that up... So, what's a stock jockey to think? I'll give you my two cents here, which I told the Vice-Chairman last night... And that is... Do you believe that Citicorp really had a profitable first two months? I mean, just a couple of weeks ago they were begging for more TARP money! Keep this in mind... Liars figure, and figures lie... Not that it wasn't true, but come on! They were begging for money just a couple of weeks ago when they supposedly were booking profits? OR... Maybe they DID book the profits, good for them! But if they were booking profits, why were they knocking on TARP's door looking for more handouts?

I had better go on record and say that's just my opinion and not that of EverBank's... Even though the disclosures all spell that out!

So... For once in the past few months, the currencies broke from the stocks... Yes, I know they gained a tiny bit on the day, but not the kind of gain that would match the rally in the currencies! But... And here's where things get unwound... But, in the overnight markets, traders and investors just couldn't stand to see the euro at 1.2850, so they took the profits they had, and brought the single unit back below 1.28. It's trading about at the same level as yesterday morning... So... All that hoopla yesterday, gone down the drain overnight... The Spinners had a great song titled... It's A Shame... Appropriate here...

China's Trade Surplus for February came in at $4.84 Billion down from January's $39.1 Billion... That's a HUGE decrease, eh? But still a surplus, and in today's economic environment that's something to be proud of, eh?

German manufacturing orders fell 8% from a year earlier, so face it folks... Everything around the world is slowing down!

And in something you may have missed, because it certainly wasn't covered in the mass media... U.S. Treasury Sec. Geithner, said that the Obama administration will press Congress for legislation to allow the IMF to sell part of its stockpile of Gold... UH-OH! If the IMF is going to resort to selling Gold... Then the you know what is about to hit the fan!

Speaking of Geithner, and those that threatened me with physical harm if I kept calling him "the cheater" won, since I stopped... But trust me, I'm an old crippled, cancer fighting man now, but if someone had threatened me in my earlier life, I don't know anyone that would want to deal with me, because I didn't know the word, "give up" / or "stop"... But, I'm a big, declawed pussy cat now, so threats do get to me!

But, I digress... What I wanted to say was Speaking of Geithner... Here's what the Wall Street Journal had to report yesterday...

"Obama and Geithner are failing in their efforts to revive the economy, according to participants in the latest Wall Street Journal forecasting survey.

A majority of the 49 economists polled is dissatisfied with the administration's economic policies. On average, they gave the president a mark of 59 out of 100, and although there was a broad range of marks, 42% of respondents graded Mr. Obama below 60."

The Reserve Bank of New Zealand (RBNZ), reduced their Official Cash Rate (OCR) by 50 BPS the other day... RBNZ Gov. Bollard had this to say.... "The world economy deteriorated very rapidly late last year, amid ongoing losses and extreme volatility in international financial markets. While monetary and fiscal policy responses in many countries have been substantial we still expect the adverse economic forces generated by the crisis to remain dominant throughout 2009. The timing and extent of global recovery remain highly uncertain."

I've had my differences with Gov. Bollard in the past, as he was once who openly talked about the need for currency weakness... So, different from my one time acquaintance, and a "hero" of mine when he was Gov. of the RBNZ, Don Brash! But at least this time Bollard is bang on with his observance!

The Japanese yen, which a few days ago, looked like it was on shaky ground, has put in two days of stellar performances, which makes one wonder if what "Mr. Yen" had to say the other day is working its magic with yen... Recall, I told you that the former currency guru of Japan, Sakakibara, who is known as "Mr. Yen" said yen could rise to 70 VS the dollar, and trade in a range between 70 and 100... I disagreed with the 70, but thought 100 might hold...

But I didn't wonder too long here on this subject, because I know in my heart of hearts that yen does not have the intestinal fortitude to climb past 85... (remember, yen is a European priced currency, so as the price goes down, the more value it returns in dollars)

On Data-Watch today, we have the usual Weekly Initial Jobless Claims, which continue to be horrific week after week, and Retail Sales for February... Retail sales unexpectedly rebounded in January with a 1.0% gain, after a 3.0% drop in December. But the stronger number, which came off a low baseline in December, was likely due to heavy discounting to move inventories sitting on store shelves. The Chain stores seem to be reporting decent sales, but everyone else's sales are in the dumpster. And then I do the quick check of the Butler Household Index (BHI), and I'm convinced that today's printing of Retail Sales for Feb. are going to be disappointing!

And finally, we'll see the Business Inventories data for Feb. Last month when I reported the Business Inventories data, a reader asked me what was up with reporting this data, as they didn't know what it was about... So, I promised them that this month, I would hold class on Business Inventories, so get out your pads of paper, and a sharpened # 2 pencil, to take notes...

Business inventories are the dollar amount of inventories held by manufacturers, wholesalers, and retailers. The level of inventories in relation to sales is an important indicator of the near-term direction of production activity. This is called the "Inventory to Sales Ratio" or I-S...

Business Inventories tend to rise when economic conditions are strong; since sales are rising at the same time, the inventory-to-sales ratio may remain stable, or rise at a very slow pace. Inventories tend to drop when economic conditions are weak; since sales are falling at the same time, the inventory-to-sales ratio may remain relatively stable. The I-S ratio then begins to rise as sales fall more quickly than inventory growth.

So... If things play out the way I think they will, recall that I've said over and over again, that this dance is gonna be a drag, no, I've said over and over again that soaring inflation is going to be on the other side of this current asset price deflation... And one of the reasons will be buyers wanting to buy and spend again, and businesses that don't have the products on their shelves because of the depression... Money chasing too few goods... And we'll see the proof in the pudding right here in Business Inventories and the I-S Ratio!

OK, that's enough, put your pads of paper and #2 pencils away, as we're finished for the day! Let's go to the Big Finish!

Currencies today 3/12/09: A$.6455, kiwi .5130, C$ .7760, euro 1.2780, sterling 1.3770, Swiss .8650, rand 10.26, krone 6.9620, SEK 8.8320, forint 239.80, zloty 3.6225, koruna 21.21, yen 96.30, sing 1.53, HKD 7.7545, INR 51.80, China 6.8388, pesos 15.16, BRL 2.35, dollar index 87.93, Oil $42.79, Silver $12.86, and Gold.... $912.80

That's it for today... Thanks to Mike for Pfilling in on the Pfennig yesterday, great job! He doesn't know it, but I'm going to back out of writing from my hotel room tomorrow... Mike, you did such a great job, you get to do more! Yeah for you! Our little Christine, loves to say, "yeah for whomever" so... We have that going for us! The trip here was somewhat uneventful, I didn't have anyone drop their hard case luggage on my head or anything! The plane out of St. Louis was delayed as there was a "maintenance issue"... I told Kristin, when I got here, that I wish they wouldn't tell me these things! Just say, "we're waiting for a passenger to board, or something" One time, years ago, the Big Boss, Frank Trotter, and I were looking out the window of a plane, and saw what appeared to be oil pouring out of the plane's wing... We were just about to get up and get off the plane, when a maintenance truck pulled up to stop the bleeding... Things you wish you didn't know about, for sure! OK, I give a presentation on World Markets this morning, so I have to look sharp, no wait, that won't happen, I have to feel sharp, no wait, that won't happen, OK, I just have to get up there and do it! HAHAHA! Time go... I hope you have a Thunderin' Thursday!

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

A change in the Trading Theme?

Chuck Butler — Fri, 06 Mar 2009 15:13:02 GMT

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In This Issue..

* A change in the Trading Theme?
* Gold rebounds Big time!
* ECB cuts 50 BPS, as expected...
* Lots of lessons today...

And Now... Today's Pfennig!

Jobs Jamboree Friday!

Good day... And a Happy Friday to one and all! It supposed to be 70 degrees here today, so in my book that makes it a Fantastico Friday!

It's also a Jobs Jamboree Friday, and while this report is probably not going to be anything good, it will be Fantastico BAD! The experts have forecast a job loss in February to be 650K!!!!!! Six Hundred and Fifty Thousand did I say? Yes, sir, may I have another, sir? Well, shiver me timbers, this is just downright awful! And if it prints this bad, it will be the most jobs lost in a month since 1949! This is horrific, just plain horrific folks... And in my opinion, will NOT signal the bottom of the barrel for labor just yet... This thing has momentum and I don't think you'd want to step in front of this run-away bus!

A strange thing is happening in the currencies though... While currency investors have had to live with this Trading Theme that rewards the dollar with every deep, dark, dangerous data report, this time it appears to be different. The dollar is getting sold on all corners overnight, and the reason is traders have looked at the size of the forecast for job losses and have run for the hills. The euro is leading the way higher, with a huge gain overnight... As I walked out the door yesterday afternoon, the euro was barely holding onto the 1.25 handle... When I woke up this morning with a wine glass in my hand, what wine, who's wine, where the hell did I dine? The euro was 1.2675! And we all know what happens when the BIG DOG gets off the porch to chase the dollar down the street... All the little dogs get to chase the dollar too!

And Japanese yen was one of the best performers, which tells me that the risk takers were back!

So... Is this a change in the Trading Theme? Well, one overnight rally doesn't lend itself to a convincing argument of such, but... It certainly points out that the dollar is vulnerable at the margins, and it once we get back to fundamentals... Watch out!

I came across another story about Europeans repatriating euros ahead of their quarter end, March 31st... Now, that would be interesting... The report didn't say "WHY" they would be repatriating their euros, but shoot Rudy, the Europeans are apparently doing it, so, again, don't step in front of that bus either!

Gold had a great day yesterday, rebounding to $940, after barely holding on to $900 earlier this week... I said at the time that I thought $900 or $890 would provide resistance, and for now, at least, that's held true. Of course having the auditors finally admit that General Motors (GM) is in trouble, didn't hurt Gold. The safe haven buyers were out in force after this announcement by the GM auditors... In case you didn't hear... The auditors at GM issued a report questioning GM's ability to remain solvent, citing recurring losses from operations, stockholders' deficit and an inability to generate enough cash to meet its obligations. GM already has received $13 Billion from the Gov't, and is seeking an additional $30 Billion... Of course that $30 Billion isn't even enough to cover GM's loss last year of $30.9 Billion! You know me... I say, "stop throwing good money at bad businesses!"

