Daily Pfennig : Consumer Spending

Dollar drifts lower....

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

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In This Issue.

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

Dollar drifts lower....

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Consumer Spending Drives GDP?

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

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

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

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

In This Issue..

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

And Now... Today's Pfennig!

Consumer Spending Drives GDP?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

3rd QTR GDP Is Strong!

Chuck Butler — Fri, 30 Oct 2009 14:40:04 GMT

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

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

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

In This Issue..

* Dollar gets sold after GDP report
* High yielders get bought!
* German Retail Sales decline...
* Real has wild swings!

And Now... Today's Pfennig!

3rd QTR GDP Is Strong!

Good day... And a Happy Friday to one and all! I can't believe how hard it rained here yesterday... Unbelievable! And me, with my cane, and not able to run, was stuck in it going from the car... Absolutely soaked! If I were a kid, I would have thought that to be fun! But, I'm not... It's still raining this morning too! UGH! Let's hope it stops in time for the Trick-or-Treaters!

OK... Well the rain fell on the dollar's parade yesterday too! And, just like I thought it would do... The dollar got sold like funnel cakes at a state fair, once the U.S. 3rd QTR GDP report printed... The dollar rally was stopped in its tracks, which meant that the "trading theme" that rewards the dollar when things look bad in the U.S. and punishes it when things look good, which is completely opposite of what it should do fundamental wise, was still in place!

3rd QTR GDP was 3.5%!!! Let's Party! Get on your red dress sweetheart we're going out dancing, we're going to party like it's 1999! Seriously, the Gov't officials, including Summers and Geithner think it's all seashells and balloons from here on out! So, why shouldn't we think the same? I mean they've never led us to the wrong side of the tracks have they? HAHAHA HAHAHAHAHAHA... And HAHAHAHAHAHAHA HAHAHAHAHA!

OK, don't get me wrong here, I'm glad the U.S. economy seems to be out of the recession/ depression... But, didn't we expect a bump in the economy? Didn't we think we would see growth by the end of the year, based on the stimulus and money supply extravaganza that went on the first part of this year? And... Based on the reports I saw, a large portion of the growth was actually a return of Consumer Spending in the quarter... Cash for Clunkers really helped the Consumer Spending along too!

But isn't it just like the people that win the lottery... Suddenly, they have all this cash... And they spend it until they have no cash and voila! They are back to having nothing to spend! That's how I think the U.S. economy will react once the stimulus and other monetary candy is withdrawn from the economy... I'm still pinning my colors to the mast of a double dip for the economy... We've got the first two parts... The negative growth, and now the positive growth... Where are we headed next? Only the Shadow knows!

We'll begin to see a glimpse of what's going to go on in the next couple of weeks, as the Fed's Quantitative Easing program has hit their ceiling of $300 Billion, and ended yesterday... The Fed's 7-month buying spree, remember they announced this plan while I was in Florida at spring training, seems to have put the lid on yields of Treasuries to allow the housing market some time to heal... But, as I told my publisher for the Currency Capitalist, Erika Nolan, when I met with her after the announcement... "the U.S. has just opened Pandora's Box of baaaaaaaaaddddddd things for the economy, for Japan has implemented this same program, but over 10 years ago, look how well that's turned out for them!"

Today's data brings us two of my faves... Personal Spending and Income... We'll see if the Consumer Spending continued in September or not...

There's a great headline to a story on the Bloomie this morning... The title reads: "Obama Bridge To Lasting Economic Expansion Risks Going Nowhere" A Bridge to nowhere... That sounds about right to me! It could be the Bridge Over Troubled Waters, or it could be the Bridge of Sighs... I still believe that the U.S. Gov't has spend Trillions taking us deeper into the abyss of a national debt, with little to show for it, except... The U.S. has ventured into the private sector deeper than any Gov't has before during this financial meltdown... Think they'll get out once it's over? HAHAHAHA HAHAHAHAHA! Not going to happen my friend!

OK, enough of that! It's a Friday for crying out loud, Chuck, can't you think of more pleasant things to talk about? Yes... Let's see... Oh yeah! I started telling you above about the non-dollar currency rally VS the dollar yesterday, so let's go back to that!

Well, there wasn't much to say other than the dollar got sold after the GDP report printed... It wasn't so much that the currencies rallied VS the dollar, as it was a sell off of the dollar, which led to a currency rally! The high yielding currencies of Australia, Brazil, New Zealand, and even Norway now that rate on the rise there, posted the best gains VS the dollar on the day. And that makes sense, right? I mean, haven't I been harping on the yield / interest rate differentials lately? And here's where they came out to play!

The data in the U.S. was good, which brought the risk takers out of the walls once again, and knowing that the U.S. interest rates are going to remain near zero for some time to come, they sold the dollar and those paltry yields that go with the dollar, and bought currencies that had a nice positive yield differential to the those paltry yields!

The Big dog, euro, as the offset currency to the dollar, obviously participated in this dollar sell off... The euro's gains were stopped this morning though, when German Retail Sales printed and unexpectedly declined in September. Remember, Germany's economy exited their recession in the 2nd QTR, albeit a nascent recovery at best... So, we'll have to keep an eye on Germany's nascent recovery to see if it "double dips" too!

Speaking of Brazil... Recently, the real has really shown its tendency to take a walk on the wild side when trading gets going... I'm talking about 3-5% swings good and bad! Whew! That's something to watch! The good news is... That even though the swings in the price of the real are wild, the overall trend continues to be good for real holders... I expect the real to react to rumors this morning that the Gov't will not throw out road blocks to impede the real's performance... That would be HUGE! And very welcomed by currency traders that trade the real always looking over their shoulders to see if the Gov't will throw out the road blocks... So, like I said, there are rumors this morning, that the Gov't will announce that they are not going to impede the real's rise at this time...

And then there was this... U.S. Treasury Sec. Tim Geithner, announced yesterday that he wants the power to not only tell a corporation that they are closed for business, but to also have the power to shrink Corporations that are not having problems! He will be the "death panel" that Barney Frank talked about a couple of months ago for non-financial institutions... Shake me, Wake me, when's it's over... Maybe I'm having a bad dream, folks...

To recap... The dollar's rally was stopped in its tracks by the U.S. 3rd QTR GDP which printed a 3.5% increase, and caused investors to seek higher yielding assets, thus selling dollars. German Retail Sales unexpectedly declined in September, thus stopping the euro from rallying further this morning. And the High Yielders get all the glory when investors realize that U.S. rates are going to remain near zero for some time to come... Aussie, Brazil, New Zealand lead the pack!

Currencies today 10/30/09: A$ .9155, kiwi .7310, C$ .9360, euro 1.4845, sterling 1.6540, Swiss .9840, rand 7.6750, krone 5.63, SEK 6.9875, forint 183.61, zloty 2.8525, koruna 17.83, RUB 29.02, yen 90.90, sing 1.3970, HKD 7.75, INR 47.03, China 6.8275, pesos 13.01, BRL 1.7325, dollar index 75.87, Oil $79.58, 10-year 3.62%, Silver $16.60, and Gold... $1,044.90

That's it for today... I'm writing from home this morning, as I have a doctor's appt. first thing before I go to work... The network was a little touchy this morning, and I wasn't sure I would get this out, but it has settled down now. Whew! Big Weekend for my beloved Missouri Tigers as they travel to Colorado. And my little buddy Alex, as his team travels to Webster Groves! HA! Good news in the local paper this morning, as the best player in baseball today, Albert Pujols announced that he wants to be a Cardinal for life! Our Blues just can't get on a roll, win one, lose one... UGH! So... Tomorrow is Halloween! I can't wait to see the little ones in their costumes! Our little Delaney Grace is Dorothy from the Wizard of Oz, with ruby red shoes, a basket and Toto too! She is so darn cute! I'll leave you with the thought of a little Dorothy coming to your door! I hope it dries out here soon... And I hope you have a Fantastico Friday and Ghoulish Weekend! BOO!

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

G-7 To Discuss Currencies?

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

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

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

Don't miss this unique opportunity. Deadline to buy the BRIC MarketSafe CD is Oct. 13, 2009. Apply today or learn more at http://www.everbank.com/001CertificatesMSBRIC.aspx?referId=11808

In This Issue..

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

And Now... Today's Pfennig!

G-7 To Discuss Currencies?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

More Strong Data Sinks The Dollar...

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

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In This Issue..

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

And Now... Today's Pfennig!

More Strong Data Sinks The Dollar...

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

GDP Does Not Compute, Will Robinson!

Chuck Butler — Wed, 05 Aug 2009 14:49:35 GMT

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.........

In This Issue..

* Currencies trade in a tight range
* Pound Sterling, the star performer?
* Something smells fishy...
* Do you see trend with Gov. Reports?

And Now... Today's Pfennig!

GDP Does Not Compute, Will Robinson!

