Daily Pfennig : Currencies

It's A Risk Off Friday...

Chuck Butler — Fri, 20 Nov 2009 15:22:00 GMT

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                            EverBank World Markets
                         A Pfennig For Your Thoughts
                               November 20, 2009

In This Issue..

* It's a Risk Off day!
* Commodity Currencies get rocked...
* Audit the Fed Bill moves along...
* Just keep spending money we don't have!

And Now... Today's Pfennig!

It's A Risk Off Friday...

Good day... And a Happy Friday to one and all! A Fantastico Friday in my books, as the people at the Retina Institute told me yesterday that the fluid on my eye was drying up, and almost completely gone. I told them I had not noticed any improvement in vision, and they said, "at least it hasn't gotten worse!" And for that, I am quite thankful! So... With that news, I head into today, and believe it to be a Fantastico Friday!

Well... In my hours on hours of waiting for the next person to look at my eye yesterday, (I think it was "train the eye doctor day" on Chuck's eye) I kept checking the currencies, and noticed that as the day went on, the non-dollar currencies were stronger, led by the Big Dog, euro... But then late last night, and I mean late last night, I checked them, and those gains had been wiped out...

So, when I arrived here this morning, I had one thing on the top of my list of things to do, and that was find out what happened... Come on, I said to myself, it had to be more than the Risk On, Risk Off stuff that's been hanging over the markets like the Sword of Damocles! But, when you get right down to the nitty gritty, that's all it was... For once again, there was some data or story, or rumor, that spooked the markets into believing the global recovery isn't going to happen, and the Risk Off came into play...

Like I said the other day, this happens so much that you start to believe Mr. Myagi is directing the markets... Risk On... Risk Off... (Wax on, Wax off) HA!

So, I bet your asking... So, what was that data, story or rumor that spooked the markets... Well... The only thing I can find was the report yesterday about Housing Starts dropping that Chris told you about... Did you know that about 14% of U.S. homeowners were either delinquent on their mortgage or in some stage of foreclosure. That is the highest rate since the group started collecting the data in 1972!

But there was something else that was announced as the day went on, that I think probably spooked the markets more than anything else... And that is a key House panel approved two amendments to a sweeping financial-overhaul bill that would give federal watchdogs new authority to audit the Federal Reserve, and would establish a fund of as much as $200 billion to help dissolve large, troubled institutions. Rep. Ron Paul (R., Texas) offered the amendment seeking to subject the Fed to audits.

The House Financial Services Committee voted 41-28 to approve the amendments, wrapping up weeks of debate but postponing a final vote on the bill until after Thanksgiving.

OK... More deficit spending for sure, and I'm positive that this was "hung on this bill" to audit the Fed as the only way it would get through the gauntlet...

Why would this Bill "spook the markets?" Ahhh grasshopper... To audit the cartel, is a step toward getting a peek behind the curtain, and that's scary folks... But! It's what's needed! And so I applaud the panel's vote... (too bad they had to hang that $200 Billion deficit spending package onto this, but that's how the dolts in D.C. work...)

So... When things get spooky traders, crawl back into the dollar's corner... Love is kind of spooky with a girl like you, is what I'm reminded of!

And when traders crawl back into the dollar's corner, the currencies that have booked the best performances against the dollar, see their fortunes reversed the most... So... In this case, it's the Aussie dollar, New Zealand dollar, Norwegian krone, and Brazilian real... These three will most likely put a losing week into the books, which hasn't happened very often during this rally that began in March. I say "most likely" because, we've seen swings in these currencies that could easily wipe out these weekly losses in a NY Minute! But with the data cupboard as empty as my stomach feels right now, (not to worry, I have my daily apple ready to consume!) today... I doubt we'll see any "swings" to bring these currencies to the positive side of the ledger this week!

The Weekly Initial Jobless Claims here in the U.S. printed yesterday at 505,000, same as the week before... I heard one air-head TV commentator (if it's a commentator, it must be from Idaho! HAHAHAHA! Get it? Common Tater?) any way... I heard one say that at 505,000, it shows that employment is on the mend... Ahem... Did you do the math? That's over 2 million new jobless people per month! Dolt head!

Yes, I know it doesn't net out the jobs that were created... I'm strictly talking about jobs that are lost on a weekly basis... You can't in your Wildest Dreams, think that we're creating more than 2 million jobs a month during a depression!

So... That data wasn't good for the "recovery campers"...

I was writing some notes for my latest video on Wednesday, and noted that Japanese yen, gets the best of Risk On, Risk Off trading... For some strange reason, and yes, I'm well aware that Japan is the second largest economy in the world, Japanese yen is considered a "safe haven" when the Risk Off is in play... And when the Risk On is in play, spanking the dollar, Japanese yen doesn't sell-off!

Now... I'm not a HUGE fan of Japan, as their Gov't Deficit is tremendous in size, rivaling the doubled in size National Debt of the U.S. And I personally feel that the yen at 88 and change is bumping the ceiling... But, the markets can be irrational, right? And with yen, they are really irrational!