While we're on the subject of cars... Did you see where Sweden told the SAAB unit "no bailout for you!" Recall, I told you in a letter a week or so ago that SAAB wanted to break away from GM, but needed Billions to do so, and had asked the Swedish Gov't for the money... And the Swedish Gov't said NO! While it's not funny to SAAB, or to GM, it's kind of funny when you think about the fact that Sweden isn't exactly your first choice when it comes to picking the democracies in the world... But, here they are holding the flag... And appear to be the only one's holding the flag, and saying NO!

And I saw a quote yesterday that made me chuckle, not that the subject is funny, because it's not, but the thought process to come up with the quote is! Let me begin with the backdrop of the subject... Yesterday, Citigroup's stock fell to below $1... Which prompted the quote from a guy that said... "Now you can finally buy Citi's stock at the dollar store"

OK... Back to the task at hand... Did you see, wait, of course you probably didn't see, because I just happened to come across it... What am I babbling about? It's the data from the Fed that there was a sharp drop in commercial paper issuance last week... Why is that so important, I hear you asking? Ahhh grasshopper, recall that after the initial meltdown of the markets in August of 2007, the issuance of commercial paper dried up, which was an important method of corporations to generate cash and for the buyers to generate above Treasury interest rates. So... A few months ago, the Fed took over facilitating the commercial paper market, to give it the backing of the Fed... And things were beginning to look brighter, until last week... Total commercial paper outstanding fell $44.2 Billion... I think this is another reason for the rally in Gold yesterday...

Yesterday, the Bank of England (BOE) left their rates unchanged, but announced they had adopted quantitative easing... And the European Central Bank (ECB) cut as we expected them to by 50 BPS, to an internal rate of 1.5%... ECB President, Trichet, was very strange in the press conference afterward, and mentioned "touching wood" when he was talking about inflation... Hmmm... Well, for all of you wondering what he meant by "touching wood"... Here in the U.S. we would say, "knock on wood"... You know for good luck!

I think Trichet was being tricky, and trying to tell us that inflation is not a problem right now, but I'm going to knock on wood, because I'm not so sure about the future! It's like Thunder, and lightening, the way you love me frightening, you better knock, knock on wood, baby, you better knock! Now the horns come in! of course the Eddie Floyd version is in my head, not the re-make years later!

OK... I had a few emails yesterday asking me what "quantitative easing" was... I had explained this all a month or so ago, but for those of you who missed class that day, and are wondering just what the heck I'm talking about...

Quantitative easing is the creation of new money out of 'thin air' by a central bank, and its injection into the banking system. The aim is to increase the amount of deposits in private banks so that, by way of deposit multiplication, they can increase the money supply by increasing debt (lending).

'Quantitative' refers to the money supply; 'easing' refers to reducing the pressure on banks. A central bank can do this by using this new money to buy Treasuries in the open market, or by lending the new money to deposit-taking institutions, or by buying assets from banks in exchange for currency, or any combination of these actions. These have the effects of reducing interest yields on government bonds, and reducing inter-bank overnight interest rates, and thereby encourage banks to loan money to higher interest-paying bodies.

Wow! The Pfennig is chock-full-o-lessons today... Let's recap... We've learned about Commercial Paper, touching wood, and Quantitative easing, all in one day! WOW!

OK, seriously folks... This Jobs report that will print later this morning is a scary thing right now... Sort of like those horror movies, when you're screaming a the girl to not look in the closet, because you know what horror lurks behind the closet door! You're screaming, "don't open the door, don't open the door"... But she does anyway, and well, you know the "rest of the story"...

Before I head to the Big Finish, I'll talk about China for a minute... Yesterday, I told you about their leader and his thoughts of a return to 8% economic growth... Well, that was followed up last night by the Central Bank Gov. Zhou, who pledged fast and forceful policies to restore confidence and prevent the global financial crisis from deepening in China... Here's what Zhou had to say... "If we act slowly and less decisively, we're likely to see what happened in other countries: a slide in confidence." and my final thought here is "it's good to be China in situations like this"... You see, China can do whatever they want to do, and do it NOW! They don't have to deal with earmarks, pork, and knucklehead lawmakers being directed by lobbyists! Now, I'm not saying that what China does do will be any more successful than our method, I'm just saying they can do what they want NOW! And one would have to think that would help things move along faster...

Currencies today 3/6/09: A$ .64, kiwi .5025, C$ .78, euro 1.2680, sterling 1.4230, Swiss .8670, rand 10.5350, krone 7.0575, SEK 9.2710, forint 249.55, zloty 3.7450, koruna 22.11, yen 96.70, sing 1.5475, HKD 7.7560, INR 51.66, China 6.84, pesos 15.34, BRL 2.39, dollar index 89.06, Oil $44.11, Silver $13.43, and Gold... $940.40

That's it for today... Day two on our own... Done! My older kids, Dawn and Andrew are coming over tonight and bringing me fish from the fish fry. So, I've got that going for me! Alex is attending cotillion on Thursday nights, and he gets all duded up with a tie, and he actually combs his hair! Looking sharp, I must say! I want to thank our neighbors, Ray and Kathy for taking Alex to school and picking him up this week, it was a HUGE help to me! OK... Later this month I'll be in St. Pete, to talk at the Investment U. Conference sponsored by the Oxford Club. Then in April, I'll be in Bermuda to talk at the Total Wealth Symposium sponsored by the Sovereign Society. I've never been to Bermuda, so I'm as excited as a kid in December about that! If you're interested in this symposium or want to know more about it...click here: http://www.sovereignsociety.com/Portals/0/landing/TotalWealthSymposium2009_FXU.html

I haven't had time to go through every "feel good" story that was sent to me, so I'll start this when I get back, as today, is the last Friday, I'll be in the office until April 3rd! And then only for a short time, as I go back out on the road to the Richard Russell Tribute dinner that day! OK... Time to hit the send button... I hope you have a Fantastico Friday, and a Wonderful weekend... And.. Don't forget to "spring forward" tomorrow night, by setting your clocks ahead one hour!

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

The Trading Theme Returns...

Chuck Butler — Fri, 27 Feb 2009 14:56:32 GMT

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In This Issue..

* U.S. data prints awful!
* Eastern Europe gets 24.5 Billion euros!
* More Problems for Citi...
* Gold at a discount...

And Now... Today's Pfennig!

The Trading Theme Returns...

Good day... And a Happy Friday to one and all! I'm going to go out on a limb and say it will be a Fantastico Friday! I don't know why, it's cold and rainy here, and we're supposed to get snow tonight... But Shoot Rudy, why not? Every day is a blessing, and Friday's are special! At least in my book!

Well... Chris left me a note last night about the day's happenings, as I was "out of touch" all day. So... I guess it would be best to let Chris give us the recap on yesterday, eh? Here's Chris... "The big news on the day was the durable goods orders, which came in even worse than expected. The dollar had lost ground vs. most of the currencies up until the durable goods number came in. The bad data for the US sent the dollar back up as investors headed back to the 'safe haven' of US Treasuries. Initial jobless claims also came in well above expectations with continuing claims climbing over 5 million for the first time ever. Continuing claims have only climbed above 4.5 million twice since the data has been recorded. They hit 4.6 million in May of 1975 and again in October of 1982. These peaks were very short lived as the came at the height of these two recessions. The problem with today's numbers is that we are still at the beginning stages of our recession and the jobs numbers look to only get worse.

The new home sales data also continued to disappoint with the month on month number dropping 10.2%. According to White House National Economic Council Director Lawrence Summers, "The US is caught in a vicious cycle where economic and financial weaknesses are feeding on each other". Obama's first budget request anticipates the government will run a deficit totaling $1.75 trillion in the fiscal year ending Sept 30. This is equivalent to 12 % of GDP (assuming we don't have a further dramatic drop in GDP or an increase in deficit spending, both of which are likely). The administration is only projecting a drop of 1.2% for the US economy this year, followed by growth of 3.2% in 2010. Sounds like a pretty rosy picture given the recent economic data!! Obama's predictions are much more optimistic than most economist's who are predicting a 2% contraction this year and growth of 1.8% in 2010. Tomorrow we will see just how realistic these optimistic growth predictions are, with the release of 4th quarter GDP along with several other pieces of data.

I'm putting my money on worse than expected growth, and higher than anticipated deficits and unemployment for the next two years. Some may call me a bear, but I prefer the word 'realist'"

Thanks to Chris for getting my Friday going for me!

Yes, it certainly sounded as though the Trading Theme that help a tight grip on the currencies in the last quarter of 2008, certainly had a hand in yesterday's move, eh? The data in the U.S. was awful, absolutely awful... And whenever it looks the darkest, and most dangerous in the U.S. the flight to safety (read Treasuries) kicks into gear, and the dollar rallies...

Big News this morning from Europe, as The World Bank, the European Investment Bank (EIB), and the European Bank for Reconstruction and Development (EBRD) announced that they will provide $24.5 Billion euros ($31 Billion dollars worth) to help the European banks and businesses cope with the global financial meltdown.

Let me recap this for you, in case you missed class that week that I discussed it every day... East European nations are struggling to refinance loans that have gone bad on them, and in today's world of a credit crisis, there's no chance that they can get the refinancing done, and that word spread through Europe two weeks ago, inflicting major pain on the euro...

While $24.5 Billion euros sounds like a lot... I'm afraid it is but a drop in a bucket to what will be needed in the end... But... It's a start! And you've got to start somewhere, eh?

The news hasn't helped the euro though, as the single unit remains offered... But then, the U.S. investors haven't wiped the sleep out of their eyes yet... Maybe after they see the news, the euro can catch a bid in its sails... Maybe...