Good day... And a Wonderful Wednesday to you! We had a very tight range trading day yesterday in the currencies, which have left them trading in about the same clothes they were wearing when I signed off yesterday! We've got that to talk about, and... Another $2 Billion for the CARS program has been allocated... What a crock! OK, Chuck, slow down, you don't need to get your blood boiling this quickly, this morning!

I'm writing from home this morning, as I have a meeting close to our old office, which means its not far from where I live, which is completely different from our current office location, which is, I'll say... Quite a distance... But, hey! I'm not complaining, just giving you the details...

OK... Well, as I stated in the opening, the currencies have traded in a very tight range for the past 24-hours, with little in the way of data to push them in either direction. That could change this morning when we see the color of the ADP Employment report, and Challenger job cut report. The ADP/Challenger reports are usually a very bad indicator of what the Bureau of Labor Statistics (BLS) print in the Jobs Jamboree (which will print on Friday this week)... But a few months ago, the people at ADP/Challenger decided to change their methodology to mirror that used by the BLS... In other words... They will lie, cheat, and cook their books too! HA! But that hasn't helped them...

I think it to be a better indicator to use the employment component of the ISM Index that printed the other day... The employment component showed that the job losses will be around 350,000 for July... That's close enough for government work regarding the forecast of 325,000 jobs lost by the surveyed economists.

However, the ADP/Challenger report will print, and the markets will make an initial reaction to the report. So, watch for that... If the ADP/Challenger report shows a greater number of jobs lost, it could push the risk appetite to the back of the class once more... At least temporarily!

OK... I was all prepared to talk about this in today's Pfennig, when I saw a note from my friend, John Mauldin, talking about it last night! He beat me to the punch! Oh well, I'm going to continue on with my plans...

What I'm talking about is the GDP report last week... Something smells of yesterday's fish here folks... I'll put it out here very simply... The Gov't tells us that Consumer Spending is only down -2.5%. Which when plugged into the GDP report tells us why GDP was reportedly stronger than expected in the 2nd QTR... Consumer Spending represents about 70% of GDP! But here's where I have a problem with the report... Corporate Earnings are down 15%... Corporate Earnings are down 15% because there's no Consumer Spending! -2.5% doesn't compute when Corporate Earnings are down 15%!

And here's where the cheese begins to bind folks... I believe the Corporate Earnings numbers are true... They are regulated to be so! While the Consumer Spending data is Gov't produced... As the robot in the Lost in Space TV program used to say... "This does not compute, Will Robinson"!

But hey! What do we expect from Gov. reports? Look at the games that people play at the BLS for example! Any old way, I just wanted to throw that out there as food for thought about the U.S. economy / recovery data...

Ty Keough and I had a quick conversation yesterday about Bank Earnings that have been reported... I discussed how disgusted I was with all this yesterday, but left it at that. Ty decided to try and get me talking about this... I know I shouldn't, but I must! These Big Banks that borrowed funds from the Gov't, got to stop marking to market the securities/bonds that had gone bust, which means they then got to sell them to the Gov't at inflated prices, then take the money they Gov't gave them for the inflated securities/bonds and pay back the Gov't! The funds also allowed the Big Banks to post those earnings that the markets got so wound up about! Now... How's that for getting your cake and eating it too!

I shake my head in disgust, folks... But hey! We've got the cartel folks over at the Fed taking care of all of this for us... Isn't that nice? NOT! We had all better be careful or before we know it, the Fed Heads will be doing an Oliver North on us!

Ok, enough of that! The British pound sterling was the star performer again yesterday and last night... The U.K. has seen a plethora of better data recently, and it didn't stop yesterday or this morning... The U.K. manufacturing index unexpectedly rose, and U.K. services expanded the most in 1.5 years in June. Factory output was up .4%, and home values shot up almost double what was forecast for them!

This recent run of better than expected data reports in the U.K. tells me that the Bank of England's (BOE) Gov., Mervyn King has come to an end of his bond purchases... For now... That means Quantitative Easing in the U.K. has ended... Again, for now... And that news , along with the better than expected data has allowed the pound sterling to rally and rally it has!

In the Eurozone, things aren't looking so rosy... Eurozone Manufacturing and services contracted at the slowest pace in the past year, and Retail Sales for June showed a 2.4% drop, year-on-year. However, these things only place a drag on the euro temporarily, as the euro will shine, with every mark down of the dollar...

And then there was this... A long time reader sent me a note yesterday, and said that it just didn't make sense that U.S. Manufacturing was healing while Capacity Utilization was wallowing in the mud (OK she didn't put it like that, I did!)... So... I put on my Sherlock Holmes hat, grabbed my pipe and looked into it, because... Now that she said that, it didn't make any sense to me either!

So, I went to the components of the ISM Index, and found that 9 of the 10 showed improvement... But none so much as the Government Construction Spending component that showed a 3% increase! So... There you have it... Manufacturing, per se, was better, but not as advertised!

So... GDP was not as good as advertised. Manufacturing was not as good as advertised. Jobs data has not been as good as advertised... Do you see a trend here? If not, you might want to go for an eye check up! HA!

OK, I've got to get this and me out the door soon, so I had better head to the Big Finish!

Currencies today 8/5/09: .8440, kiwi .6745, C% .9295, euro 1.44, sterling 1.70, Swiss .9420, rand 7.91, krone 6.03, SEK 7.1415, forint 185.49, zloty 2.85, koruna 18.05, yen 95.30, sing 1.4340, HKD 7.75, INR 47.62, China 6.8310, pesos 13.13, BRL 1.8160, dollar index 77.27, Oil $71.70, 10-yr 3.72%, Silver $14.70, and Gold... $966.70

That's it for today... A better day for yours truly on the trading desk yesterday, not so long! I'll get a late start today though, with this meeting I'm going to right out of the starter blocks. Little Delaney's Birthday pool party was wiped out by the rain yesterday, but not to worry, the family gets to celebrate her turning 2 this weekend! Our new BRIC MarketSafe CD has really caught on with the newsletter writer community, and with investors! Our phones are ringing off the hook once again, which is a very good thing! The BRIC MarketSafe is explained in the "ad section" above, if you haven't already, you should check it out! Ok... Day light is burning, I've got to get moving! Hey! I just realized that I didn't rant about the CARS program... I bet that makes your day!... I hope your Wednesday is Wonderful!

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

Dollar continues it’s slide...

Chuck Butler — Fri, 31 Jul 2009 14:45:32 GMT

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

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

* Dollar continues to slide...
* US GDP contracts but not as fast...
* Nordic currencies outperform...
* Japanese yen continues to fall...

And Now... Today's Pfennig!

Dollar continues to slide...

Good day... The last day of July is upon us. Time just seems to keep moving faster as it seems summer just got started. The fall of the dollar also accelerated yesterday as investors moved back out of the 'safe haven' of US$ and continued to shop for more yield. The greenback tried to stage a bit of a rally in early European trading, but has fallen back off again as I sit down to write the Pfennig.

I got a call from a Reuters reporter yesterday mid morning to ask why the dollar was rallying at the same time stocks were moving higher. I quickly paged through my Bloomberg looking for some sign why both were heading higher. The trading pattern which has been established over the last few months has these two asset classes moving in opposite directions; good news for the US economy sends stocks higher and the dollar lower as investors retreat from defensive 'safe haven' positions in the US$. The opposite occurs whenever there is data which shows the global economic recovery is faltering, stocks move lower and the dollar rallies with safe haven buying.

But yesterday morning, for a short period both were moving up. I first looked at the jobs data to see if they held any clues. The Initial Jobless claims came in slightly higher than expected, confirming our calls that the labor market will continue to be a drag on the US economy. But the reporter pointed out the continuing claims has dropped. I explained to her that the continuing claims were dropping because people are falling off the rolls. Drops in continuing claims are not due to people going back to work, but are due to people being out of work longer than the labor department's records. So I didn't see anything in the jobs data which would cause stocks to rally.

Unable to find anything in the data to support the short term market movements, I moved the conversation to the longer term trends which I feel much more comfortable speaking about. And by the time the conversation was over, the quick rally in the dollar had subsided, and the dollar index was moving back down. The short term market movements are very hard to call, as the currency and equity markets can move on emotion and rumor for short spans of time. But they will always move back toward the underlying trend line. Right now, the trend is for the US$ to weaken vs. the major currencies; as investors begin to look for currencies with higher yields and better underlying fundamentals.

So the dollar continued to fall vs. every currency except the Japanese yen. The Nordic currencies of Sweden and Norway led the charge vs. the US$ with Sweden moving up over 1.5% and Norway appreciating just under 1%. As I wrote yesterday, the Swedish krona has been one of the best performers recently as their economy has begun to recover ahead of mainland Europe. Sweden's central bank, the Riksbank, was more aggressive with rate cuts than the ECB, so they will now have more room to increase them as the global economy recovers. Like Norway, Sweden went into the global recession in a fundamentally solid position, with a good trade surplus and low national debt. But Norway seems to be a bit better positioned going forward, as they rely on commodity based exports and while Sweden is geared more toward manufacturing. Both should continue to move higher vs. the US$.