Hey! Did you see that there's pressure on U.S. Treasury Sec. Tim Geithner to resign? Personally, I don't know that he's done any worse than Hank Paulson... But, then, is that what we've come to accept? Bad leadership? I've said this before, and I know it really gets under some people's skin... But, besides the National Deficit, and the Trade Deficit, we have a Leadership Deficit... I'm talking about the lawmakers, The Fed Chairman, and Treasury Sec... I guess the administration should be thrown in there, for it's been that way for the last 9 years!

The European Central Bank's President, Trichet, and the Swiss National Bank's Gov., Roth, both spoke last night, and neither referred to the currencies in any way, but Trichet did add to the Risk Off mood of the markets by saying that, "it is too early, as of today, to declare the crisis is over." The People's Bank of China's Gov., Zhou, said that China was "passive on the direction of the dollar"... Hmmm... I have to wonder if he was truly speaking from the heart there, or... Just stating that to keep the dollar from falling into an abyss...

You know about the stock sell off that I've been warning you about for a couple of months now, that could very well drag the currencies and commodities along for the ride? Well... I know that you all think that I'm playing the boy who cried wolf, here... But, recent trading days have me worried a bit about this taking baby steps right now...

My trader / chartist, friend, sent me a note and told me to watch the A$, for it is very close to its 9-month trend line support of .9093 (it's currently at .9110), for should it close below that number it would signal (according to him!) a correction to 88-cents... Not a huge drop, but it's not like these charts can pin-point a level that a currency will turn-around... Or maybe they can! I'm lost when it comes to charts... I look at them and unless they are as obvious as a man with a hatchet in his head, like the U.S. dollar chart since 1971, then I could make a case for an asset that's being charted to go either way!

That's why charts are not "fundamentals"... Fundamentals are what put an asset into a trend, either weak or strong, and charts tell you what happened in that trend...

And then there was this... According to the Wall Street Journal..."Some of Goldman's largest shareholders have urged the firm to reduce the size of its bonus pool, arguing that it should pass along more of its blockbuster earnings to investors. The investors hold tens of millions of shares in the Wall Street firm, which is on track to make the biggest employee payout in its 140-year history."

Chuck again... Where have these "largest shareholders" been all these years? Why make a big deal about this now? Oh, that's right! The Gov't has made it look "dirty" to give bonuses...

Oh... And I heard that the Senate's version of the Health Care Bill will cost $849 Billion... Just keep spending money we don't have, Congress... I'm reminded of a saying by Voltaire... "Common Sense is not so Common"...

To recap... The Risk Off wax is being applied by Mr. Myagi again this morning, as the non-dollar currencies, other than yen, have given back recent gains VS the dollar. The "Audit The Fed" Bill has been pushed through the gauntlet for a vote after Thanksgiving. The Aussie dollar is near its 9-month trend level, and shareholders want "some of the action"!

Currencies today 11/20/09: American Style: A$ .9110, kiwi .7225, C$ .9360, euro 1.4850, sterling 1.6490, Swiss .9820, European Style: rand 7.5880, krone 5.68, SEK 6.97, forint 182.25, zloty 2.80, koruna 17.4340, RUB 28.95, yen 88.90, sing 1.39, HKD 7.75, INR 46.63, China 6.8278, peso 13.09, BRL 1.75, dollar index 75.64, Oil $76.91, 10-year 3.33%, Silver $18.17, and Gold... $1,137.20

That's it for today... I've been doing some "educational" presentations for the people over at DTI... I've done 2 on currencies, and 1 on Gold... Next Monday, I'll be doing one on "other ways" to diversify, using foreign stocks and bonds... You can listen to it if you want by clicking here at 1:30 CT on Monday... http://www.dtitrader.com/trading_education_MMM_Everbank_Nov23.htm

I'll be heading down the road to Columbia Missouri tomorrow, to watch my beloved Missouri Tigers on Senior Day... My little buddy Alex, had his football team banquet last night... His team went 20-5-1 in three years... That's pretty impressive! Now they move on to High School, where's it's a whole different animal! I have 4 videos to do today! YIKES! But I've got my "blue shirt" on... So, I should be good to go! Let's get working on today, and make it the best Fantastico Friday ever!

Chuck Butler
President
EverBank World Markets
1-800-926-4922
1-314-984-0892
www.everbank.com
* Early withdrawal penalties apply. Fees may reduce earnings.

Risk Aversion Creeps Back Into The Currencies...

Chuck Butler — Thu, 12 Nov 2009 15:32:59 GMT

..But First, A Word From Our Sponsor..
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* High upside potential
* No market risk to deposited principal
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In This Issue..

* Comments spook currency traders...
* A$ hits 15-month high, this time going up!
* Geithner as the "joker"?
* China changes statement about the renminbi...

And Now... Today's Pfennig!

Risk Aversion Creeps Back Into The Currencies...

Good day... And a Tub Thumpin' Thursday to you! It's a Thursday, and it's not raining here! YAHOO! After a week of Indian Summer weather, we're slowly creeping back to the colder weather, but still, better than most Novembers of the past, so far!

That was a strange feeling yesterday, having a holiday in the middle of the week, but the day was nice, and I got to spend the day with my granddaughter, Delaney Grace, who sang me songs all day long!