My long-time colleague and friend, Ed Bonawitz, sent me a link to a story that was originally printed in the Wall Street Journal regarding Citigroup... It seems there are some problems, and not little ones, that would kick in if the U.S. Gov. does go ahead and take a 40% stake in the bank...

The problems center around the fact that Citi is in 100 countries... And... With a 40% stake in Citi taken by the Gov. it could kick in some "fallout" around the world. For instance... lets consider Citi's stake in Banamex, Mexico's 2nd largest bank by assets. According to a Mexican law, any institution that is more than 10%-owned by a foreign government can not run a bank in the country. This has sparked concerns that Citi may be required to curtail some or all of its stake in the bank, a unit which has been called "a crown jewel" of Citi's operations.

Now... Multiply those problems times 100...

In a "sign of the times"... Denver's Rocky Mountain News will publish its final edition today, and the Hearst Corp. said it may close the San Francisco Chronicle unless it can quickly slash costs. Four newspaper owners have filed for bankruptcy protection since December: Tribune Co., owner of the Chicago Tribune and the Los Angeles Times; the closely held Star Tribune paper in Minneapolis; the parent company of the Philadelphia Inquirer and the Philadelphia Daily News; and New Haven Register owner Journal Register Co. And finally, last week I told the boys and girls on the desk that a Sunday edition of the NY Times was now worth more than the stock of the company... At least that's what I read!

Speaking of newspapers... I had a nice interview with the Pittsburgh-Post Gazette on Wednesday afternoon. The writer wanted to know why suddenly, there's a mass move to buy Gold... Well... That's like throwing me a slightly arched softball when I was younger... You would find in the next field after I was finished taking my swing at it! Anyway, no, I'm not going to slip into a rendition of Glory Days!

But... I told him, a lot of stuff, things that I tell you all the time... But the writer was especially interested in the thought that Gold no longer has competition from deposit rates... Since countries all over the world are lowering interest rates, albeit, some faster than others, deposit rates are pretty darn low... And with Gold being a non-interest bearing investment, the deposit rates no longer hold a hammer over the shiny metal!

And... As I look at the screens this morning, and see Gold trading at $946, I think to myself... Well! That's a $50 discount to earlier this week! But... Now it seems a chartist believes that Gold has put in a double top, and is set to retrace 50% of its gain since October, which would take it back to $850... I tell you this, so you know what the chartist believes he sees right now... But me? Hmmm... I guess it could happen, any thing can happen these days... But... And there should be a drum roll here... If that should happen Gold will have formed a stronger base at $850 to slingshot it back to $1,000 and beyond... That's my story and I'm sticking to it!

So... After looking at the screens for the Gold price, I noticed that collateral damage across the board that the Trading Theme caused yesterday by pushing the dollar higher. It would be difficult to find a currency that gained VS the dollar yesterday...

It's awful looking out there, folks... Shoot Rudy, even Mexican pesos are trading with an ugly looking 15 handle! And Japanese yen, which we used to be able to count on every day to be the Lone Ranger VS the dollar, is now on the back side of their rally days... And Chinese renminbi? Stuck in the mud... There's no better way to describe what's going on with renminbi...

Well... The data cupboard, which wasn't so kind to the U.S. economy yesterday, yields more bad news today, I'm afraid... We'll see the latest revision to 4th QTR 2008 GDP, which is supposed to take us to -5.4% from -3.8%... I said all along that 4th QTR GDP would be -5%, so maybe this one gets us there, and I can pay myself on the back... HA! We'll also see The Chicago Purchasing Manager's Index (manufacturing), and the U. of Michigan Consumer Confidence.

So... If the Trading Theme comes back into play today, we'll head into the weekend with the dollar swinging a mighty hammer once again... No currencies will want to step in front of that dollar bus...

It's the end of February, and if you are a long time Pfennig reader you know that I get all physced out about March. As March bring about my annual trek to Florida for spring training, and warm of course... This year, instead of going and coming back for a day or two, I'm going to remain in Florida from March 11th to April 1st. I'll be speaking at the Investment U. conference at the end of the month in St. Petersburg, but other than that, I'll be in and around Jupiter... And no! I'm not going to Jupiter to get more stupider! HA! So, now I just have to get through 11 more days, of this freaky weather here in St. Louis!

Currencies today 2/27/09: A$ .6440, kiwi .5025, C$ .7935, euro 1.2660, sterling 1.42, Swiss .8515, rand 9.9220, krone 7, SEK 9.04, forint 235.40, zloty 3.70, koruna 22.14, yen 97.60, sing 1.5470, HKD 7.7540, INR 51.10, China 6.84, pesos 15.07, BRL 2.3450, dollar index 88.26, Oil $44.26, Silver $13.21, and Gold... $948.40

That's it for today... I spent another eventful day at the Siteman Cancer Center yesterday. At one point in the day, I actually thought that I would get to leave there without them inflicting pain on my eye for once... But, I was mistaken... Badly! OUCH! Wednesday, I had lunch with my oldest friend in the world. Robin and I have been friends since kindergarten. He's a successful lawyer, helping people. Not the kind that people usually despise! Tomorrow is my older sister's birthday... Happy Birthday, Barb! Barbara just began reading the Pfennig about 3 or 4 months ago. In fact all my sisters now at least receive it. They always wondered what the heck I did for a living! Now, I need to convert my two brothers! A big win for the Blues last night, as they move within 3 points of the playoffs. And how about those loveable Missouri Tigers? A BIG win on Wednesday night. Next up for the Tigers is BIG BAD Kansas... That will be a tough one on the road... OK... Hope everyone gets to enjoy this Friday and the weekend... Get out and have a Fantastico Friday!

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

A Eurozone Bond To Compete With Treasuries?

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

In This Issue..

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

And Now... Today's Pfennig!

A Eurozone Bond To Compete With Treasuries?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Geithner's Plan Disappoints...

Chuck Butler — Wed, 11 Feb 2009 15:19:14 GMT

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In This Issue..

* Trade Deficit to narrow further...
* Currencies rally, then sell off...
* Obama's stimulus loses backers...
* Riksbank cuts 100 BPS unexpectedly...

And Now... Today's Pfennig!

Geithner's Plan Disappoints...

Good day... And a Wonderful Wednesday to you! Well... Tim Geithner didn't experience a Terrific Tuesday, as I had wished for him... And now, it looks as though the shine is coming off the new President as more and more individuals are "not buying" his appeal to the nation to get a stimulus package passed... The currencies rallied and then sold off after Geithner gave the details of his "new and improved" plan... We've got some potential market moving data printing today and more! So... Let's go to the tape!

Front and Center this morning, we have some data that could potentially move the currencies today. I'm talking about the Trade Deficit for December. The "experts" have forecast a narrowing of the December Trade Deficit from $40.4 Billion in November, to $35.7 Billion. Now, that all sounds wonderful, as this is one of the twin deficits that I have banged on for years now. But the resolution is completely different than what I wanted to see. I wanted to see U.S. exports bring the Trade Deficit down... Instead we have a complete collapse of demand for imports... And with the dollar stronger than it was 7 months ago, exports are falling like a house of cards.

Now, here's the potential market moving piece of this data... Last month (January) when the November $40.4 Billion Deficit printed, it was more narrow than forecast, and sparked the dollar to a 1.5% gain in one day. But that's not all, the rest of that week the dollar gained 2.5% (in the dollar index)... So... While this isn't the path I would have liked to see the Trade Deficit narrow, it is narrowing...

Unfortunately, for the Twin Deficits, the other Deficit, that resides in the Budget, is taking up the slack... I now figure that the Budget Deficit could very well hit $3 Trillion this year... We already have $1.2 Trillion from the Congressional Budget Office, $838 Billion in the "new and improved" stimulus package the Senate passed yesterday, and don't forget the $350 Billion in TARP money that was carried over from last year, that will be spent this year... And you know, there will be "another" spending package coming in the future, because people like you and me are calling out this "new and improved" stimulus package...

A recent poll by Pew Research Center found that a narrow majority of Americans, just 51%, support the stimulus. And that's down from 57% in January. Even worse for the administration, support seems to be dropping among people who say they've learned more about the stimulus:
Notably, support for the proposal is now much lower than it was in January among those who have heard a lot about the economic stimulus. By 49% to 41%...

And here's something in the plan that I bet you didn't know was a part of it. I thank a dear reader for bringing this to my attention. He's a doctor, so I believe he knows what he's talking about here folks...

"This past weekend and Monday I took the time to read "The Obama Stimulus Plan." I will leave politics to the side and will leave my interpretation from an Economic perspective aside ( I double majored at Bucknell in Chemistry and Economics ). What I will NOT leave to the side is what is buried in "The Bill" from a health care standpoint. YOU NEED TO KNOW.....the "stimulus bill" is a Trojan Horse.....hidden in "this horse" is the legislation to NATIONALIZE HEALTH CARE."

So... Do I have your attention now? Here's a link to the story by Betsy McCaughey on Bloomberg...
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aLzfDxfbwhzs

OK... I won't carry on about that... I've given you the information to do with as you please.

Back to the task at hand... The Geithner Plan was a bust according to the markets... Here's what the Wall Street Journal had to say about the stock sell off... "Financial stocks led a broad move down in the market on the heels of Geithner's unveiling of the Treasury's bank-rescue plan and Senate passage of the stimulus measure. The Dow Jones Industrial Average dropped by roughly 350 points, or 4.2%, reaching its worst levels of the day in mid-afternoon trading. Bank of America and Citigroup experienced double-digit percentage losses."

Currencies followed along with stocks, like they have for a couple of weeks now. The euro, which had traded up to near 1.31, fell back to yesterday morning's figure of 1.2975, as if nothing had happened. The high yielders like Aussie, kiwi, and Brazil, had all been trading higher this week on hopes that the Geithner Plan would bring the risk takers back to the markets. But that didn't happen, as Geithner really disappointed the markets with his plan...