The focus today will be on the 2 quarter GDP report which will be released this morning. GDP is expected to have contracted 1.5% after a 5.5% contraction in the first quarter. If the number comes in as expected, the dollar will likely sell off as investors move back into riskier assets. But as I mentioned earlier, the currency markets have started to show signs of moving away from the safe haven / risk aversion pattern recently. Investor's focus will eventually shift toward interest rate differentials. But I still think it is a bit too early for this shift to occur, and a stronger GDP figure will likely cause a further drop in the US$.

We will also see Personal consumption data for the second quarter which is expected to show US consumers are continuing to increase savings. Consumption is expected to have fallen .5% after rising 1.4% during the 1st quarter. In spite of government efforts to stimulate spending, US consumers are worried by rising unemployment and won't likely loosen their tight grip on their wallets anytime soon. Finally, we will end a busy week of data releases with the Chicago Purchasing Manager's index which is expected to show a slight increase to 43 from 39.9 reported last week. This would be a second consecutive monthly increase, a sign that the manufacturing sector is bottoming out. Even though the number continues to move higher, any number below 50 is seen as a negative indication for the economy. Even with inventories near record low levels, manufacturers will likely wait for consumers to start spending again before increasing production.

The pound sterling continued to rise against the dollar after a report showed British consumer confidence held at the highest level since April of last year. It seems the pound sterling has moved to a upward trend, after dropping most of last year.

The Japanese yen continues to fall vs. the US$ as investors sell the currency and move to higher yielding assets elsewhere. Japan's unemployment rate rose to a six year high in June and consumer prices fell at a record pace. The Japanese economy continues to be stuck in a stagnant deflationary state and will be dependent on a global economic recovery to spark exports. Increasing growth in other Asian nations (mainly China) has sparked production increases by Japanese manufacturers. This has been the one positive sign out of Japan recently, but this one piece of data couldn't halt the selling of the Japanese yen.

Elections in Japan will be held at the end of next month, and the opposition party is all but guaranteed to win. The ruling Liberal Democratic Party is in a shambles, and has produced 4 prime ministers in the last 4 years. The new government is expected to increase spending on government programs, but like the US administration, no one has figured out how to pay for these increases. The opposition's spending proposals add up to 3.5% of GDP, and the party has ruled out raising Japan's 5% consumption tax for at least 4 years. Much of the funding for the new programs will come from cutting 'waste' in existing spending programs (sound familiar?). Gross national debt in Japan is currently 180% of GDP and rising as the stimulus packages kick in.

Many factors in the Japanese economy are eerily similar to those in the US, and neither looks to recover quickly. Both the US$ and the Japanese yen will continue to be sold as investors move into currencies of countries with much better economic potential. The short and medium term prospects for these two currencies certainly look negative.

Two currencies which seem to be on a much different path than the Japanese yen are the Australian and New Zealand dollars. Both are headed for their longest set of monthly gains since 2004. With interest rates expected to start rising, and China continuing to consume commodities which both produce, these currencies should continue to perform well. Barclays Capital raised their forecasts for both currencies saying rising risk appetite will boost demand for them in the short term. "A better than expected US GDP result would be the final icing on the cake for July and would provide great opportunity for the Australian dollar to retest 83.38 cents," according to the report.
Currencies today 7/31/09: A$ .8284, kiwi .6561, C$ .9269, euro 1.4139, sterling 1.6552, Swiss .9231, rand 7.804, krone 6.1628, SEK 7.2825, forint 187.92, zloty 2.9328, koruna 18.089, yen 95.70, sing 1.4405, HKD 7.7500, INR 47.935, China 6.8321, pesos 13.2126, BRL 1.883, dollar index 78.966, Oil $66.81, 10-year 3.61%, Silver $13.63, and Gold... $938.42

That's it for today... The EverBank kickball team played or final regular season games last night and ended up victorious in both. More importantly, we were able to make it through both games without an injury! We finished in third place, so we will have a pretty good seed going into the end of season tourney. Happy Birthday to Ann Hopkins today! I have worked with Ann off and on since I started in the banking industry back in the late 80's, and she is a real treat to have on the desk. 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

Risk aversion returns…

Chuck Butler — Fri, 17 Jul 2009 17:11:25 GMT

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In This Issue..

* Risk Aversion returns...
* Money Multiplier dampens stimulus effects...
* TIC flows show concern of foreign investors...
* China back on growth track...

And Now... Today's Pfennig!

Risk aversion returns...

Good day... Chuck got an early start on a two week hiatus from the desk, so you will be stuck with me writing the Pfennig for the next two weeks. But don't worry, you will still get a small dose of Chuck over the next week as he typically emails me his thoughts while on the road (I call it Pfennig Pfodder). Risk aversion dominated the currency markets overnight, as terrorists set off two separate explosions in Jakarta and investors moved money back into the 'safe havens' of the US$ and Japanese yen.

Chuck wrote about this move yesterday, believing the bad news regarding CIT would probably cause a risk reversal. But the US stock market shook off the CIT news and rallied higher after a big earnings report by JP Morgan and a somewhat positive statement by Nouriel Roubini. Roubini, the New York University economist who is credited with predicting the financial crisis, said in a speech yesterday that the US economy might be close to the bottom. The stock jockeys took this statement along with the positive earnings reports and ran stocks up. But Roubini later tried to caution these bulls against reading too much into his statement, and reminded everyone that he has not changed his thoughts on a US recovery: "I continue to see a shallow, below par and below trend recovery."

Those looking for a quick v shaped recovery will be disappointed, as we continue to believe the recovery here in the US will be more of an L shape as our economy struggles to recover. After all, who is going to propel the US economy to recovery? In past recessions, we have been able to depend on the US consumer to pull us back out. But the poor consumer is now facing the highest unemployment rate post WWII combined with falling home prices and much stricter lending policies. And with the dire fiscal position of most states matching that of the federal government, the tax burden placed on almost all taxpayers will likely be rising, chewing up more of consumers disposable income. We are no longer be able to rely on US consumers to 'borrow and spend' our way to GDP growth (which is actually a good thing!!). Consumers are tightening their belts, and saving a larger percentage of their income; good news for the consumers, but bad news for the economy.

The administration has tried to take over where the US consumer left off by borrowing record amounts of money and injecting it into the economy through stimulus packages. But recent data bring into question whether or not this stimulus is having the desired effect, and many are now questioning whether any fiscal measures can pull the economy out of recession. With the credit markets still tight, and the negative outlook for consumer demand, no amount of government intervention seems able to stop the decline in jobs and quickly pull the US out of this recession/depression. The reason is that the 'multiplier effect' of the stimulus money is too low. Typically when the government injects funds into the economy, the effect of each dollar they spend is multiplied several times over as it moves through the lending / spending cycles. It works like this: $1,000,000 given to a bank by the Fed is lent out to consumers and business who then spend the funds on goods and services. The companies who sell the goods and services place a majority of these funds back into the bank who then turn around and lend them back out, starting the cycle all over again. But recently neither the banks or the consumers are acting 'normal'. Banks who have received stimulus funds are using them to shore up balance sheets and keeping them in reserves. Consumers who have received stimulus funds, or are strong enough to qualify for loans have been doing the same thing; using the funds to pay down debts and saving a larger percentage. So the multiplier effect of each dollar injected by the administration has been much smaller than in years past. While some in the administration are calling for another stimulus package, others are now realizing the impact of government stimulus will continue to be decreased by the low multiplier. The government should probably just let the recession take its course, and avoid adding more debt to our already over burdened tax payers.

But 'big government' is back, and the current administration obviously feels it is their job to make government even bigger. Chuck had this to say about this weeks earlier announcement of a new government run health care program:

"The Big Debate right now is a National Health Care program... I'll come right out front and center and say that I'm not for it, which shouldn't surprise anyone that's been reading this letter very long. But there's someone else who should be more important a figure against this than I think the media is reporting...

I'm talking about Douglas Elmendorf, the Director of the Congressional Budget Office who, under questioning by members of the Senate Budget Committee, had this to say...
"Instead of saving the federal government from fiscal catastrophe, the health reform measures being drafted by congressional Democrats would worsen an already bleak budget outlook, increasing deficit projections and driving the nation more deeply into debt."

He went on to say... That "bills crafted by House leaders and the Senate Health Committee do NOT propose the sort of fundamental changes that would be necessary to reduce the trajectory of federal health spending by a significant amount."

But... I doubt they listen to him... For when it comes to spending and driving up the deficits.. They haven't listened to former CBO director, Alice Rivlin... And they haven't listened to former Comptroller General, David Walker... Why the current CBO director now?"