So... Last night, I'm doing some writing, and before I put the laptop to bed for the night, I checked the currencies, and while they had drifted in the early Asian session, the Big Dog, euro was still trading above 1.50, and the Aussie dollar (A$) had set a 15 month high of .9368... But when I turned the currency screens on this morning after arriving to a pitch black office, which is the way I like it this early in the morning, the euro had given back about 1/2 cent, and so had the A$... So, it was my mission to find out what caused this slippage...

The only thing I could find was a comment by the Chinese Premier, Wen Jiabao, who said that "the world faces an uneven recovery"... This made traders think twice about leaving me behind, no wait... I mean they thought twice about the green light they thought they were under to have carte blanche with the dollar...

The dollar also received a bit of love from the comments by U.S. Treasury Sec. Geithner, a.k.a. the Cheater... Geithner was doing his best Robert Rubin, circa 1995, saying that he believes strongly in the need to maintain a strong dollar and said the United States was determined to get its budget deficit down. HAHAHAHAHAHAHAHAHAHA! That's a joke, right? OH! He wasn't joking? Are you sure? Because for a minute there, I really thought he was joking, for what, in the past, has he or this administration done to back up those words? But he wasn't joking... Hmmm... And I was all ready to give him a new nickname... The Joker...

Geithner did say that the U.S. was well aware it must work to keep investors' confidence in U.S. economic policymaking... Yeah, and that's exactly what you've done, right? NOT! Hey Timothy, you might want to check the scorecard on your performance so far... The dollar index has fallen 7.6% this year, and hit a 15-month low of 74.89 yesterday...

OK... I've got to go on to something else, otherwise I'll say something that will cause people to fill my email box with nasty emails! But... It sure looks like Risk Aversion has crept back into the currencies after all these statements... We seem to run into these Risk Aversion stints about every week... They come, they take away gains, and they go away, thus allowing the gains to be reinstated...

How about that 15-month high for the A$ yesterday of .9368? At least this time the currency is on the way up when it hit that 15-month figure... 15 months ago, it was on the way down! So, here's the skinny on this move by the A$... Australian employers added jobs in October... This was unexpected... But... Caused the immediate response of speculating that the Reserve Bank of Australia (RBA) would indeedly do, raise rates at their next meeting on Dec. 1st...

There was another "push" to the A$ yesterday... And it came from Gold! The shiny metal pushed to yet another new all-time high record level of $1,117 during the day... I might remind you here that Gold is Australia's third most-valuable raw material export... Oh! By the way, Australia's unemployment rate is now 6.5%, which is still too high, but falling... And doesn't that have a nice ring to it, versus saying an unemployment rate is rising past 10%?

The A$ pulled its kissin' cousin from across the Tasman, New Zealand dollar / kiwi along for the rally yesterday... Kiwi continues to be haunted by the ghost of deficits past... But, hiding in Australia's shadow suits kiwi just fine... And New Zealand Retail Sales just posted a nice, surprise, uptick... There are all kinds of reports going around that say the New Zealand 3rd QTR GDP will be strong... I'm from Missouri, so they'll have to show me!

There was further news out of China yesterday, from the People's Bank of China (PBOC)... The PBOC stated that "the exchange rate will be guided in a proactive, controlled and gradual manner and based on international capital flows and movements in major currencies." What's the news of this you might be asking? Ahhh grasshopper, sit... Here is the news... That statement is completely different toward the Chinese currency than previous statements that said that the PBOC would keep the currency "basically stable"...

This is Central Bank parlance folks, to say that the PBOC will continue to "gradually" move the renminbi... As previously they basically said they would keep it at current levels... The foreign newspapers are all over this statement like a cheap suit, folks... But I think they're going in the wrong direction... The foreign newspapers are thinking that the PBOC has given the "high sign" that they are ready to allow the renminbi to float... Buzzzzzzzzzz! I'm sorry, that's the wrong answer... We hate to see you leave, but Johnny, tell our contestant what they've won!

I just don't see it as that... The Chinese like to play these games with words, to get everyone all lathered up... And then pull the rug out from under them... No rug pulling from under me!

The Wall Street Journal (WSJ) is reporting this morning that Central Banks around the world, like the Russian Central Bank, are buying dollars to underpin the currency from a free fall... The WSJ also said the Asian Central Banks have all been buying dollars to keep their currencies from getting too strong... Hmmm... I wonder how that's been working out for them? Oh... Here's the skinny on that... "Quite clearly, all Asian central banks have found it necessary to intervene, and it's costing us," said Korn Chatikavanij, Thailand's finance minister.

So, it's kind of nice to see other Central Banks around the world throwing good money at bad money, like the Fed Reserve has done for 15 months now... At least they're not throwing money down the toilet, nononononononono! YES THEY ARE! They're buying dollars! What dolts!

OK... While I was browsing through the WSJ, I saw another story that caught my attention... Here was the headline... "Fannie Mae, Freddie Mac say more losses are possible"... According to the WSJ, the U.S. Treasury has already injected $112 Billion into Fannie Mae and Freddie Mac since the government took them over last year... And now, more losses are possible?