It was reported yesterday that economic advisors for Obama were in a tug-o-war with Geithner on this Plan, and that Geithner had won... Given the reaction by the markets, I think I would like to see what the Advisors had planned, to make a choice between the two! Maybe Geithner is swayed by the old regime at the Treasury, given he had his hands in there helping the old Treasury Sec. Paulson, with his bailouts and TARP last year... Hmmmm... Makes you wonder...

I read the text of the Geithner Plan... And was very disappointed... I will say that the Treasury's plan to make this all transparent is good... In fact you can follow the money trail at this website: www.finacialstability.gov But, the rest of it was the same old, spending taxpayer funds on shoring up financial institutions... Could go up to $1 Trillion!

You all know where I stand on this spending that we can't afford, and placing the burden of paying it off on our grandchildren... It's downright immoral! Let the financial institutions that can't cut the mustard sell themselves to someone who can, or close, and when all the dust settles, we'll be left with the financial institutions that are strong and ready to grow! But that won't happen, as my friend Bill Bonner (www.dailyreckoning.com) says about the Fed and Treasury propping up these institutions... He calls them "the meddlers"... Great term!

So... As I said above, the Geithner Plan rubbed the markets the wrong way, and stocks and currencies hit the skids... Bonds had a banner day... Of course you knew they would after I talked about how they had started the year off with the worst performance since 1980! UGH! And... As always, well for the past 6 months... As the risk takers took their high yielders rally and went home... Japanese yen, rallied... There was another currency that rallied along side yen yesterday... Swiss francs... But that didn't last through the night...

One of the biggest losers (to use the name of the TV show my beautiful bride can't miss each week), was the Swedish Krone, as the Swedish Central Bank, the Riksbank, made a larger than expected rate cut of 100 BPS (50 BPS was forecast). The Riksbank also basically outlined their plan to cut rates further in future meetings.

British pound sterling lost ground too, when the Bank of England's (BOE) Gov. Mervyn King made some statements about the U.K. being in a "deep recession" and that it will "probably require lower interest rates and an increase of money supply"....

Now, the lower interest rates aren't what put the kyboshes on the pound's recent strength... It was the comment about increasing money supply... Which in my book of how to value a currency is one of the top valuation indicators. You see, inflation in the U.K. has fallen to .05%, 1.5% below the ceiling target for inflation, and lowering the interest rate is one thing, but increasing money supply? I truly believe that increasing money supply places the velocity of money rule in place, and inflation can spiral when that happens... It's akin to "playing with fire"... Somebody is going to get burned!

And here's a sign that a country's currency is on the downward slope... Mexico's Central Bank said that it will "continue to intervene to support the peso"... UH-OH! Let's see what this intervention has gotten the Central Bank so far this year... The peso is down 4.7% this year, and lost 2.3% of that yesterday! The Central Bank bought $1.1 Billion worth of pesos last week to prop up the currency... Their foreign reserves now stand at $82 Billion worth, so they could play this game for some time... But, in the end, the markets have deeper pockets, and if they smell blood in the water, like I think they do now with pesos, they will test the Central Bank's willingness to spend those foreign reserves!

The folks over at Citigroup, issued a report on China yesterday, and they are bucking the trend to downplay China in 2009... Citigroup believes China will surprise on the upside, and their currency, the renminbi, will continue to gain VS the dollar in 2009 to 6.6, from current levels of 6.83... So... This is one of the few reports that follow along with my general feeling of China...

The Geithner Plan was good for Gold, as the shiny metal gained $20 yesterday, and is up another $10 this morning, and is trading at $924.69... I gave a long interview yesterday regarding deflation and inflation. I tried to explain how the deflation we are seeing right now is asset deflation, not your ordinary monetary deflation, for that would require a contraction of money supply... I was asked what assets perform well in a deflationary cycle... Cash... And while Gold is the same as cash... Gold! I have a new term that I came up with for Gold... An "uncertainty hedge"... How do you like that one? Everyone is uncertain as to what's going on and what will happen with all this spending going on, and what performs well? The "uncertainty hedge"!

And on that note... I think I'll head to the Big Finish! And don't look now but the price of Oil is falling again....

Currencies today 2/11/09: A$ .6530, kiwi .5230, C$ .8025, euro 1.2950, sterling 1.4360, Swiss .8655, rand 9.8980, krone 6.7175, SEK 8.2430, forint 227.50, zloty 3.5140, koruna 22.0850, yen 89.90, sing 1.5060, HKD 7.7510, INR 48.69, China 6.8330, pesos 14.60, BRL 2.2890, dollar index 85.60, Oil $37.84, Silver $13.39, and Gold... $924.69

That's it for today... I tried and tried to get "something" out of the Geithner Plan last night, but it totally lacked specifics, and I understand why the markets began to circle the bowl. Speaking of last night... I tried to watch our Blues play hockey, but they were just not playing well, so I switched it off, and began to research for today's letter! Now that's how bad the Blues were playing! Lots of young talented players, but it looks like they won't make the playoffs again this year. UGH! T-minus 3 days left till Valentine's Day... Are you ready? Tomorrow is Lincoln's Birthday... His 200th birthday! WOW! Can anyone explain to me why he doesn't have a holiday? That putting all Presidents into one holiday, is a bunch of bunk in my book! OK... Suzy Q just arrived, so that tells me it's time to get this all wrapped up in a bow and sent! I hope your Wednesday is Wonderful!

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

Passing Out The Dollars...

Chuck Butler — Fri, 16 Jan 2009 14:59:12 GMT

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In This Issue..

* Risk Takers return...
* Bank of America gets more cash!
* 30-year mortgages below 5%!
* Looking for direction...

And Now... Today's Pfennig!

Passing Out The Dollars...

Good day... And a Happy Friday to one and all! A Fantastico Friday so far, let's keep it going, eh? It is downright cold here. I'm reminded of that one looooonnnnngggg winter I spent in Des Moines, Iowa... This artic cold was the "norm" for that winter there... I didn't need any other reason to move back to St. Louis, once the spring thaw came around!

Well... Right out of the starters blocks this morning, we have a change in sentiment going on... The Risk Takers are back in the driver's seat this morning, as the markets are feeling better about things given that the remaining TARP money has been given to the Obama campers to dole out, and Bank of America came away with an emergency lifeline from the Gov't that totals about $138 Billion... $20 Billion in cash, right here, right now, with the rest spread out between liquidity access and guarantees... And... The TARP money... Given the fact that the Obama people have been itching like they just rolled around in poison ivy, to get their hands on that money... You've got to wonder... Are these guys going to do their best to out do the previous administration when it comes to piling up debts?

You know where I stand on all this bail out money, and the Gov't sinking their teeth into banks more and more... Besides the fact that the Gov't shouldn't have their hands in the cookie jars that belong to banks, imagine if you will, just how well run these banks will be with the Gov't pulling the strings... YIKES!

OK, I could go on and on there like the Energizer Bunny, but that would be wasting my time, because the people that make these decisions don't read the Pfennig! But you do, dear reader, so... It's onto currencies...

The currencies, led by the euro, are trading much better this morning, than yesterday morning, when the euro took a blow to the mid-section from the European Central Bank (ECB) after the ECB decided to cut rates 50 BPS to 2%.

The euro has gained this morning even in the face of the news that their Trade Balance, which turned negative in October, widened to 4.9 Billion euros... German export declines led the way to this widening... But shoot Rudy, we're only talking about $6.5 Billion dollars worth of deficit... The U.S. chalks that up almost daily!

OK, so we've got a mini-currency rally going the day before a 3-day weekend here in the U.S. You know what that means today, right? Yes, the New York trading desks will be left to the junior boys and girls after lunch, and the volume will basically dry up this afternoon.

Chris reported yesterday about the awful / disappointing Retail Sales for December number (-2.7%) and I just wanted to add my two cents worth. I just wanted to say that I think you can use the ISM (manufacturing) Index, and Retail Sales reports to judge just how deep this recession is going to be... And if we have a negative -2.7% Retail Sales in DECEMBER! Then I think we're in for a long protracted and deep recession... But then I've been saying that for a year now!

And what have I been telling you for the past two weeks about the Weekly Initial Jobless Claims? In case you forgot, I said that the reason they had fallen back to below 500K, was that the holidays chopped out days that people could file... Well, on the first full week of work... The Weekly Jobless Claims jumped to 524K.... Not that I want to see that large of a number... It's just that the dollar bulls pointed to those reports, the last 2 weeks, and said that things were getting better... I knew better than that!

I saw a headline news story flash across my screen at home yesterday, saying that 30-year mortgage rates had fallen below 5% for the first time in history! That's great! Now go out and get your interest rate down on your home loan... NOW! Save money... And I mean save it! I was telling my beautiful bride about all this, and said... "you know, what's sad? It's the fact that a lot, and I mean a lot, of homeowners are upside down with their home loans, and won't be able to refinance now." Don't know what I mean by upside down? I mean that their loan balance exceeds the home's value...

If the risk takers came out of the walls yesterday, then that must mean the High Yielders of Australia, New Zealand, and Brazil are rebounding... But how much of this can someone take? Up, down, up, down, back and forth, like watching a tennis match. WE NEED DIRECTION! Why can't the markets make up their collective minds? It's like they're torn between two lovers... Feeling like a fool... One love is the thought that the U.S. will rebound from all this and be stronger for if it doesn't kill you , it makes you stronger... And the other love is the thought that we just keep building up debt... And soon the Fed will begin their quantitative easing, which means more and more debt and dollars, and that just spells bad times for the dollar.

The Wall Street Journal is reporting this morning that: Citigroup reported a net loss of $8.29 billion, and Bank of America swung to a fourth-quarter net loss of $1.79 billion. Bank of America's numbers includes their purchase of Countrywide Mortgage, but not Merrill Lynch...

Deeper, darker, more dangerous... More and more everyday, that's where this economy has hanging over it like the Sword of Damocles!