Data released yesterday showed the number of Americans filing claims for unemployment benefits fell last week to the lowest level since January. But like last week, these jobless claims were skewed by the Labor Department's 'adjustments'. As I explained last week, the automakers typically lay off workers during July, so the BLS adds back thousands of jobs in order to offset these seasonal layoffs. But this year, the auto plants laid off these workers months ago, so the seasonal adjustments are adjusting away actual job layoffs, not just temporary automobile layoffs. These distortions will likely continue for the next few weeks, with the weekly numbers climbing back over 600,000 in August when the seasonal adjustments end.

The TIC flows were also released yesterday and showed International demand for long term US financial assets weakened in May. Investors sold the most Treasury notes and bonds in six months, with the net Long-term TIC flows dropping almost $20 billion. The 'experts' had predicted a rise of $16.5 billion in purchases. But as investors dumped long term Treasuries, purchases of US stocks in May were the strongest since January of 2008. So the impact of these flows were minimal on the value of the US$. The administration has to be worrying about the direction of the TIC flows, as it continues to bring record amounts of Treasuries to the markets. If investors shy away from the new debt, interest rates will be driven higher putting further pressure on our 'stealth recovery'.

After reviewing the numbers, I spotted another item which should be cause for concern. The report showed foreign governments were moving from the longer term maturities of Treasury notes and bonds into shorter term bills which have a maturity of less than one year. Foreign governments continue to be worried about the future ability of the US to maintain our record deficits. The Chinese economy continues to grow, and is propelling them to a much more important status among global leaders. Chinese Premier Wen Jiabo continues to express concerns regarding his country's US Treasury holdings, and officials in Japan, the second largest investor, have also begun to express concern. The administration is calling in the big guns to try and assuage China's concerns. Federal Reserve Chairman Ben S. Bernanke will brief Chinese officials at a summit this month about how the US plans to keep inflation in check over the next few years. The summit is the first high-level gathering of its kind since President Obama took office.

China reported yesterday that their economy grew 7.9% in the 2nd QTR, which was greater than the 7.7% forecast by economists, and the 6.1% that was booked in the 1st QTR. This was the first acceleration in growth in more than two years, and comes on the heels of a $585 billion stimulus package which was targeted at increasing infrastructure and getting credit flowing again. The positive growth number will likely cause them to start raising rates in 2010 according to a Bloomberg news survey. Economists predict the one-year lending rate will climb over 50 basis points after remaining steady for the rest of the year. China is the only one of the 10 biggest economies that is expanding, and confirms what we have been saying for some time: China will be the engine which propels the global economy out of recession.

Chuck noticed the good numbers out of China before heading out yesterday, and sent me the following:

"This news must be manna from heaven for Australian commodity exporters... As I've said for some time now... China's economic strength = strong demand for raw materials, of which Australia is not only geographically positioned to supply China with raw materials, but has the raw materials to supply to China! And demand for Australian raw materials is a proxy for commodities as a whole... And, will underpin the A$!"

If you agree with what Chuck is saying regarding the A$, it may be a good time to buy some more as the AUD$ slid below .80 overnight due to risk aversion. Both the AUD$ and NZD$ fell against the dollar and the yen as investors shifted to safe haven currencies. The New Zealand dollar fell the most in two weeks after Fitch Ratings cut the nation's long term sovereign credit rating outlook to negative. Fitch said the nation's deficit is large and a "stronger fiscal adjustment than currently planned" may be needed. First, I think everyone should treat anything coming out of the rating agencies with caution. But I agree that the nation's deficit is too large, but the news coming out of China should go a long way toward pushing these commodity exporting countries back into the black. As Chuck says above, as China expands the commodity currencies should stay well bid.

Before I head to the big finish, Chuck wanted me to make this announcement to all the Pfennig readers....

After 2 long years of looking for the next MarketSafe CD to issue, I decided to put together the countries that have been in the news lately. So... Introducing: The EverBank MarketSafe BRICK CD! This will be a 3-year CD that will have FDIC protection, 100% Principal Protection, and 100% of the upside of the combined values of the currencies from Brazil, Russia, India and China! If the combined values of these 4 currencies should go down in 3 years, you'll get your principal back!

To invest in this new MarketSafe CD, you need to either go to: www.everbank.com where after reviewing the offering you will be able to apply for the CD right on line, or by calling the trading desk @ 1-800-926-4922 for the details.

Currencies today 7/17/09: A$ .8000, kiwi .6444, C$ .8945, euro 1.4100, sterling 1.6291, Swiss .9276, rand 8.102, krone 6.3926, SEK 7.8203, forint 194.08, zloty 3.0682, koruna 18.3992, yen 93.83, sing 1.4504, HKD 7.7501, INR 48.68, China 6.8316, pesos 13.58, BRL 1.9318, dollar index 79.49, Oil $61.93, 10-year 3.56%, Silver $13.19, and Gold... $934.45

That's it for today... The EverBank kickball team pulled out another victory last night in a tightly contested match. Happily, none of our players were injured, but a player on the opposing team did a faceplant which still has everyone on the desk laughing. The weather here in St. Louis has turned fall like, and we are supposed to have record lows over the weekend. Should be perfect for a triathlon I am competing in Sunday morning. 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

Frightened investors move back into US treasuries.....

Chuck Butler — Fri, 10 Jul 2009 14:46:50 GMT

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In This Issue..

* Jobs data skewed by 'seasonal adjustments'...
* BOE surprises the market...
* Oil falls below $60...
* China's reserves continue to grow...

And Now... Today's Pfennig!

Frightened investors move back into US treasuries.....

Good day...Chuck has a bevy of doctor's appointments today, so he decided to let me take over the Pfennig. Unfortunately it will go out a little later than usual, as I always struggle to get all of my thoughts together so early in the morning. Its not that I come in late (I was here two hours before everyone else) but it just takes me much longer than Chuck to get it all on paper. But enough of the excuses, I've got to get writing.

Weekly jobless claims released in the US yesterday morning fell below 600k for the first time since January but the continuing claims continue to rise, hitting another record. The slight improvement in the weekly numbers was distorted by the automotive sector. Car companies typically shut down plants in early July in order to change over to the new model year. Bankruptcy forced many of these plants to shut down much earlier than normal, and some temporarily started up production again during the past few weeks.

Chuck would have a field day with the jobless claims, as the government economists were hard at work 'massaging' the numbers to give everyone a more 'clear' picture of the data (why can't they just report the actual number of people filing for unemployment?). As Chuck has pointed out, the Labor Department adjusts the figures using seasonal and demographic trends, creating 'ghost jobs'. Since automobile plants typically shut down in the first weeks of July, the labor department expected a large increase in claims during this time. In order to offset these 'seasonal factors', the brain trust at the Labor Department added back a number of jobs in order to balance out the expected temporary layoffs in the auto sector. You would think the Labor Department would realize that most of these automobile workers were already idled, and therefore keep the adjustments to a minimum. But that would be too logical, so they just went ahead and 'seasonally adjusted' the claims as if this was a typical July for the auto sector.

The continuing claims illustrate a much clearer picture of the US job market, with unemployment spiking up to 9.5% in the US. The news from the retail sector was also gloomy, as the ICSC Chain Store Sales fell another 5.1% YOY during the month of June. Inventories also continued to shrink for a ninth month in a row in May to just over $400 billion. This is the lowest level since August of 2007, and raises some longer term inflationary concerns. Some of you are probably questioning this last statement, so I will explain.

Lower retail sales have forced stores to keep inventories down. I was in a local Walmart store the other day and noticed the shelves were emptier than what I have seen in the past, items weren't stacked 5 deep and didn't reach toward the ceiling. US consumers have been buying less and saving more, a very good thing! But stores have reacted by dropping the amount of inventory they are carrying (again a smart thing for retailers). Against this backdrop, the US government continues to flood the economy with cash, trying to get consumers to start spending again to jumpstart the economy. For now, the cash has been hoarded by banks and used by consumers to pay down some of their massive debt. Eventually the 'all clear' horn will sound, and consumers will start looking to make purchases again, but will find empty shelves. Inflation will follow, as too much cash will be chasing too few goods.

But our government has a much shorter term view, and continues to pump money into our economy with no real regard for future inflationary concerns. And some very smart economists seem to agree with the administration. Both Nouriel Roubini and Robert Shiller, respected economists, are calling for additional stimulus. In a radio interview yesterday, Roubini predicted the US recession will last another six months and be followed by a 'shallow' recovery. On the same radio show, Shiller said the economic crisis would continue despite the $12.8 trillion pledged by the US government and Federal Reserve.

The BOE shook up the markets with a surprise announcement not to increase its quantitative easing program. The Bank's Monetary Policy Committee put the program designed to pump extra cash into the markets by purchasing its own debt on hold after announcing it would also keep interest rates steady at .5%. The move was a major surprise to the markets, and sent the price of gilts (the UK's treasury bonds) falling and the price of the Pound Sterling higher. The BOE was the first of the western central banks to begin the controversial program in which it monetizes its debt; hitting the overdrive button on the printing presses by monetizing its debt. We've never been a fan of the Quantitative Easing programs, as they are short sighted with total disregard for the future inflationary pressures the exert on the economy. But several other central banks, desperate for a way to get cash into their economies have followed the BOE's lead.