Let's see... The Government took them over, and more losses are possible? Sounds like the Post Office... Sounds like Amtrak... What else has the Government taken over, and the bleeding continues? I know, and you know where I'm going with this, so I'll stop there!

What some more depressing data? October saw 332,292 U.S. homes seized by lenders or listed in default or auction documents according to RealtyTrac... October was the 8th consecutive month of 300,000 or more.... There was a 3% decline in October from September, but I wouldn't get too lathered up about that, given the chart I saw and shared with the desk the other day regarding residential loan resets that are coming due in the next two years, with peaks in Sept of 2010, and Sept 2011...

Looking at this chart tells me that the cartel, I mean the Fed will have no other choice but to keep rates low, and to keep buying Treasuries to keep the yield from getting too high... Haven't we learned anything the past 10-years? You have to learn from previous mistakes or you'll make them all over again... And that, is what, I, believe, the Fed is doing! The tried like heck to keep the Tech Bubble from bursting, by keeping rates artificially low, and credit loose as a goose... What were the unintended consequences of those actions? And what will be the unintended consequences of these actions by the Fed? I don't have an answer to that, but I don't see how this works out nice for the U.S. economy and taxpayers...

Before I go on... A reader sent me a note that made me laugh... He said, "Hey Chuck, since you can't decide on whether or not call the Fed the Fed or the cartel... Why don't you just put them together and call them the Fartel"? HAHAHA HAHAHAHAHAHA!

The data cupboard finally gets restocked today, and we'll see the usual Thursday fare of Initial Weekly Jobless Claims, which remains above 500,000 every week, and something that Tim Geithner might want to pay attention to... The U.S. Monthly Budget Statement, which will be somewhere around $160 Billion for October... Annualized, that's almost a $2 Trillion deficit in the Budget! OUCH! Say it ain't so, Joe!

To recap... The non-dollar currencies rallied all day yesterday, but have given back those gains in the overnight sessions. Most of the slippage has been from words, not actions. The Chinese premier, and the U.S. Treasury Sec. So... Don't look for this to be any reversal of the weak dollar trend... The Aussie dollar hit a 15-month high last night on a strong employment data report, which has traders thinking another rate hike on Dec. 1st is coming, and the Asian countries have been buying dollars to keep their currencies weak, and according to them they are "paying the cost"!

Currencies today 11/12/09: American Style: A$ .9315, kiwi .7370, C$ .9315, euro 1.4950, sterling 1.6580, Swiss .99, European Style: rand 7.4380, krone 5.6050, SEK 6.8550, forint 180.50, zloty 2.7645, koruna 17.0490, RUB 28.79, yen 89.80, sing 1.3870, HKD 7.75, INR 46.65, China 6.8267, pesos 13.17, BRL 1.7150, dollar index 75.25, Oil $78.67, 10-year 3.44%, Silver $17.57, and Gold... $1,116

That's it for today... Isn't that something, the Gold move? My good friend, David Galland, said that Gold is "blowing a raspberry"! HA! Well... Now that my blood has been thinned out, and had the consistency of water, the swelling in my left leg has backed off just a bit... At least I don't have to continue with the shots! Next week I go back to the cancer doctor that has been treating my left eye that was taken over by cancer... I really don't know why I have to go back, he told me last time there "was nothing else he could do"... All these things, and still life goes on, right? Yep! Little Delaney Grace was really cute the other day, trying to pawn off her carrots to me, she kept telling us that the carrots were mine to eat, not hers! Well... I'm locked down in St. Louis until late January... But my annual Christmas vacation will break things up... I know, it's a month away, but I can't help starting to get geeked about it! OK... A little long here with the Big Finish, I had better get going on this Tub Thumpin Thursday!

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

Silence Is Golden...

Chuck Butler — Mon, 09 Nov 2009 15:27:51 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..

* A HUGE dollar sell off overnight...
* BLS admits the Birth/Death model was wrong...
* The 20th anniversary of the fall of the Berlin Wall...
* Kiwi is best performer overnight...

And Now... Today's Pfennig!

Silence Is Golden...

Good day... And a Marvelous Monday to you! A Spectacular weekend, weather wise, here in the Midwest... And Indian Summer, is what my dad would have called it. The news from the Sports teams wasn't so spectacular, but we had the weather going for us!

Welcome to Monday's edition of A Pfennig For Your Thoughts... I'll start off today with a note about the currencies, then do a recap of Friday, and then a look ahead to the rest of the week... So... Strap yourself in, and make sure to keep your arms and legs inside at all times during the ride!

I checked the currencies last night, as is my tradition of taking a peek at the Japanese open... And the dollar was getting sold... I thought to myself, self... I bet G-20 got things going here! And then this morning, when I turned on the currency screens, I saw that the dollar really got sold overnight, and in the morning session of Europe. The Big Dog, euro is flirting with 1.50 again, the Aussie dollar (A$) is flirting with 93-cents, and the Swiss franc is not only flirting, but holding hands with parity against the dollar!