Well... The euro has inched up one tick at a time since I came in and turned on the screens this morning, so we've got that going for us, eh? We've seen these mini-rallies get wiped out in one day though recently... So, I'm just looking for some direction, and hope the market participants and traders finally get over their first lover, and realize the only lover for them is the second one... (see above, if that confused you!)

And finally... With the risk takers back (for today at least) Gold has pushed higher overnight, adding $11 bringing its price to $828.90... Store of wealth, folks... Look how well Gold has held its store of wealth, while the dollar has continued to lose its purchasing power for years! Something to think about as we head into the weekend...

Currencies today 1/16/09: A$ .68, kiwi .5490, C$ .8110, euro 1.33, sterling 1.4955, Swiss .8950, rand 9.85, krone 6.9425, SEK 8.1050, forint 208, zloty 3.13, koruna 20.3575, yen 90.70, sing 1.4850, HKD 7.7590, INR 48.80, China 6.8375, pesos 13.77, BRL 2.32, dollar index 83.60, Oil $35.40, Silver $10.80, and Gold... $828.90

That's it for today... Well... I started radiation treatments for my eye yesterday. The doctors decided that the shots were no longer working, and the fluid was spreading to my macular, which if it hit would blind me for good in that eye. So, I began 2.5 weeks of daily radiation treatments. I know that quite a few of you were wondering what was going on... So there you have it! Chris is off skiing this 3-day weekend, and will be going again on next month's 3-day weekend. I was working on our monthly newsletter, Review & Focus, which is available to World Markets Clients, and stopped for a minute to reflect, where we've gone with the Review & Focus since I began writing in it July 2000... WOW! 104 issues! ( I think, if my math is correct) Of course I don't think my calculator can figure how many Pfennigs I've written over the years going back to 1992! Double WOW! And now I have my new "paid" subscriber newsletter that is published by the Sovereign Society, called "The Currency Capitalist"... 6 issues so far there too! I'm surprised my fingers aren't thinner from all the work they do! HA! OH MY! Look at the time, I've carried on too long... Time to hit send... And hope you have a Fantastico Friday!

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

Retail sales disappoint even more…

Chuck Butler — Thu, 15 Jan 2009 16:16:31 GMT

EverBank is a Member FDIC and Equal Housing Lender.
......................................................
In This Issue..

* Retail sales disappoint....
* Chuck's views on the Lone Prop...
* Waiting on the ECB...
* Emerging market currencies sell off...

And Now... Today's Pfennig!

Retail sales disappoint..

Good day... The big news yesterday was the retail sales numbers, which fell twice as much as expected. Chuck predicted a tough Christmas season, and the BHI was right again. Sales dropped 2.7 percent according to yesterday's report from the Commerce Department. The falling home prices, rising job losses, and tighter credit have all combined to finally force US consumers to adjust their spending habits. No matter how low retailers slashed prices during the recent Christmas season, US consumers just weren't buying. The economy is forcing consumers to wean themselves off of the dangerous drug of easy credit. In spite of Bernanke and Paulson's attempts to get consumers borrowing and spending again, the economic slowdown is forcing the US consumers to reign in their spending. But while this change in consumer habits is good for the longer term economic health of the US, it only serves to drive the economy even further into recession over the short term.

And the bad economic data just keeps rolling in. U.S. foreclosure filings spiked by more than 81% in 2008, a record, according to a report released Thursday, and they're up 225% compared with 2006. The total foreclosure filings in 2008 topped 3 million and showed no signs of slowing down in spite of the efforts of both the government and banking industry to slow them down. Foreclosure filings actually accelerated in the 2nd half of the year, increasing 17% in December over November of 2008.

The Fed gave us a glimpse of their view on the markets yesterday with the release of their Beige Book. Nothing in the report was a surprise, as respondents from the 12 Fed districts portrayed a gloomy economic scene. The report suggests the Fed may need to implement further measures to restore credit markets. The Fed districts reported more job losses, hiring freezes, and reduced hours. The New York district reported that 'substantial' job reductions have yet to show up in payrolls data. Doesn't sound good for the US economy in 2009.

Today we will continue to get negative news on the US economy with the release of Producer Prices and the weekly jobs numbers. Producer prices will bbe down and initial jobless claims will probably top 500k. We will also get the very volatile Empire Manufacturing and Philadelphia Fed numbers showing further rot on the manufacturing vine.

The dollar actually rallied with these numbers, as investors turned back to it as a 'safe haven'. This move is similar to the moves we saw in the latter half of 2008 as the dollar rallied in the face of poor US economic data. Chuck sent me his thoughts on this latest 'safe haven rally' and wanted me to share them with you all:

"Reuters reported Wednesday night that the U.S. is close to extending Billions of more aid to Bank of America... Citigroup, as reported yesterday, is selling off units to raise capital... I wonder if Big Ben Bernanke and Hank Paulson drink more than 7 cups of coffee a day... Researchers show that drinking more than 7 cups of coffee a day may trigger delusions...

What does the rot on the vine at BOA and Citi have in common with delusions? Well... I think that Big Ben and King Henry are drinking more than 7 cups of coffee a day, if they believe their "stimulus" / TARP is going to get these two ginormous banks back on terra firma!

Remember the Lone Ranger? Remember a couple of years ago, when the dollar was propped up by Fed rate increases, and the tax amnesty for U.S. Corporations doing business overseas? Those props were pulled away one at a time, and for the next 2 1/2 years the green/peachback fell flat on its face... Well, it came up with another prop this summer... However, this time... There's only one prop... The Lone Prop, I'm going to call it from here on out... It's called the "Safe Haven" prop... And it has done the dollar well since July...

But just like in early December when I smelled a Santa rally to year end, and it happened... I'm seeing chinks in the dollar's Lone Prop's armor... The Fed has just about run the course of things it can do to get this economic engine revved up again, to no avail... And just like I said a couple of weeks ago, Paulson and Bernanke are like the King's men, who tried to put Humpty Dumpty back together again! Their stimulus plans, their money supply injections, their guarantees on debt, their taking over the Commercial Paper biz, to their putting their hands in bank's cookie jars... Nothing has worked... And why? Because, it's not nature's way to interfere! One of my all time fave songs, by Spirit (Randy California) called, "It's Nature's Way"... It's nature's way of telling, something's wrong... It's nature's way of telling you in a song.... It's nature's way of receiving you... It's nature's way of retrieving you... It's nature's way of telling something's wrong...

It's obvious they were singing about something else... But I would say if sung today, it would be sung to the economy... One of these days, these mental giants will figure out to leave well enough alone, and let markets take their course... But that's not happening now, and I'm sure it's not going to happen any time soon, given the news that President-elect Obama wants control of the remaining $250 Billion in TARP money, and then wants to push through a stimulus package that will be anywhere between $800 Billion and $1 Trillion as soon as he takes office!"

Chuck is pretty amazing, he had another tough day at the doctor's office yesterday, but still found the time to send me his thoughts on this recent move by the dollar.

The Euro sold off a bit yesterday as currency traders were waiting on the ECB which will likely cut 50 basis points this morning. Some actually began predicting a 75 basis point cut, but the noise on the street is confirming a 1/2% cut. But the markets will focus more closely on the press conference following the rate announcement. Many are expecting the ECB to signal more cuts are on the horizon, but I disagree. The leaders of the ECB have a hawkish tilt, and Trichet has continued to illustrate his desire to not follow the US Fed's ZIRP (Zero Interest Rate Policy). A 50 basis point move would put interest rates at the lowest levels since 1999, and a further move would be unprecedented. Trichet said last month that there is a limit on how far the ECB can cut rates and will likely push for a pause after today's cut.

But recent data out of Europe shows their economy continues to contract, and inflation is being held down so Trichet will face mounting pressure to drop rates further. If Trichet can hold the line, the euro will likely benefit vs. the US$. The euro rose 10 percent vs. the dollar in December, after Trichet said he wouldn't be trapped with borrowing costs too low. The European economy is slowing, but will likely be able to weather the financial tsunami better than the US.

The emerging market currencies of Brazil and South Africa slid yesterday with 'risk aversion' back in vogue. The Brazilian real sold off to a two week low on concern over a further deterioration of the US economy. The South African rand sold off in concert with a drop in the price of gold and commodities. The higher yielding currencies of New Zealand and Australia also fell vs. the US$ as investors turned back toward the 'safe haven' of the US$. But don't expect this dollar strength to last, as this lone prop of 'safe haven' will be kicked out from under the dollar.

On to the currency wrap up:

Currencies today 1/15/09: A$ .6632, kiwi .5379, C$ .8033, euro 1.3170, sterling 1.4602, Swiss .8928, rand 10.1408, krone 7.2099, SEK 8.3956, forint 212.64, zloty 3.2109, koruna 20.6965, yen 89.11, sing 1.4957, HKD 7.7598, INR 49.0175, China 6.8365, pesos 14.1862, BRL 2.3841, dollar index 84.253, Oil $37.80, Silver $10.50, and Gold... 812.35

That's it for today... I see where the ECB did cut 50 basis points, which was widely expected. I can look forward to another full day of meetings on the new computer system we are looking to install later this year. I'll be heading out to Colorado tomorrow for a 'guy's weekend' of skiing. Hope everyone has a Terrific Thursday!!

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

The Dollar Swings A Mighty Big Hammer!

Chuck Butler — Wed, 14 Jan 2009 17:01:53 GMT

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In This Issue..

* Another dollar rally....
* Rumors in Ireland...
* Trade Deficit narrows...
* Retail Sales to disappoint?

And Now... Today's Pfennig!

The Dollar Swings A Mighty Hammer!

Good day... And a Wonderful Wednesday to you! I'm writing from home today, as I will not be in the office on this wonderful Wednesday. Writing from home, or the road, always presents problems for me, as I'm so used to being in the "saddle" at my desk, and having information all around me. But, my little work desk at home has some of those amenities... So, what the heck, quit your grumpiness, and get to writing, Chuck!