The move by the BOE was even more surprising given the fact that the Chancellor has authorized another 25 billion pounds to be added to the program. Perhaps the Bank's Monetary Policy Committee is finally starting to realize all of the QE which it has done hasn't really had the desired impact. Much of the extra cash being created by the program is simply being hoarded by banks and is not making its way out into the economy via loans. Sound familiar? We have a similar situation occurring here in the US, with banks sitting on a majority of the stimulus monies which they have received. They have used the funds to shore up their balance sheets, a good thing long term, but not what the central banks intended with the introduction of the QE programs.

But enough of the economic talk, I need to let you know what happened to the currency markets overnight!! In spite of the Labor departments attempts to 'adjust' the weekly jobless claims, the economic data released here in the US yesterday was generally poor. This raised further concerns regarding the global economic recovery, and forced investors back into the US treasury market. As typical during these periods of uncertainty, the Japanese yen was the best performing currency. This is due to a general deleveraging as investors purchase yen to pay down debts used to invest into higher yielding assets.

We have seen this pattern repeat several times over the past year. As investors start to see some signs of recovery in the global economy, they invest into the higher yielding currencies, and borrow funds at lower rates available in Japan. But as soon as they begin to question the recovery, they move back out of the higher yielders and pay back these loans in the Japanese yen. Morgan Stanley believes the recent move by the yen is just the beginning of another big move, predicting a move to 85 yen/dollar. The foreign exchange strategists at Morgan Stanley predict the yen will continue to rally through the end of the year as doubts about the global recovery intensify. But their longer term predictions are less enthusiastic, as they feel the yen will weaken throughout 2010.

The commodity currencies took a hit over the past few days as the price of oil and metals continued to fall. Oil fell below $60 per barrel for the first time in a couple of months. Concerns over the global recovery, along with some slight calming of tensions in the gulf states have caused the price to drop. One commodity currency which has been able to hold steady during the recent selloff is the Brazilian real. A report that car sales in China surged bolstered the outlook for the commodity rich country. China's passenger-vehicle sales rose 48% in June, pushing China past the US as the world's largest auto market.

Increased automobile demand in China is another sign of their slow move away from an export based emerging market economy to that of a more balanced one. China's exports tumbled for an eighth month in June, but internal demand helped by the government's stimulus package is offsetting some of the impact of these falling exports. Imports also fell, but the size of the decrease was the least in eight months. This is good sign for the future of China, as imports are typically a leading indicator for exports in China.

China's foreign exchange reserves likely topped $2 trillion for the first time, climbing another $67.8 billion in the second quarter. The central bank is predicted to release the number sometime today. The increase in reserves certainly cause concern in the currency markets, as officials in China continue to call for the diversification of these reserves. According to a story in the Financial Times, China launched its highest profile criticism of the dominant role of the US dollar as a global reserve currency during the last day of the G8 meetings in Italy. "We should have a better system for reserve currency issuance and regulation, so that we can maintain relative stability of major reserve currencies exchange rates and promote a diversified and rational international reserve currency system," Chinese state Councilor Dai Bingguo was reported to say. Western leaders tried to play down the remarks, with Gordon Brown stating that he did not remember Mr. Dai making the remarks.

Separately, Joseph Yam, chief executive of the Hong Kong Monetary Authority, said Hong Kong might consider diversifying more of its $200 billion reserves away from the US dollar. I would expect China to keep the heat on the Obama administration in order to try and get them to reign in some of their 'quantitative easing' programs. The Chinese officials continue to be concerned about the future inflationary consequences of these programs. But at the same time, they have to be very careful about the diversification out of the dollar, as they still hold trillions of dollars and don't want to cause a sudden fall in their value. The big boss, Frank Trotter, constantly reminds us that China has a much longer term thought process, and has an extreme amount of patience. I would expect them to continue to slowly diversify their holdings, adding to the long slow decline of the US$.

With that I will move on to the currency roundup. Sorry to go so long this morning, but I felt like there was a lot of data to get through.

Currencies today 7/10/09: A$ .7760, kiwi .6263, C$ .8596, euro 1.3902, sterling 1.6198, Swiss .9172, rand 8.196, krone 6.5369, SEK 7.9021, forint 199.10, zloty 3.1440, koruna 18.708, yen 92.76, sing 1.4623, HKD 7.75, INR 48.97, China 6.8327, pesos 13.6408, BRL 2.009, dollar index 80.489, Oil $59.66, 10-year 3.337%, Silver $12.64, and Gold... $909.39

That's it for today... Everyone is limping into the office this morning, as we played a double-header in our kickball league last night. We ended up splitting the two games, but as my wife continues to tell me, kickball is a game for kids, not middle aged currency traders!! One of our team had to go to the hospital last night, as he injured his shoulder diving for a catch in the outfield; I hope Joe B's shoulder turns out to be ok!! St. Louis is getting ready for the All Star weekend, and I saw one of the blimps floating around last night. My son, Brendan and I are heading downtown to compete in the All Star Charity 5k run which begins at Busch Stadium. It will be fun to be downtown and around all of the All Star hoopla, even though we don't have a ticket to any of the events. Hope everyone has a fantastic Friday and a Wonderful Weekend!!

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

A Dollar Roadblock!

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

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In This Issue..

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

And Now... Today's Pfennig!

A Dollar Roadblock!

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

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

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

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

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

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

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

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

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

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

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

That Ian... What a guy!

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

A shrinking US economy puts pressure on the US$...

Chuck Butler — Thu, 30 Apr 2009 14:54:18 GMT

.........But First, A Word From Our Sponsor..........
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EverBank is a Member FDIC and Equal Housing Lender.
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In This Issue..

* US GDP falls more than expected...
* FOMC holds course...
* Canadian dollar has a great week...
* Oil helps commodity currencies...

And Now... Today's Pfennig!

A shrinking US economy puts pressure on the US$...

Good day... Yesterday was a big day in St. Louis as President Obama came to visit on his 100th day in office. I can't believe it has been 100 days since the inauguration. Time sure does fly! I'm sure Obama and the rest of his administration would like the calendar to move even faster as this recession will likely last through the end of 2009. While the government has thrown trillions of dollars at the markets in an attempt to turn them around, the key ingredient for recessionary cycles to reverse is time. There is now 'quick fix' for the problems we are in, and the policies the administration has begun will take time to have an impact on our shrinking economy. Obama said as much in his nationally televised press conference last night.

Speaking of shrinking economies, US GDP showed an even steeper contraction in the first quarter than that predicted by economists. US GDP fell 6.1% compared to the 6.3% fall during the last quarter of 2008. This drop confirms that we are now in the worst recession since the Great Depression. There report showed a record slump in inventories and further declines in housing. But another report released by the Commerce Department showed a surprising 2.2% gain in consumer spending in the first quarter, the most in two years. So we have consumers who increased their spending and confidence, while the US economy was contracting at near record pace.

Another report which didn't get much press was the GDP Price Index and the Core PCE which are measures of price inflation. These numbers rose more than expected, with the GDP price index rising 2.9%, nearly doubling economists predictions of a 1.8% increase, and substantially higher than last quarters .5% rise. This sets up the possibility that we could see what many consider the worst case scenario, falling GDP with rising inflation (STAGFLATION). With inventories at very low levels, a slight increase in consumption can lead to a very quick rise in prices. But the Fed doesn't seem to be bothered too much by that scenario, as they continue to focus on efforts to get the economy growing, with no apparent concern about inflation.

The Fed's Open Market Committee voted unanimously yesterday to leave its target interest rate unchanged at between 0 and .25% (they really can't go much lower!!). They also voted to continue to their purchases of long-term Treasuries and housing debt which they began last month. The FOMC statement said the contraction has slowed and the outlook "improved modestly" but the economy may "remain weak". Job losses and a very tight credit market will likely inhibit consumer spending in the coming quarters.

As I said earlier, there was no mention whatsoever of an exit strategy on how the Fed plans to pull in the record amount of money supply it has unleashed on the economy. The Fed said they will continue to monetize the debt at an unbelievable pace: as much as $1.25 trillion of mortgage-backed securities, $200 billion of federal agency debt, and $300 billion of Treasuries. They are making these purchases in an attempt to keep interest rates at below market levels to fabricate a refinancing boom. While they have been somewhat successful in keeping rates lower than they would be under normal market conditions, these purchases are extremely inflationary and won't be easily reversed. But the FOMC believes they will have plenty of time to worry about inflation and have decided to basically ignore it for now. Problem is, inflation can spike pretty quickly, and the FOMC will be hard pressed to raise interest rates just as the economy is starting to pull out of recession. I just don't believe they will have the guts to be proactive with inflation, and will probably see a major spike in prices on the other side of this recession.