So, what's behind this big move in the currencies VS the dollar? Well... The move has been fueled by G-20... And it's not anything that the G-20 members said... In fact, G-20 said nothing, nada, zero, zilch, a great big goose egg, on the currencies... Traders are taking this to mean that the G-20 member nations don't have a problem with the weak dollar, and that's akin to giving them the green light to sell the dollar further... Proving once again that Silence is Golden... (to non-dollar currency and precious metals holders!)

I had said in one of my recent videos that I do for the Sovereign Society and my "paid for" Newsletter, The Currency Capitalist, that I truly believed that the weak dollar and the rise of the non-dollar currencies would be a "hot topic" at the next G-20 meeting... So, I was wrong with that thought... So, since G-20 was given the reins of the currencies, they haven't said a word... I find this to be very significant folks... You know, it's not like if G-20 said the dollar's fall was too deep, they could do anything significant about it... But the fear of something would be enough to wrap a tourniquet around the dollar's bleeding. But... They didn't! And so we go on with the dollar selling, which in reality is what the U.S. Gov't really wants anyway! A general slow depreciation of the dollar is the way the Gov't would like to see the trading go...

So... There we have it! A non-dollar currencies rally, that's wrapped around G-20's silence on the weakness of the dollar.

Friday... We saw the Jobs Jamboree, really surprised on the "good side" of the job losses which according to the BLS (Bureau of Labor Statistics) was "only" 190,000 for October... Now, that's quite the fall from the +500K job loss months we saw 6 months ago... The Unemployment Rate, however, spiked to 10.2% in October... The first time the Unemployment Rate has been above 10% since the recession of the early 80's...

And then there was this, regarding Job losses... Chris Manning of the BLS stated last month that payrolls were overestimated in the twelve months ending March by 824,000. The source of this error was the birth/death model. BLS used "plug" numbers for the number of births and deaths. These "plug" numbers were wrong. They led to estimated positive contributions to employment that were too high. Most of the error (675,000 out of a total 824,000 jobs) occurred in the first quarter of this year. The birth/death model was adding significantly to payrolls when all other payrolls were falling. In reality the contribution from net births and deaths was in fact negative.

How long... has this been going on? (A great old song!) But, haven't I ripped this Birth/Death model for years now? And here you go! Even a BLS employee says they were wrong to add these jobs!

So... The question is when do this job losses get posted? Well... I don't think you'll see that folks... It's just the way the Gov't does things... Hides them, cheats you, and then says, "we made a mistake" and goes on about their business of hiding and cheating you!

Oh... And one more thing here regarding the Jobs Jamboree... According to BLS, payrolls fell at a 188,000 a month rate over the last three months. But their own household survey says employment fell at a 589,000 a month rate.

I shake my head in disgust... But, shoot Rudy, we all know how "the game is played" so, we just adjust our numbers and go on...

So... I guess you heard that the House passed the Health-Care Overhaul Bill this past weekend... I'm not going to go into this for this would be a "hot button" for a lot of people... I just want to know what this is going to cost, and don't believe anyone in the Washington D.C. that tells you that it won't cost anything! Their track record on that stuff is horrendous! Which also means that if they tell you it's going to cost $1 Trillion, it's going "really cost" double or triple that!

So, we just keep adding on to our deficit, folks... The people in D.C. are so worried that they need to spend more, instead of reducing spending... I really think that anyone that voted for this new spending program, needs to get "fired" the next time their term is up...

OK... Enough of that! The Data Cupboard is empty today, and doesn't really get re-stocked with Tier 1 data until Thursday... So... The data isn't going to help the dollar out the front-end of this week.

The IMF issued a report this past weekend that isn't helping the dollar... The IMF said that there are "indications that the U.S. dollar is now serving as the funding currency for Carry Trades" was one of the things that hurt the dollar... The other thing was that the IMF felt that the dollar was still "overvalued"... Which in anybody's book means it can fall further!

The IMF also said that the euro had "experienced the most appreciation among major advance economy currencies and that it remains on the strong side of its equilibrium."

Hmmm... So... First it was the silence by G-20, and then the slap in the face by the IMF that has the dollar on the run this morning... I wonder what direction this will go once the New York traders arrive at their desks, and see what the overnight markets have done to the dollar... My guess is they will first take some profits, and then add on to the dollar's woes... But that's just a guess, who knows what those "fickle" traders will do!

So, like I said above, the euro, A$, Swiss are all moving higher VS the dollar... But the "winner" for best performing currency overnight is the New Zealand dollar / kiwi! At one point overnight, kiwi traded at 74-cents... It has since given back some ground, but the move overnight was impressive! Kiwi got a nice bump when Dairy Giant Fonterra raised their forecast dairy payout... With farmers' incomes representing .7% of the GDP, this was good news for the economy, and thus the thoughts begin to switch to a rate hike by the Reserve Bank of New Zealand (RBNZ), which just last week was downplaying any such rate hike... This might change their mind...

Today is the 20th anniversary of the fall of the Berlin Wall... That was HUGE in our lifetime wasn't it? I'm reminded of President Ronald Reagan telling the Communists 2 years earlier to "tear down this wall"...

And... Chris Gaffney left me this note from Friday...