The dollar ripped through the 1.32 handle of the euro yesterday, like a hot knife goes through butter! There was little to no resistance in that 1.32 handle, and before you could tell one of the many people on the desk here that sneeze all day, God Bless you, we were trading with a 1.31 handle in euros. The talk about a European Central Bank (ECB) rate cut has really ramped up this week, and taken its toll on the single unit. No one is mentioning that even if the ECB cuts 75 BPS this week, they'll still have a an interest rate / yield advantage over the U.S! I guess they'll sort that all out somewhere down the line, eh?

There's a rumor going round, that's someone's underground, no wait, there's a rumor going around that Ireland had requested aid from the IMF... Whoa there Partner! I know that things in Ireland have turned around on a dime from boom to bust, but I wasn't aware of a problem that would run that deep... The rumors were denied, of course, but you know me... Where there's smoke, there's fire... I'm reminded of an email I received 2 weeks ago from a reader in Ireland, that talked of a major slowdown in the economy. The writer, was very adamant about how bad things had gotten that he compared Ireland to a banana republic! I responded to him, and said, no... That can't be, because we've got a corner on being a banana republic right here in the U.S.A.!

You should have seen the sell off in euros when this rumor hit the streets! It was scary how fast a currency could lose a handle! But, after the rumors were denied, the single unit rallied back nearly as fast as it fell, and is now trading, as I write at 1.3225. The dollar is swinging a mighty hammer once again...

Talk about a flight to Risk Aversion! This rumor has the Risk Aversion campers battening down the hatches and heading to the cellars! Risk Aversion is NOT good for currencies and commodities.

Another reason for the Risk Aversion campers to batten down the hatches is the report from yesterday that Citigroup is going to sell their brokerage arm, Smith Barney, to Morgan Stanley for $2.7 Billion in cash... This to me, sounds like a fire sale, and that Citigroup is in deep dookie once again... Citigroup has already received $45 Billion from the Gov't in TARP money, much more than any other bank has received, for sure!

This news scares the bejeebers out of me, as Citigroup has always prided themselves on the fact that a customer could do "one-stop investing"... I guess, we'll have to wait-n-see if Citigroup announces a sale of another unit somewhere down the line, eh? But for now... This news is not good for any asset!

Well... Today, we'll see the color of the Retail Sales for December. We all know that December Retail Sales should be kicking rear and taking names later... But... And that's a BIG BUT... Not last month, unfortunately. As we get ready for the printing of Retail Sales, the experts say that Retail Sales will have fallen -1.2%, following a -1.8% in November. The Butler Household Index (BHI) tells me that while Christmas shopping was good, it wasn't on scale with other years, and I believe the Retail Sales will be very disappointing this morning.

OK, what do we have here? A Fed Head talking about our ZIRP (zero interest rate policy). I know, we're not quite at zero yet with the official rate, but the Fed Funds people would tell you differently! So, in my book, I say ZIRP! Well, this Fed Head, Lacker, thinks that interest rates will stay very low for some time... Say it ain't so, Joe! I don't want to see rates at zero for a long time, folks! That's part of the reason we're in this mess to begin with!

Oh, and yesterday, Big Ben Bernanke, was speaking over in London, and kind of threw some cold water on Obama's $800 Billion stimulus plan... I can hear Obama saying... "Hey! He backed all the other stimulus plans, but now he's throwing cold water on mine!" Well... I said "kind of threw" I didn't say he DID throw cold water on the plan... I'll let you decide... Here's Big Ben... Fed Chairman Ben Bernanke said the "stimulus package being crafted by Barack Obama and Congress could provide a "significant boost" to the sinking economy. But he warned that such a recovery won't last unless other steps are taken to stabilize the shaky financial system." And what is he talking about in the "other steps"?

Here's more Big Ben... "There will be no lasting recovery without further government action and funds to strengthen the financial system, with the timing of an economic recovery "highly uncertain." OH GREAT! More Government action! That's Central Bank parlance for "we're getting our hands deeper into the cookie jar"!

OK, I've gone this far, and have not mentioned the huge drop in the Trade Deficit that showed up in the print yesterday... The Trade Deficit fell from $56.8 Billion in October to $40.4 Billion in November! WOW! This fabulous! Or is it? Let's take a closer look at the numbers... U.S. exports fell $8.7 Billion and imports fell $25 Billion. Lower oil imports accounted for more than half of this drop, but ex-petroleum imports also fell $10.5 Billion.

So... Here's the problem folks... As I tried to explain yesterday... A narrowing Trade Deficit because of less spending and larger exports would be manna from heaven... But a narrowing Trade Deficit because spending was slashed, and exports also fell, is not a good thing for the economy. It simply means that 1. The U.S. consumer has dried up and with consumption at least 70% of GDP, we're in for a long recession... And 2. that the dollar is too strong, otherwise exports wouldn't be so far off too. Yes, I'm quite aware of the fact that the recession is hitting all over the globe, but come on, we still buy Chinese and Japanese and even German exports even in a recession don't we? These same countries would be doing the same with U.S. exports...

And then there's this... News of the weird... Chris Gaffney saw a story yesterday that he sent to me, that qualifies for this category... Here's a snippet of the story... "The Bank of England will be able to print extra money without having legally to declare it under new plans which will heighten fears that the Government will secretly pump extra cash into the economy." Oh boy! Just what the pound sterling needs as a stabilizer eh? NOT! This is awful news for the pound folks...

I've said for months now that the Bank of England (BOE) was following in the Fed's & Treasury's steps, which could be to ruin, but following nonetheless! This is just another step in the Fed's & Treasury's direction. The free use of a printing press... The story went so far as to say "this will spark comparisons with the Weimar Germany and Zimbabwe, were uncontrolled use of the printing press ultimately caused hyperinflation." This is where they're getting a little out of control with the sensationalism... I prefer to say that it should compare to the U.S.... Which may still see hyperinflation in the future... But not the kind of Germany and Zimbabwe! YIKES!

So... As I get ready to head to the Big Finish... It looks as though that Trading Theme is back in force again, and the dollar will benefit any time the data shows the recession to be deeper, darker and more dangerous... Makes no sense to me! But that's the work of the mental giants these days... So... If Retail Sales is as disappointing as I suspect it to be in about 15 minutes, then the dollar should be supported today...

Currencies today 1/14/09: A$ .6670, kiwi .5440, C$ .8185, euro 1.3190 (slipped back again), sterling 1.4535, Swiss .8925, rand 10.0450, krone 7.14, SEK 8.30, forint 210.20, zloty 3.1420, koruna 20.42, yen 89.45, sing 1.4920, HKD 7.7570, INR 48.83, China 6.8350, pesos 13.83, BRL 2.3140, dollar index 84.15, Oil $38.87, Silver $10.76, and Gold... 826.50

That's it for today... Thanks to all who sent along good wishes for clean reports this week... I told you yesterday that I was draggin' the line a bit... I went home and fell asleep... Woke up to take some medicine and back to bed... Feeling a bit better this morning... Rest... It's a Godsend! I got my itinerary for the Orlando Money Show next month (Feb 3thru 7) yesterday... I'm looking forward to some warm weather already! I'll be at two presentations, and one EverBank Town Hall Meeting... So, I'll be busy! My little buddy, Alex, and beautiful bride used to accompany me on this trip each year, and Alex would go to Disney World, or Universal Studios to ride roller coasters and stuff, but now that he's older, it's not good to take him out of school, so no more rock-n-rollercoaster for him. :( OH well... Time to go... I hope your Wednesday is Wonderful!

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

Bailout failure accelerates dollars decline...

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

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....

In This Issue..

* Senate rejects auto bailout...

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

* Goldman and Citigroup predict a dollar fall...

* China to continue to appreciate...

And Now... Today's Pfennig!

Bailout failure accelerates dollars decline...

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Chris Gaffney, CFA

Vice President

EverBank World Markets

1-800-926-4922

1-314-647-3837

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

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

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In This Issue..

* Bailout fuels a rally...

* How long the rally last?

* A slew of data today...

* Thoughts from Jim Rogers...

And Now... Today's Pfennig!

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837

Obama picks his economic team...

Chuck Butler — Mon, 24 Nov 2008 16:19:37 GMT

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

Gold and silver prices are down.

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

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In This Issue..

* Obama picks his economic team...

* Nordic currencies rise...

* US floods market with dollars...

* China looks to keep growth at 8%...

And Now... Today's Pfennig!

Obama picks his economic team...

Good day... Hope everyone had a great weekend, mine sure was. We had a fun time Friday night bowling and playing pool at our Xmas party. Unfortunately Chuck wasn't able to attend, as he was down in Florida speaking at a Wealth Masters Conference. He will be heading back into St. Louis today, and will be back in the saddle tomorrow morning for what will be a short week.

The big news over the weekend was the unveiling of President elect Obama's economic team. Obama has picked Timothy Geithner, head of the Federal Reserve Bank of New York, to be his Treasury secretary, and former Treasury chief Lawrence Summers will be White House economic director. Obama is also likely to nominate New Mexico Governor Bill Richardson as Commerce Secretary. Geithner has had a primary role in the Federal Reserve's attempt to steer Wall Street through the current financial tsunami. He also oversees most of the Fed's special lending programs set up this year to channel more than $1 trillion to banks and other financial institutions.

Just this weekend, Geithner helped push for additional funds to help Citigroup avoid a possible bankruptcy. The nation's largest financial services firm received $306 billion of US government guarantees for troubled mortgages and toxic assets to stabilize the bank after its stock fell 60 percent last week. Citigroup also will get a $20 billion cash injection from the Treasury department, adding to the $25 billion the company received last month under the TARP. Just last week, current Treasury Secretary Henry Paulson was saying there aren't any firms which are 'too big to fail', but I guess the rest of the administration decided he was wrong. The bailout of Citigroup has stabilized overseas markets, with currency investors starting to move back out of the 'safe haven' of US treasuries.