Inflationary concerns are at the forefront of the ECB as they prepare for next weeks policy meeting. ECB President Jean-Claude Trichet has imposed a gag order on council members as they argue over what to do next to rescue the European economy. Some members had been taking their cases to the media recently in an attempt to push the ECB into following the UK, US, and Japan down the quantitative easing path. But more conservative members don't believe the ECB should use these untested methods, and are worried about the eventual inflationary impact of them. The ECB cut rates less than expected in April, and pushed a decision to use other methods off to next week's meeting. Germany's Axel Weber wants to make 1% the floor for the benchmark rates, and is against buying debt to pump additional money into the economy, while other council members want to begin asset purchases to force rates lower.

Data released this morning show Europe's unemployment rate rose to the highest in more than three years, and inflation held at a record low, which will increase pressure for the ECB to continue to cut rates. The March unemployment rate jumped to 8.9% in the Euro area, and inflation held steady at .6% in April. Other reports released this week suggested confidence in Europe is stabilizing which could counter some of the pressure to take additional measures. Chuck will bring you the details of the ECB meeting, which will occur a week from today.

The dollar sold off on safe haven reversals, but then moved back up in European trading. So after a bit of a roller coaster ride, we are pretty much right where we started yesterday morning. But the overall market sentiment seems to be shifting back to dollar negative. Two separate reports released by currency trading desks yesterday revised their currency forecasts down for the US$. Bank of America - Merrill Lynch revised their forecasts for the dollar, yen, euro, and pound on the 'rising probability' the global recession has passed its lowest point. Their report stated the euro would recover faster than previously predicted as the global economy turns. A separate report by Citigroup said the dollar would fall if/when the 10 year Treasury note yields rise above 3.06%. Technical analysts at Citigroup wrote that past trading patterns look like they are repeating. "Buying the dollar and US Treasuries was the trade of choice toward the end of 2008 and is now unraveling," they said.

Global deleveraging pushed investors back into US$, but as the global economy recovers (led by an increase in consumption in China), investors will move these funds out of this safe haven. Yield differentials will again determine investment direction, and growing economies will be able to attract more speculative capital. The US$, which has benefitted from the global downturn, will be sold. In order to protect your portfolio, investors should have some exposure to the currencies and metals.

One currency which has turned in one of the best performances vs. the US$ this week has been the Canadian dollar. The loonie touched the strongest level in two weeks on a move up in the price of oil. Equity markets are up, as investors have become much more confident regarding a global turn around. This confidence has carried over to the commodity markets, where oil and some of the industrial metals have been rising again. Canada relies on shipments of raw materials including oil, natural gas, copper, and lumber for more than half of its export revenues.

A report released by TD Securities, a large Canadian trading desk, predicted the Canadian dollar would appreciate by as much as 14 percent by November if it breaks through a key technical level. If the US dollar breaks below 1.1764 CAD$/$ (or above .85 UScents/CAD$) the upside opens up hugely over the next few months. The report puts a target of 1.04 CAD$/US$ (or .9615 US$/CAD$) for the loonie, a 14% increase from today's levels.

As I touched on above, the commodity currencies turned in one of their best performances in weeks as the price of oil shot back above $50. Both Norway's krone and the Australian dollar rallied along with the Canadian dollar. The AUD$ actually rose to the highest level in more than six months against the US$. The Norwegian krone, Australian dollar, and Canadian dollar are three of the best four currencies vs. the US$ on a YTD basis. The top performer vs. the US$ in 2009 has been the South African Rand, but recent rate cuts there may start eating into its recent strength.

South Africa cut its benchmark rate a full percentage point, the fourth reduction since December to help spur their economy. New Zealand's central bank also cut rates to a record low yesterday. Reserve Bank Governor Alan Bollard reduced the overnight rate by 50 basis points to counter the nation's worst recession in more than three decades. He indicated that rates may go lower, and will stay down for the foreseeable future. The kiwi sold off after the announcement.

Good economic news out of Japan has been rare, so yesterdays report that Japan's factory output rose for the first time in six months was a surprise. And even more surprising was the fact that the pace of the output rise was nearly double that predicted by economists. Factory production climbed 1.6% in March from February, when it dropped 9.4%. In a separate report, the Bank of Japan said the world's second largest economy will resume growth in 2010 after shrinking 3.1% this fiscal year. But I still caution investors regarding investments into the yen. The Japanese yen benefitted from the reversal of the carry trade, but global markets seem to be substantially less leveraged than before. The Japanese yen is not going to be able to benefit from another large push by additional deleveraging.

Got to go now, as we have our quarterly officers meeting in a few minutes. Sounds like it will be all good news, as EverBank continues to hit on all cylinders. It really is another Great Day at EverBank!!

Currencies today 4/30/09: A$ .7289, kiwi .5666, C$ .8383, euro 1.3263, sterling 1.4812, Swiss .8790, rand 8.4585, krone 6.5931, SEK 8.0664, forint 218.38, zloty 3.323, koruna 20.125, yen 98.15, sing 1.4775, HKD 7.75, INR 50.035, China 6.8210, pesos 13.74, BRL 2.1796, dollar index 84.49, Oil $51.81, Silver $12.62, and Gold... $889.20

That's it for today... more rain is predicted for today, and the rain is expected to continue all the way through the weekend. Typical spring weather here in St. Louis. The big positive on the rain is that it washes away most of the pollen, and provides some relief for my allergies. Had a great run through a local park with my wife last night, its kind of nice having company on my runs (I can never get her to wake up as early as I do during the week!). Hope everyone has a great day today, as it is Tub Thumpin Thursday!!

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

Awful Data!

Chuck Butler — Thu, 16 Apr 2009 12:55:23 GMT

.........But First, A Word From Our Sponsor..........
Record 2008 results take EverBank® to new heights.

In a year that saw many of the nation's largest financial institutions falter, EverBank excelled. Our 2008 achievements, which came as no surprise to us, included:

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

In This Issue..

* Weber opens Pandora's Box...
* A record low for Capacity Utilization!
* Do I hear a Chicken?
* China's economy grows 6.1%

And Now... Today's Pfennig!

Awful Data!

Good day... And a Thunderin' Thursday to you! The "Day After" Tax Day... It still hurts! And to think, one of these days, I'll be paying even more, thanks to the direction of our country... And you will be too! There's no two ways about it, the Deficit in funding in Washington D.C. which will be a result of all the spending, is going to require greater revenue... Where does the Gov't get the revenue? From taxes... Of course if it wasn't a debtor nation, it would not have to pay out the large sums of interest on the Treasuries it issues... But, that... Is a discussion for another day.

The currencies saw more dollar strength yesterday, but it wasn't a result of anything the dollar had going for it... In fact, the results of the data yesterday was all dollar negative... No, this time it came from the Eurozone. Right about the time I was hitting the send button yesterday, European Central Bank (ECB) minister, Axel Weber Opened Pandora's Box of questions regarding future direction of the ECB... Let's go to the tape!

Weber was so kind to mention that the ECB will announce a package of "non-standard" monetary measures at their next meeting in May... Brother, you should have seen all the different angles that were taken by the pundits after this announcement! Some believe he was telling the markets to get ready for Quantitative Easing. (not sure why he would do that, the ECB still has room to cut rates lower) Some believe he was telling the markets to get ready for rate cuts down to 0%. (not sure why they would need to go to 0%, or why he would make that announcement now, when rates are 150 BPS away from 0%)

Either way, the euro took the brunt of the message, and got sold, leading the other currencies to a day of dollar strength across the board... The board that stops in Japan that is! The Japanese yen continues to get back in the good graces of currency traders.

So... What about the data prints yesterday? ZOWIE! Talk about negativity! First, let's look at Capacity Utilization, since I talked so much about it yesterday. Capacity Utilization fell to 69.3%, a new all-time low for the series. And, the manufacturing component of the data fell to a new all-time low! Recall, I told you this was a "forward looking" piece of data... So the future doesn't look so bright, eh? Guess I won't have to wear those shades!

Industrial Production also posted a negative number for the month of March posting a -1.5% decline. And... CPI? Well... Consumer inflation posted the first year-over-year decline in the headline rate in over 50 years! 1955 (it was a great year!) was the year... Prices were 0.1% lower in March than in February, contrary to the "experts" that thought prices would increase by .1% This resulted in the annual inflation rate falling to -0.4%, the first negative number since 1955!

So... Don't look for interest rates in the U.S. to be going anywhere for some time... The one thing you can look for though is more Quantitative Easing...

And... Leave it to the media to spin the TIC Flows in a positive manner... TIC Flows (net security purchases by foreigners) posted a figure of $22 Billion in February, which is below the amount needed to finance the Current Account Deficit. However, the media spun it like this: "International demand for long-term Treasuries rose in February as China and Japan added to their holdings." Hmmm... Well, it's a true statement... But, not complete!

OK, enough on the data yesterday... Talk about putting someone to sleep! ZZZZZZZZZZ!

Did you hear about the U.S. Treasury turning yellow belly? OK, let me first set this up... During the Presidential campaign, Obama indicated that China had indeed manipulated their currency... But when it comes down to the cheese that binds, the Treasury Dept declined to name China as a currency manipulator... Bawk, Bawk, Bawk... Chic-ken!