"The government extended the first time homebuyers $8,000 tax credit on Thursday. While this tax credit was intended to help alleviate the glut of housing left by the credit crunch and resulting downturn, housing analysts have found the tax credit did little for home sales. Between 80 percent and 90 percent of the people who have bought homes using the credit would have purchased those homes without it. Sounds a lot like the cash for clunkers program; Taxpayer money wasted in order to try and make the data look good in the short term.

But not only did they extend the first time homebuyer's credit, they also approved what I think is a really stupid addition. The expanded program introduces a $6,500 tax credit for people who already own homes but want to buy new ones. Unlike the cash for clunkers program, the old homes which these buyers now occupy will not be destroyed; they will be placed onto the market. So what does congress think this $6,500 credit is going to accomplish?? It isn't going to decrease the number of homes on the market. It will help the banks, title companies, and mortgage lenders, who make money on the transaction. But it won't help the homeowners who are facing foreclosure, or the taxpayers who don't take advantage of."

Yes, Chris... That's what's going on here... And again, people are still wondering why China has such a problem with the direction of the U.S. and our deficit?

And Gold... The shiny metal reached $1,100 on Friday... And with the dollar weakness overnight, Gold has moved even higher... I know it sure seems to be that Gold has moved really quickly through the $1,000 level, and it did! I'm still waiting for the "correction" to buy some more... But, right now, it looks like that correction might not every materialize!

Speaking of this... I'm also still waiting for a decoupling of the risk assets... Getting back to the fundamentals... It could be happening right now, folks... We can only hope!

And then there was this... I received an email the other day from a reader, who said to me that he thought I enjoyed seeing these things happen in the U.S.... WHAT? I do not revel in these things I talk about... I merely point out what I think will happen given a tax cut, or more deficit spending, or protectionism, etc. It doesn't take a rocket scientist to figure these things out! And... Besides... I live here, my kids live here, my granddaughter lives here... I think in some way that as long as I point these things out, and ways for people to profit from them, that I'll make things better for them...

Ok... That was good to get out of the way this morning... Let's go to the recap and then the Big Finish, eh?

To recap... G-20 was silent about the currencies and weak dollar, which has given traders the green light to sell the dollar further. The IMF didn't help the dollar either, saying that the dollar was still "overvalued". The BLS admitted the Birth/deal model had made HUGE errors in the past years, and

Currencies today 11/9/09: American Style: A$ .9280, kiwi .7380, C$ .9280, euro 1.4990, sterling 1.68, Swiss .9395, European Style: rand 7.43, krone 5.62, SEK 6.87, forint 181.75, zloty 2.8140, koruna 17.0975, RUB 28.7525, yen 89.90, sing 1.3850, HKD 7.75, INR 46.4475, China 6.8263, pesos 13.34, BRL 1.7045, dollar index 75.10, Oil $78.44, 10-year 3.51%, Silver $17.71, and Gold... $1,108.40

That's it for today... A tough weekend for our football teams... My beloved Missouri Tigers lost again, while the undefeated high school Flyers and the 8th grade Flyers became undefeated no more... UGH! Oh well, on to wrestling for my little buddy, Alex! I took my beautiful bride to see an old band mate of mine Saturday night! Old buddy, Preston, was still quite the showman on stage, with his drums! The band sounded great! My spring training buddies, made tentative plans for our annual trip to Jupiter on Friday... 16 weeks till pitchers and catchers report folks... And with that... It's time to see what's on my desk from Friday, and get going on today's trading! I hope you have a Marvelous Monday!

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

3rd QTR GDP To Lift Our Spirits?

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

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In This Issue..

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

And Now... Today's Pfennig!

3rd QTR GDP To Lift Our Spirits?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The Dollar Bounces Back!

Chuck Butler — Tue, 27 Oct 2009 14:22:19 GMT

..But First, A Word From Our Sponsor..
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* 4 BRIC currencies: Brazilian real, Russian ruble, Indian rupee, Chinese renminbi
* High upside potential
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Don't miss this unique opportunity. Deadline to buy the BRIC MarketSafe CD is Dec. 3rd, 2009. Apply today or learn more at http://www.everbank.com/001CertificatesMSBRIC.aspx?referId=11808
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In This Issue..

* Rumors kill the currency rally...
* Risk Aversion campers return...
* Dr. Faber with some thoughts...
* Big Mac and the real...

And Now... Today's Pfennig!

The Dollar Bounces Back!

Good day... And a Terrific Tuesday to you! The rain is back... First we had the coldest / rainiest spring I can ever recall, and then a very mild summer, now this... Cold and rain in the fall... I'd say that's climate change for you!

Good news from the scans! By the grace of God, I sailed through the scans and tests, cancer wise... I would like to thank everyone that had me in their thoughts, and prayers... Those are powerful things, don't forget that one minute!

OK... Well, the non-dollar currencies didn't enjoy such good news yesterday, as they got whacked a good one! After signing off yesterday, the non-dollar currencies continued to rally VS the dollar, and then the rug got pulled out from underneath them in a NY Minute! What happened? The risk assets were dropping like the Cardinals' batting averages at the end of the season... Well... Remember yesterday when I said that the data for the week looked like it might show some healing in the economy which would be bad for the dollar?