The dollar has fallen vs. all of the major currencies in early European trading, with the high yielding currency of Brazil leading the way with a 3.57% increase vs. the US$ since Friday. The Nordic currencies of the Swedish krona and Norwegian krone were in second and third place vs. the US$ with increases of just over 2%. The high yielding South African rand was number 4, and the Danish krone rounded out the top five performing currencies this weekend. Chuck has been talking about the Viking Index CD during his presentations, which is a combination of the currencies of Norway, Sweden, and Denmark. This index gives investors an excellent way to take advantage of the short term strength of the US$; investing into currencies of countries with good solid underlying economic fundamentals.

The economic fundamentals of the US continue to weaken, and congress is now predicted to send President elect Obama an economic stimulus package the day he takes office January 20th. Senator Charles Schumer and House Majority Leader Steny Hoyer both said they would have a $500 to $700 billion stimulus package waiting on the new president's desk. The Federal Reserve, which has already pumped out hundreds of billions of dollars, is looking to flood the world financial system with even more money. The Treasury, on course to borrow some $1.5 trillion this fiscal year, will have to tap global capital markets for even more to finance this new economic rescue package.

The Fed has set up currency swap lines with more than a dozen other central banks. Some of these arrangements, including those with Europe, Britain and Japan, are open-ended, allowing the Fed's counterparts to draw as many dollars as they need. The US has also established individual $30 billion swap lines with Brazil, Mexico, South Korea, and Singapore. These currency swaps are one of the items which has been propping up the value of the US$.

As the Fed has stepped up its efforts to combat the credit crisis, our US balance sheet has mushroomed. Assets rose to $2.2 trillion from just $924 billion less than three months ago. The central bank's holdings are likely to increase further. "I would not be surprised to see them aggregate to $3 trillion - roughly 20 percent of GDP - by the time we ring in the new year," Dallas Fed President, Richard Fisher said on Nov. 4th.

On November 3, the department tripled its estimate of planned debt sales in the final three months of the year to a record $550 billion. Paulson told a conference in Washington November 17 that the US will issue some $1.5 trillion worth of Treasury securities in the fiscal year that began October 1st. And that number is also likely to grow. Obama's pick for his administration's economic advisor, Lawrence Summers told the same conference that the US needs a "speedy, substantial and sustained" stimulus package to aid the economy. By the time it all ends, the TARP will likely be closer to $2 trillion than $1 trillion.

The danger, other than the fact that eventually our children and grand children will have to repay this debt, is that this dumping of dollars into the world's financial markets will end up with inflation sky rocketing higher. After all, the ultra-easy Fed policy of the late 90's is exactly what fueled the asset bubbles and the problems we are dealing with today. But Bernanke and Paulson aren't worried about inflation right now, as they try to prevent the biggest credit catastrophe in decades from sending the economy into a deflationary nosedive. Over the long run, the current policies will create inflation, and with the huge amount of money supply being pumped into the markets, the move from deflation to inflation will be abrupt. The Fed won't be able to immediately drain the markets of the huge amounts of money supply which have been pumped in. Unfortunately I think we could be facing a rapid increase in inflation just around the corner.

China announced plans for a second Chinese stimulus package in order to keep their economy expanding at a rate over 8 percent for each of the next two years. The new proposals include income tax cuts, salary increases, and larger housing subsidies, Chinese reported yesterday. The new proposals show the government is determined to maintain strong growth as the rest of the world slips into recession. A growing Chinese economy will provide an anchor to the overall Asian region, and will help stabilize commodity prices. I continue to believe the Asian currencies, along with the currencies of commodity exporters, have some of the best value. China will maintain a good growth rate, and is slowly moving toward a more balanced economy, with internal demand picking up some of the slack left by the western recession.

While this week will be short, it is packed with data as we will see home sales today. Tomorrow is a bigger day as we get 3rd quarter GDP, Personal Consumption, Consumer Confidence, and the S&P Home price index. And to close out the data week on Wednesday we will get Durable goods, Personal income and spending, New Home sales, U of Mich confidence, and the PCE numbers along with the weekly jobs data. Like I said, it will be a lot of data packed into a very short week. Could make for some volatile days in the currency markets.

Currencies today 11/24/08: A$ .6387, kiwi .5398, C$ .7905, euro 1.2751, sterling 1.4991, Swiss .8257, ISK (No Quote), rand 10.28, krone 7.0627, SEK 8.1964, forint 207.03, zloty 3.0363, koruna 19.98, yen 95.49, baht 35.29, sing 1.5175, HKD 7.7525, INR 50.09, China 6.8285, pesos 13.5737, BRL 2.3906, dollar index 86.96, Oil $51.65, Silver $10.04, and Gold... $821.00

That's it for today... As I said in the first paragraph, the Xmas party on Friday night was a great time, even though I wasn't among the top bowlers or pool players. Yesterday my son and I had to choose between going duck hunting or heading to the Rams game. We chose correctly, as the Rams got embarrassed by the Chicago Bears, and Brendan and I had a great afternoon in the duck blind. This will be a short week, as Chuck emailed me that we will be shutting the phones down early on Wednesday. Both Chuck and I will be out on Friday, as I will be heading up to Chicago for my son's hockey tournament and Chuck will be cleaning up from his big Thanksgiving day bash. Hope everyone has a great start to the short week, and a Marvelous Monday!!

Chris Gaffney, CFA

Vice President

EverBank World Markets

1-800-926-4922

1-314-647-3837

Misguided risk aversion...

Chuck Butler — Fri, 21 Nov 2008 16:31:01 GMT

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In This Issue..

* Bad data pushes investors into US treasuries...

* Barclay's says the euro will rally...

* SNB surprises with a rate cut...

* Iceland gets their bailout...

And Now... Today's Pfennig!

Misguided risk aversion...

Good day...The dollar rallied a bit yesterday on some very poor economic data which illustrated just how bad things are getting here in the US. As Chuck has repeatedly told everyone, in the current trade pattern the dollar rallies whenever we get negative data for the US economy. Investors get spooked by this negative data, and run scared into the 'safety' of US treasuries.

Ty sent me a quote from respected newsletter owner/author Bill Bonner yesterday: "Misguided risk aversion, anyone? A few months ago, investors stretched for yields. Now, it's safety they reach for...and grab U.S. Treasury debt with both hands. Investors now seem to have an unqualified trust in the full faith and credit of the world's largest debtor. Yields on 91-day T-bills have fallen to 0.11% - scarcely a tenth of one percent!"

And when you adjust these yields for US inflation, the real yields on US treasuries are negative (even the 10 yr treasury real yield is -.43%!!). These investors won't be parked in US Treasuries for long, but while fear continues to drive the markets, the US dollar will remain strong.

The data which sent shivers down investors spines yesterday was a one two punch of weekly jobless claims and leading indicators. The number of Americans filing for unemployment benefits approached a 26-year high of 542,000 last week. The Unemployment rate will likely increase another 100 bps by this time next year, and stay at these elevated levels for an extended period of time.

The second blow came shortly after the jobs data was released, as the index of leading US economic indicators fell in October for the third time in four months. The Conference Board's gauge dropped .8%, more than forecast, after rising .1% in September. This index points to the direction of the economy over the next three to six months. Consumers and companies are cutting back as job losses mount and housing and manufacturing sink deeper into a slump. These two pieces of data indicate just how quickly the US economy is falling into recession.

Investors fled stocks and moved back into dollars throughout the trading day yesterday, rallying the dollar index back to the highest level since April 2006. We moved above 88 on the dollar index a week ago, but it was unable to maintain the higher level.

The same thing occurred last night, as equity markets in Asia rebounded, bringing the dollar index back below the 88 handle. Apparently there was speculation that a sale of Citigroup Inc. will reduce risk in the financial system, slightly increasing the confidence of investors. This is how perverse these markets have become; the possible sale of one of the largest financial firms in the US actually rallies the markets.

The European Union announced that is crafting a coordinated economic stimulus package to spur its 27 nation economy. European Commission President Jose Barroso told reporters in Brussels today that the commission will announce a fiscal stimulus plan next week. The plan will be based on member states taking measures suited to their own economic situation. I like the approach the EU is taking to the crisis, as they will design the stimulus to try and meet the differing needs by each country. According to the EC president, "Everyone is suffering from the crisis and everyone needs treatment, but not everyone needs the same pill."

According to Barclay's Capital, the euro will strengthen 16 percent against the dollar in the next 12 months as Chinese demand drives up prices for oil, reducing the US currencies attractiveness. Two-thirds of the euro's 22 percent slide since the July peak of $1.6038 can be accounted for by plunging oil prices, Barclays said. China is the second largest oil consumer after the US, and "Contrary to current received wisdom, oil prices are much more important for the euro-dollar cross than either the stock market or interest rate differential right now," wrote London-based David Woo, global head of currency strategy at Barclay's. Declining oil prices have helped the greenback by narrowing the US current account deficit, reducing the US's need for overseas funding, Woo said. He forecasts the euro will trade in a range around $1.24 in the next three months, but then rally to $1.45 over the next year as accelerating growth in China helps oil prices retrace their recent fall.

I agree with Barclay's analysis of global commodity prices. China and the rest of Asia will continue to be the world's growth engine, and demand for commodities will increase. The stimulus packages which are being pushed will put additional upward pressure on raw material prices. The commodity rally will not only help the Euro, but will help push up prices of the Norwegian krone, Australian dollar, and Brazilian real.

Switzerland's central bank surprised the market yesterday, dropping its benchmark interest rate by 100 basis points. The Swiss National Bank reduced its target for the three month Libor to 1 percent and promised a 'generous and flexible' supply of Swiss Francs. It's the third unscheduled move by the SNB since the beginning of October. I would expect the SNB to keep rates on hold at their meeting next month given the extent of yesterday's move. The Swiss Franc fell as the dollar strengthened yesterday, but rallied overnight and is now trading close to where it was prior to the SNB move.