Well, the Fed's Beige Book printed yesterday, and believe it or don't, half of the Fed Districts are seeing a moderation in the pace of the economy's decline. That plays well with the mental note I made yesterday about full planes and restaurants. But is this just U.S. consumers refusing to batten down the hatches and save for a rainy day? You know, denying the recession and maintaining their spending habits? I mean, you know, the generation that comes after me, has never experienced a major slowdown... Maybe they don't know how to act? HA!

China posted at GDP for the 1st QTR of 6.1% Pretty darn good for an economy that was slowing down so much the Gov't had to implement a stimulus package. While it's a far cry from the 11 and 12% growth rates of a couple of years ago, it's still better than a sharp stick in the eye! I still believe that China will be the first economy to come out of the global recession.

Japanese yen got bought on the China GDP number, as traders were disappointed with the figure... I believe this all to be overdone, a little to much drama for my taste... I would be careful with this kind of trade, for you never know what the Chinese (a communist country) will do...

So... If yen is getting bought, that means the high yielders are getting sold, and so it is for the once high flying currencies of Australia, New Zealand, Brazil and South Africa. I still believe that eventually hedge funds, and investors are going to grow tired of the paltry yields on U.S. assets, and look to go elsewhere... Therefore, I like to be ahead of the crowd, if you get my drift...

Indian rupees are stealth like these days in gaining ground once again... I've had my foot stepped on plenty of times by the Indian Central Bank and their intervention whenever the currency gets stronger... But much like most things, I forget the pain, and talk glowingly about rupees once again... Talk about a country that is least likely to implement Quantitative Easing!

And finally, Gold... It just hasn't been a good week for Gold. Every morning the shiny metal posts a gain at the London Morning Fixing, but gives it all back by the end of the day. Today, Gold posted a loss at the Fixing, so maybe, it gains all day! A reversal of fortune if you will! The Uncertainty Hedge is still just that folks... And in these days of uncertainty you have to wonder, just what's going on in the minds of investors without Gold... But that's just my opinion...

Currencies today 4/16/09: A$ .7195, kiwi .57, C$ .8285, euro 1.3165, sterling 1.4850, Swiss .8710, rand 9.0250, krone 6.7150, SEK 8.3075, forint 222, zloty 3.2550, koruna 20.44, yen 98.70, sing 1.4975, HKD 7.75, INR 49.75, China 6.8325, pesos 13.08, BRL 2.1835, dollar index 85.23, Oil $49.71, Silver $12.66, and Gold... $889

That's it for today... The Big Boss, Frank Trotter, was on the Fox Business Channel on Tuesday morning. He was interviewed by one of our faves, Alexis Glick. As I always say, he has the face for TV, I have the face for radio! Tough first game of the playoffs for our Blues. Not to worry, they'll get them the next game. I slept right through the Cardinals' game and my little buddy Alex's baseball game last night! UGH! Tomorrow, I'll have the first of the "feel good" business stories that I've accumulated. I know, it's been some time since I first announced this, but, that was before vacation, and San Diego, etc. Hopefully, the long wait will be rewarded! It's a crazy time in the world of sports, with baseball getting into full swing, Basketball and Hockey starting their playoffs, and spring football for college teams... A veritable smorgasbord of sports... A Whitman's sampler if you will! OK, time to eat my apple... I hope your Thursday is Thunderin'!

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

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

Down on the dollar? Foreign currencies at EverBank could be your answer. If you're intrigued by the possibility of lower portfolio risk and gains against a weak U.S. dollar, look to us for:

Apply today. Visit EverBank.com, or call the World Markets Trading Desk at 800.926.4922
......................................................

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

Wild Swings!

Chuck Butler — Tue, 30 Dec 2008 15:35:10 GMT

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In This Issue..

* Euro gains, then loses, then gains...
* Inflation and Commodities...
* The euro turns 10!
* Risk Aversion remains but is waning...

And Now... Today's Pfennig!

Wild Swings!

Good day... And a Terrific Tuesday to you! Well, it happened way too late for yours truly to witness it, but my beloved Missouri Tigers rallied and won the Alamo Bowl in overtime. Go Tigers! Hopefully they can fix the defense before next fall!

OK... Remember those Wild Swings I talked about yesterday? The Wild Swings that could be a result of thin volumes in this the second week of Christmas. Well... We witnessed them in earnest yesterday! As I signed off yesterday, I told you that the euro had rallied 2 whole figures to 1.43 and change. Well, that rally dissipated throughout the morning, and by late in the day the single unit was 1.39 and change... WOW! Now that's a Wild Swing!

You can point to profit taking as the reason for the move, and with the volumes thinned out by Holiday trading, one profit taking sell begot another, and before you knew it, the euro was looking at a loss on the day.

But don't despair, as the single unit has rallied back overnight. Back to the high 1.41 handle, in fact when I arrived it was 1.4205! Wild Swings... I keep saying Wild Swings and every time I type it I want to say Wyld Stallyns, the name of Bill and Ted's band in their Excellent Adventure move... "Ted, while I agree that, in time, our band will be most triumphant... Hey! That's righteous... Excellent!

OK, enough of that silliness... I had some guy tell me that I should stop the silliness and just report the news, that the silliness was making me look foolish... Well! If I couldn't go off on these silly tangents then I wouldn't write the letter! It's what I do! It's my style! It's me! And I wouldn't change a thing!

So, back at the ranch... The fighting in the Gaza Strip continued yesterday, and those fears of disrupted oil supplies to the U.S. are once again on the minds of currency traders this morning. You know, I said this a few weeks ago, and it needs to be repeated, especially now with these fears of disrupted oil supplies. Can you imagine what this whole recession and financial meltdown would look like if Oil had remained around $100 a barrel? The drop in the price of Oil would always be welcome at my house, but even more with the U.S. economy staring straight the nose of a .44 that has recession written all over it!

This collapse in the price of Oil has other consequences... For those of us that need gas for our cars the collapse is manna from heaven. But for the Canadian dollar / loonie, this collapse has been a shot to the mid-section, bowling over the loonie and leaving it in a fetal position on the canvas. Yes, the shot to the mid-section was that devastating for the loonie, but wait! That's not all (why do I feel like Billy Mayes here?) The loonie also had to contend with falling interest rates and Commodity prices overall that collapsed... That's one, two, three strikes you're out at the old ball game!

But, I still think the loonie can improvise, overcome, and adapt, (to borrow a line from Clint Eastwood) once inflation begins to creep into the markets again.

OK, I can hear every mother say, "that's not going to happen any time soon, Chuck"... Well, maybe not, but I can tell you this... U.S. Consumers might be turning into "savers" once again, but they won't / can't stay that way. It's not in our blood! We bargain hunters, and let me tell you about the bargains that will be out there in all the assets that have suffered from asset price deflation! They will be at "can't pass that up" levels, and the U.S. consumer will eat up those levels like kids eat up cake! And after all this recession has taken its toll on businesses, that have closed up or slowed production to snail's speed, that's where the inflation comes in... Money chasing not enough goods... Think about that...

That will also mean that the U.S. Fed will be behind the inflation eight ball once again, as they won't see it coming, and will be so focused on getting out of the recession, that they'll keep interest rates too low for too long once again, and that will speed the inflation rate along to high levels once again.

Well... That was quite the discussion, eh?

I saw a story by the Wall Street Journal talking about how Japan's NIKKEI had fallen 42% this year... I wondered why did the WSJ pick on Japan? It's not like the NIKKEI was the only stock market to suffer this year... A quick look at the roster shows the Dow down 36%, NASDAQ down 43%, and S&P 500 down 41%, the German DAX down 41%, the FTSE down 33%, and so on... Stocks had one very bad year... I don't see that reversing any time soon either, folks. Globally, Corporations are going to be posting some very ugly returns in the 4th QTR, and that should show up in stock prices...

When we turn the calendar to 2009, the euro will be celebrating it's 10th birthday! WOW! Has it really been that long already? In 10 short years, the euro has done things its creators never thought it could do in 10 years... To have gained 26% of the world's currency reserves in 10 short years... To reach parity to the dollar and then move to 1.60 in 10 short years... To be within spittin' distance of parity to the pound sterling in 10 short years... Europeans, even including those in Spain, which is one of the countries naysayers like to point to as one that will break away from the euro. 70% of the Spanish that were polled, believe the euro will overtake the dollar as the World's reserve currency...

OK... Don't know what those crazy Spanish are smoking, but you can't complain about the euro, and the European Central Bank, and then promote the currency as the world's reserve currency... I guess the rumors of Spain's want to leave have been greatly exaggerated, eh?

Well, the Aussie dollar (A$) has found a base around 65-cents, and is knocking on the door to 70-cents... I would think that given Gold's rise, 70-cents would be the top for now... But if Gold can take the next step to $900 and beyond, then the A$ will have support to move higher than 70-cents. And the A$'s kissin' cousin across the Tasman, kiwi, looks like it is in a range between 55-cents and 60-cents... If the A$ does follow a rise in Gold, kiwi would grab the coattails of the A$...