Well, it wasn't data that caused this move... It was a few things that I'll list for you that ganged up on the currencies and gave the markets the thought that the U.S. economy just might not be free and clear, which brought about a return of the "Risk Aversion" trades... Here's the list that ganged up on the non-dollar currencies...

Things making the U.S. economy look like its on shaky ground again include:
1. rumors that the first-time home buyer's credit will not be extended past Nov 30
2. rumors that the ING rights issue is not being well received
3. talk of bank downgrades
4. mention of a new bill addressing 'too big to fail' giving the Gov't broad power to dismantle financial companies that get into trouble

I was asked by our Public Relations people to put together some thoughts for CNBC... So, the above stuff was what I put together... CNBC then asked for an interview... Well, this is where I get off the bus... Long time readers know that I've been ambushed twice at CNBC, and decided to not go back for a 3rd... So, even though this interview has little chance of an ambushing, since they asked for the info... The Big Boss Frank Trotter will be doing the honors at 8:40 CT / 9:40 ET, today... So, don't forget to tune in!

Another thing that may be giving the dollar some love is the yield on the 10-year Treasury... This yield, as reported in yesterday's Pfennig, had bumped up to 3.50%, which had been the proverbial line in the sand in the past... 3.50% had been the level that had seen strong Treasury buying (probably by the Fed!) to bring the yield back down... But yesterday, we saw this yield inch higher to 3.54%... We should keep an eye out of this, to see if we see slippage in the yield, for it would only mean one thing... That the Fed was buying again! And that's the reason the dollar got some love yesterday from this yield... Because so far... The Fed hasn't gotten their hands dirty here... But should they, once again, it won't support the dollar...

So... There you have it! Just when we thought the data this week would send the dollar to the woodshed, these things popped up to underpin the dollar! Hopefully, it's just a case of sell the rumor and buy the fact for the non-dollar currencies, as most of this stuff was just rumors in the markets...

But it did get people / investors / traders thinking about just how oversold, in the short-term, the dollar was... It normally takes something like this to get those thoughts to come to the front of the class, as the negativity had such a stronghold.

We've seen these "Risk Aversion" moves in the past 7 months, and each time they've been short in terms of time that they lasted. But that doesn't mean we'll see the risk aversion campers leave shortly this time... They might... And they might not... Don't you just love it? I know one thing for sure! The sell off yesterday was swift and strong. For instance, the euro was 1.5050 before the sell off, and is 1.4890 this morning! What does that look like to you? Buzz! If you said, "Chuck, it looks like a cheaper level to buy" then you may have won a free subscription to the Pfennig newsletter! If you did not have that answer, then there's a free parting gift for you at the door! HA!

Yes, it certainly does look like a cheaper level to buy... Of course it doesn't mean that tomorrow's price won't be cheaper, but given the history of the risk aversion reversals in the past, it doesn't mean that it will be cheaper either!

And... According to Commerzbank... "it would probably be premature to call this the end of the dollar's weakness. It remains under pressure due to the low interest rates and the resulting attractiveness as a financing currency for Carry Trades."

I saw a story last night about the Brazilian real, and how the real's +35% gain VS the dollar this year, as a Big Mac in Brazil costing more than in New York and London... Uh-Oh! That Big Mac Index again! But that doesn't scare the research team over at Goldman Sachs, for they still believe the real has room to gain VS the dollar... And you know me and the Big Mac Index... While it's a "nice" measure, it's not the holy grail of currency outlooks... I can point back to 2000 and 2001, when the Big Mac Index said the dollar was overvalued, but it took nearly 2 years before we saw dollar weakness... So, I don't put much faith in the Big Mac Index, for short term forecasting... Not that I forecast, at least not in this letter I don't, for I would be hung out to dry by readers if I got something wrong... I mean look at when I said I thought the Aussie dollar COULD go to parity, and it only got to 98.5-cents!

OK... Dr. Marc Faber was in the news last night, as he was giving an interview on Bloomberg TV... This is Dr. Faber's words folks...

"The dollar will become worthless when people eventually realize the fiscal situation in the U.S. is a disaster. It will go to a value of zero eventually, but not right now. Looking at Mr. Obama's administration, it should already be there." He went on to say...

"In my opinion, about 50% of tax revenues will be used just to cover interest payments on the government debt. That's unsustainable. Then you'll really be forced to print money. The best investments right now are foreign currencies, commodities, and equities." And then when asked about Fed Chairman, Big Ben Bernanke, Dr. Faber said, "He's a money printer. He's nothing else."

Whew! That's taking the whole shootin' match of the Gov't and the cartel, I mean the Fed, to the woodshed, eh?

For those of you at home keeping score, make sure you've jotted down the right figure of dollars that the U.S. Gov't and the Fed have spent, lent or guaranteed... $11.6 Trillion!

OK... It looks like the last country that's needed to sign the Lisbon Treaty, the Czech Republic is going to sign it... Now, let me be perfectly clear about this... I don't agree with the Lisbon Treaty, but the European Union has gone so far down this road now, that there's no turning back, so you might as well go along and sign the thing, I guess... The one thing it does do, is underpin the euro... For if this Treaty did not get signed, the pressure on the euro would have been great, because you would have had all the naysayers coming out of the walls again talking about a collapse of the European Union and a return to the legacy currencies... You know: Deutsche marks, French francs, Spanish pesetas, and so on...