In other interest rate news, the Bank of Japan kept its benchmark rate at .3 percent today and said it will consider pumping more money into the financial system to prop up an economy that fell into recession last quarter. Japanese banks are in a much better financial position that banks in the Eurozone or the US, and the Japanese consumers are flush with cash. Japan went through a long deflationary period, and consumers there are less leveraged than here in the US. The stronger position of Japanese banks, and the more solid consumer base will enable the Japanese economy to weather the global slowdown much better than most other economies. The yen will retain its attractiveness as the world faces a long, long recession.

Technical analysts predict the yen may rally to 92.50 in the short term, and could move above the 13 year high of 90.93 which it hit on October 24. According to the analysts, the so-called support level is near the bottom line of a trend channel that tracks the dollar's decline from a two week high of 100.55 yen on Nov. 4. The US currency is poised to extend a 3.5% loss this month as it failed to rise above the 20 day moving average and the down trend is still very clear.

The Australian dollar approached a five year low against the dollar in late US trading and the New Zealand dollar traded near a six year low as investors moved out of the carry trades after the negative US data yesterday. But the Australian dollar bounced back overnight as the Reserve Bank of Australia announced it had bought a record 3.15 billion Australian dollars in October. The RBA continued to purchase its own currency this morning, "providing liquidity as on previous occasions," said a spokesman for the Sydney-based central bank. The Australian dollar has posted a record monthly drop in October and the RBA has been purchasing the AUD$ in an attempt to slow the drop. Commodity prices continue to fall, dragging down the exchange rates of commodity exporting countries. Falling interest rates have also put pressure on the higher yielding currencies of NZD and AUD.

Iceland finally got the long promised bailout from the IMF and four Nordic countries yesterday. The IMF and four Nordic countries gave Iceland a $4.6 billion bailout. The Icelandic government will also borrow about $6.3 billion from the UK, Germany, and the Netherlands to cover foreign deposit guarantees at failed lenders. While the rescue was desperately needed, it will heap almost $11 billion of debt on the shoulders of the islands population of just 320,000. "This is an extraordinary scale of problem related to the size of the economy," IMF Mission Chief to Iceland Poul Tomsen told reporters. "Iceland is in an unprecedented situation." GDP in Iceland is predicted to shrink about 10 percent next year, the IMF says. The island had the fifth-highest per capita income in the world in 2007, but the collapse of their financial system has caused the Icelandic krona to lose two thirds of its value this year. The rescue may start to add some liquidity back into the banking system, but the massive amount of debt will likely keep the Icelandic economy from rebounding for a number of years.

Currencies today 11/21/08: A$ .6212, kiwi .5272, C$ .7817, euro 1.258, sterling 1.4982, Swiss .8194, ISK (No Quote), rand 10.46, krone 7.0831, SEK 7.2031, forint 211.78, zloty 3.046, koruna 20.405, yen 94.87, baht 35.22, sing 1.5304, HKD 7.7513, INR 50.02, China 6.8311, pesos 13.8031, BRL 2.457, dollar index 87.56, Oil $50.38, Silver $9.17, and Gold... $756.88

That's it for today... Big day here on the desk as we are all excited about our Christmas party tonight. Yes, it is a bit early for a Xmas party, but I'm not one to complain about free food and drinks!! And the party is being held at a bowling alley, which is right up our alley (pun intended) as we are a fairly competitive group. I actually took a bowling class in college, but I haven't bowled in a few years, so I hope I can recall some of what I learned back then. 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

Cash For Trash...

Chuck Butler — Thu, 25 Sep 2008 14:04:34 GMT

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In This Issue..

* Grave words about the economy...

* OPEC warns of a higher Oil prices...

* FDIC in need of $150 Billion?

* Citigroup calling for a higher euro...

And Now... Today's Pfennig!

Cash For Trash...

Good day... And a Tub Thumpin' Thursday to you! Well... The President sure painted a rosy picture for the U.S. economy last night didn't he? NOT! Whoa there partner! With words like "collapse" and "danger" and "panic", President Bush was telling the country that we're in deep dookie! In telling the public that the government must put $700 Billion of taxpayer's money at risk to bail out the financial system, he said... "We're in the midst of a serious financial crisis. Our entire economy is in danger. America could slip into a financial panic."

Now... Those are some serious statements, folks... And were followed up by the comments by the chairman of the House Financial Services Committee, Barney Frank, who said, "Whatever you think about whether or not there was a need for a bailout... Once the president, secretary of the Treasury, and the Federal Reserve Chairman have announced that if you don't do this, there will be a collapse, there's probably going to be a collapse if you don't do it."

Wow! Those are grave words there folks... But don't you feel like snake oil salesmen are selling us a powerful medicine that if we don't take it we'll die? Why all these grave words now? Where has this been for the last year, as the credit wound tighter and tighter, house values spiraled downward, Oil reached $145, The dollar continued to lose purchasing power? It's all related... And if these bozos on Congress can't see that, we're in deep dookie whether we pass this $700 Billion bailout package or not! There are two guys that see the light... Ron Paul, and Jim Bunning...

So... The markets are waiting for the bailout package to be passed, and it does look as though they are close to reaching an agreement on the amendments to the deal... But, until they pass it, the markets are basically standing still. The dollar did receive the McLovin I talked about yesterday, as Big Ben Bernanke and Treasury Sec. King Henry filled the halls of congress with more lies and videotape... You see... No one is talking about the fact that this $700 Billion doesn't do anything to improve spiraling house prices... Nothing to improve the recession... Nothing to improve energy prices... And so on, and so on... I will say this about the package... I call it... "Cash for Trash"... And nothing's going to change my mind!

Overnight, the dollar has given back the small gains it took yesterday, as I can't see why foreigners that make investments in the U.S. and are needed to do so to finance the Current Account Deficit, could feel a warm and fuzzy about the prospects of the U.S. economy, and thus the dollar denominated investments they would make.

I would think that passage of the package would put risk back on the table, and allow the high yielders and alternative to euro currencies to move to the front of the class. Aussie, kiwi, Norway and Sweden fall under those headings...

There's news this morning that our friends, NOT! At OPEC are telling people that the price of Oil may have to gain as investors hedge against the dollar... Very astute observation! But one that will not be welcomed by most Americans. I say "most" because there are those that don't deal with automobiles, and then there are those, like a friend of ours at EverBank, that is an oil man... He's been walking around with a smile on his face like a Cheshire Cat for the past 5 years, and why not? Oil has slipped overnight to $104.60, from $109 yesterday morning. So... No need to panic yet!

There's also a story regarding the FDIC, and how they will probably need at least $150 Billion next year to deal with bank closings... OUCH! Now that's going to leave a mark! And one that will be quite ugly to see!

Yesterday, I told you how Citgroup's FX people were calling for parity in the Aussie dollars once again... Well, shortly after I hit the send button, I saw where Citigroup is also issuing a "buy" recommendation for euros. Citigroup's insight here is based strictly on "dollar weakness"... Which if very close to what I'm always talking about with the euro, as the euro is the "offset currency" to the dollar... Dollar weakness will be first seen in euro strength.

It's a good thing this has been a slow week for economic data in the U.S. as it would have probably been ignored had it printed anyway! The markets have become myopic with the bailout package. But nonetheless we have data printing today, that would normally play well with the currencies, keeping their hands to themselves! August Durable Goods, Weekly Initial Jobless Claims, and August New Home Sales will all print this morning. None would give any McLovin to the dollar anyway... So, I'll just sit here on the Dock of a Bay, watching the tide go away, wasting time... AH, Mr. Pitiful on a Tub Thumpin' Thursday!

A reader sent me a note yesterday and said that he had seen the 3-month Treasury Bill yield actually go negative yesterday morning! That's crazy stuff! As I look at the yield curve right now, a 3-month Treasury Bill will yield you 67 Basis Points (BPS)... Of course after the bond dealer takes a fee, it probably is negative, or it might as well be!

Well... As I was getting ready to head to the Big Finish, I looked over at the currency screens and saw the dollar rallying again... The euro, which was 1.4716, when I came in, is now 1.4665... A tight range, sure, but, I just wonder what caused that slippage... I'll go check and be back in a minute...

I'm back now, did you miss me? HA! Anyway... There's nothing on the news wire regarding the slippage in euros, or the strength of the dollar, either way you look at, we're void of news... So, off I go to the Big Finish, are you coming with me?

Currencies today 9/25/08: A$ .8360, kiwi .6845, C$ .9665, euro 1.4670, sterling 1.8545, Swiss .9215, ISK 93.10, rand 8.1850, krone 5.6375, SEK 6.5975, forint 164.02, zloty 2.2715, koruna 16.62, yen 105.80, baht 33.95, sing 1.4220, HKD 7.7710, INR 46.16, China 6.8170, pesos 10.83, BRL 1.8590, dollar index 76.75, Oil $104.59, Silver $13.36, and Gold... $885.25

That's it for today... Cardinals decide to start winning after they've been eliminated! That's pretty much how the season has gone for my beloved redbirds. My little buddy, Alex, tried out for the jazz ensemble (guitar) the other day, he sure has come a long way with his guitar playing ability in the past year and half. Don't know how he'll be able to juggle football and jazz band if he makes it, but that's his problem to deal with! I go to see my oncologist and blood doctor today, to game plan the next phase of being a cancer beater. I realize that I had it once, and the cancer wolf is always at the door, but I can't begin to tell you how good I feel, not having to take that medicine that made me so sick, and tired. I can taste food again, and that alone is priceless! But, I'm here... And if the medicine had anything to do with that, and I'm sure it did, then I'm very grateful to have had the opportunity to take it no matter how sick it made me! I'm sure the next phase will include an attempt to lose some weight... I usually only have bad luck with losing weight. That reminds me of that silly song on Hee-Haw... If it weren't for bad luck I'd have no luck at all (with weight)! Now, that mad me smile, thinking of Saturday nights and my mom and dad watching Hee-Haw! Now, that just made it a Tub Thumpin' Thursday! Hope yours is Tub Thumpin' Too!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837