It's all tied to "Risk Aversion"... If Risk Aversion continues to hold a grip on the markets because of the Credit Crisis, then Commodities as a whole can't take off on any extended rally, and that keeps the currencies in check too. I do see less Risk Aversion in the markets these days than I saw in October and November, but it remains there like the relative that comes to stay for Christmas and doesn't leave!

The Gaza Strip fighting doesn't do anything to eliminate the Risk Aversion trades, but does lend a hand to the rise in Swiss francs. The franc is still seen as a "safe haven" currency. We had a few people sell francs yesterday on some story they read about Switzerland's economy mirroring Iceland's... Yeah right! OK, I'm not in Switzerland, and don't have the on the ground experience there, but that sound pretty strange doesn't it?

Long time readers might recall when I used to give the weekly updates of the IMM futures positions in the currencies. This was one way of watching the demand for a currency, or the lack of demand in short positions in a currency. I stopped because at one point it was getting crazy each week. But, I never stopped watching them... And I noticed something last week... Dollar short positions, the previous week, stood at $238.3 million... But last week they jumped to $559 million, with positions in yen, euro, franc, loonies and A$'s all increasing... Hmmm...

A friend / colleague in Jacksonville sent me a story in the WSJ yesterday regarding this Russian dude that has predicted the fall of the U.S. He first predicted it in 1997, and said the U.S. would fall by 2010, with sections of the country going to different countries. This is all crazy stuff folks, but if you want to read it, put away the sharp objects, and click here: http://online.wsj.com/article_email/SB123051100709638419-lMyQjAxMDI4MzIwOTUyMTkxWj.html

Now... I'm not even buying one word of what this guy is saying, and liken him to Iben Browning, you know the guy that predicted the massive earthquake in the 80's? But found it interesting that he wrote his first thoughts on this in 1997...

The Chinese renminbi is back to its old tricks of barely registering gains on the scale... But at least they are gains! The renminbi's gains this year will come in around 7%... Hey! That's better than losing 43% in the NASDAQ! The currency was on pace to gain more than 10% this year until the recent goings on... I suspect the Chinese currency officials will continue to allow the renminbi to gain, but not down a One-Way Street. So expect setbacks along the way...

Currencies today 12/30/08: A$ .6925, kiwi .5780, C$ .8135, euro 1.4180, sterling 1.4510, Swiss .9455, ISK 145.50, rand 9.4940, krone 6.9660, SEK 7.7250, forint 188, zloty 2.9325, koruna 18.75, yen 90.15, baht 34.75, sing 1.4410, HKD 7.75, INR 48.48, China 6.8309, pesos 13.70, BRL 2.3540, dollar index 80.55, Oil $39.15, Silver $10.81, and Gold... $871.75

That's it for today... Whew! Long day yesterday, I'll have to see what I can do about that today! HA! I was looking for my little buddy, Alex, to watch the Mizzou game with me last night, and he was "not going to watch it, Dad, they lost to Kansas!" After explaining that if it's your team, you root for them win, lose or draw, he watched it with me... He has no recollection of the football depression of the 90's at Missouri. He only knows about their return to prominence. So a loss to Kansas is devastating to him. To me, I lived through the football depression of the 90's, nothing devastates me about Missouri Football! Well, Mary Owens is here, so I must be running late again, already on my second day back. UGH! That's OK, because tomorrow I'll be even later! You see, tomorrow is New Year's Eve, and if I have any intention of staying up to midnight, I will NOT be getting up when I normally do... So, expect the Pfennig a little later tomorrow morning... Time to go... I hope your Tuesday is Terrific!

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

Holiday pause...

Chuck Butler — Tue, 23 Dec 2008 14:58:33 GMT

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....

In This Issue..

* US data may wake up the markets...

* Toyota reports a loss...

* NZD falls, AUD gains...

* Will the Rupee shine in 2009?...

And Now... Today's Pfennig!

Holiday pause...

Good day... The currency markets remained in a tight range through the day yesterday with no movement from the majors currencies vs. the US$. Japan has a public holiday today, so trading this afternoon will be very quiet. Jennifer, who is doing all of our currency trading while Chuck is out, let me know that the trading desks were extremely quiet yesterday afternoon. But the markets may wake up a bit this morning, as we wait for data on 3rd quarter growth in the US.

GDP is expected to have fallen .5% in the 3rd quarter, and Personal Consumption is also predicted to have dropped last quarter. Later in the morning we will get reports on the sagging housing market. New home sales and existing home sales are both expected to have dropped slightly during the month of November. And with sales dropping, prices of both existing homes and new homes are also expected to have dropped. Finally, this afternoon we will get the ABC Consumer Confidence number which will likely show another drop in consumer sentiment.

I went over to a shopping center last night while I waited for my son's hockey practice to end. I was surprised at the number of shoppers in the Electronics store, but after speaking with a sales person, he told me the traffic has been down, with many shoppers waiting for items to go on sale after the holiday. Most retailers make their year during these last two weeks of December, and it will be interesting to see just how many sales we will see post Christmas.

The Japanese yen has been in the news again, as Toyota Motor Corp. forecast its first operating loss in 71 years yesterday. The worlds second largest automaker said the sagging global economy and a rising yen were to blame. Japanese officials have not yet decided to intervene, but a quick move below 90 by the yen could trigger action by the central bank. Bank of Japan Governor Masaaki Shirakawa was trying to jawbone the yen yesterday as he spoke about the negative effect the strong yen has on the economy. The thin holiday markets give officials a perfect opportunity to drive the yen back down.

New Zealand's dollar fell for another day as a report showed their economy shrank. New Zealand's gross domestic product declined .4% in the three months ended Sept. 30 from the 2nd quarter. A further move down in NZD interest rates will likely combine with the slower economic growth to put further selling pressure on the kiwi. New Zealand central bank Governor Alan Bollard has been aggressively cutting rates to try and avoid the deepening recession. He has cut 3.25% since July, and has indicated that there is still room left to cut further.

In a split with their kissin cousin across the Tasman, Australia's currency advanced against the US$. The Aussie dollar rallied as some of the base commodity prices rallied. Copper rose yesterday in New York trading as traders predicted the drop in Chinese interest rates will keep the largest Asian market growing. Gold futures also rose overnight, helping to support the Australian dollar. Raw material exports make up 60% of Australians economy, and China is their biggest trading partner. I believe the Chinese government will be successful in keeping economic growth right around their target of 8%, and this growth will support the Australian dollar.

The Indian rupee fell further against the US$ yesterday, and will likely end up the year as the worst performing Asian currency. But Moody's Economy.com is predicting the currency will be the region's biggest gainer during 2009. "India's rupee is one of my top picks as the country has a strong domestic market with very strong growth potential," Moody's Sherman Chan said in an interview yesterday. "It is one of the most attractive destinations for foreign direct investments with its large domestic market and a very well educated workforce." He expects the currency to rise 7.7 percent against the dollar next year. But much of this rise will occur during the last half of the year, and Chan said the rupee could get weaker before starting its move up.

Moody's Chan also said he thinks the Chinese Renminbi will be 'largely stable' as authorities seek to protect exporters while avoiding upsetting trade partners. I agree with his assessment, and believe the Chinese Renminbi will continue its long slow appreciation through 2009.

As I wrap this up, I want to remind everyone to take advantage of this pause in market volatility to take a look at your portfolios. It is a perfect time to reallocate your positions to align them with your investment goals. The big moves in the markets have probably caused most portfolios to become over allocated in some currencies such as the Renminbi and Yen, and under allocated in commodity currencies of Australia or Norway. You can contact the trade desk and have one of our specialists review your holdings. While we can't manage accounts, they will be more than happy to share their opinions with you.

Currencies today 12/23/08: A$ .6840, kiwi .5723, C$ .8219, euro 1.4007, sterling 1.4832, Swiss .9223, ISK 145, rand 9.7375, krone 6.9865, SEK 7.8310, forint 189.08, zloty 2.9429, koruna 18.8077, yen 90.06, baht 34.60, sing 1.443, HKD 7.75, INR 48.7625, China 6.8488, pesos 13.18, BRL 2.3755, dollar index 80.966, Oil $40.16, Silver $10.76, and Gold... $845.25

That's it for today...Sorry for the shortened Pfennig today, but as I said above, the markets have been very quiet lately. The temperatures warmed up out of the single digits today, but another round of winter snow/ice is supposed to come through St. Louis today. I'll be heading to the annual Mizzou/Illini game with my wife this evening. I hope to catch up with Chuck who will be at the braggin rights game with a few of his friends. Hope everyone has a Terrific Tuesday!! GO MIZZOU!!

Chris Gaffney, CFA

Vice President

EverBank World Markets

1-800-926-4922

1-314-647-3837