Speaking of Europe... I know it's not really November... But it's close enough! The Norges Bank of Norway will meet tomorrow, and are expected now to raise rates, which would make them the first European Central Bank to raise rates... Notice I said "now"? Well, the rest of the crowd are jumping on my bandwagon that began a couple of months ago when I said that it was a race between Australia and Norway to be the first to raise rates... There weren't many pundits out there calling for rate hikes... But as time has gone on, and they read the Pfennig, they've come along nicely! HAHAHAHAHAHA!

In the last couple of weeks, the Pfennig and me, have been mentioned a couple of times by the best writer on the planet, Richard Russell... And now, I have learned that Harry Schultz has mentioned the Pfennig and me in his most recent letter... The Pfennig is really beginning to get noticed, eh? That just puts more pressure on me to come up with fresh, informative information!

Hmmm... And then there was this... PIMCO's Bill Gross, who is known as the "bond king" admitted that he "has some concern on owning Treasuries"... If Bill Gross has some concern folks, shouldn't we? I recently did about a 20 minute video for our friends over at the Sovereign Society on the Treasury Bubble... Sure wish Bill Gross would have said something like this when I was putting that video together! Imagine what I could do with a statement like that when I'm doing a video on the Treasury Bubble!

OK, to recap... The dollar came back with vengeance yesterday, after some rumors on the street led people to believe that things in the U.S. won't be free and clear after all, which led to risk aversion... We've seen this risk aversion before, and each time it hasn't lasted too long... Dr. Marc Faber checks in with some comments on the dollar, and Bill Gross has some concern about owning Treasuries!

Currencies today 10/27/09: A$ .9185, kiwi .7485, C$ .9370, euro 1.4890, sterling 1.6440, Swiss .9825, rand 7.5680, krone 5.6350, SEK 6.8930, forint 180.25, zloty 2.8170, koruna 17.52, RUB 29.11, yen 91.90, sing 1.3965, HKD 7.75, INR 46.95, China 6.8294, pesos 13.24, BRL 1.7325, dollar index 75.85, Oil $79.09, 10-year 3.54%, Silver $17.14, and Gold... $1,040.10

That's it for today... Well... From one thing to another... No sign of cancer is a great thing for me! But now the left knee and lower leg... I go for another test today, to see if they can figure out what's causing the swelling. So, I'm not out of the woods completely, just yet... Originally, I had thoughts about attending the Grand Opening of La Estancia de Cafayate in Argentina that's going on this week... But then Ty Keough told me how long it would take me to get there, and I decided that my trip to Cabo San Lucas next week was enough! Then I think that's it for me this year, as far as travel goes... I normally speak to the Wealth Masters Group in December on Marco Island, but they moved that meeting to next spring... So, I think I'll be home until we go to Orlando for the Money Show in Feb. 2010! You'll be so tired of hearing from me, you all will probably take up a collection and buy me a plane ticket somewhere! HA! OK... Time to go... I hope your Tuesday is Terrific!

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

China Grows at +8.9%!

Chuck Butler — Thu, 22 Oct 2009 18:08:51 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..

* Currency rally is reversed overnight!
* Pay Czar dreams...
* Brazil may reverse capital inflow tax...
* An Asian Union?

And Now... Today's Pfennig!

China Grows at +8.9%!

Good day... And a Thunderin' Thursday to you! It's raining outside, so... It must be a Thursday! Amazing how many Thursdays have seen rain this fall! The ground isn't the only thing that's getting watered down this morning...

Front and Center this morning, the euro traded well past 1.50 yesterday afternoon, and drug all the other non-dollar currencies higher as the day went on. But overnight, all that giddiness with seeing the euro over 1.50 for the first time since August of 2008 (and then it was on the way down, instead of this time on the way up!), has been watered down...

Here's the skinny... China printed a very strong 3rd QTR GDP number overnight of +8.9%, and instead of basking in the glow of that report, currency traders took a different route, and decided that if: China is growing that strongly, then stimulus in China will be removed soon, and other countries will follow suit... No one in the markets believes that the U.S. economy can withstand a removal of stimulus... Big Ben Bernanke might believe so, but the markets say "ain't no way!"

So, here we are once again with this stupid trading theme of "what's bad for the U.S. is bad for the world, and thus a flight to the dollar and Treasuries is required"... I just love how these guys "decide this is what's going to happen and the rest of the trading world follows them"... The non-dollar currencies got all caught up in this, and thus were sold off almost throughout the Asian and European sessions... I have seen the euro pop back up since I came in though, so maybe this will be short-lived...

There was news out of Brazil yesterday that was interesting... Yesterday I told you about the "tax" on capital inflows to slow down the stock market, and the real... Well, there were rumors yesterday that the Brazilian Gov't would change this from "Capital inflows" to "Capital outflows"... This would apply to balances that were in the country for less than 2 months... So... This removes the albatross from the real's neck, in my opinion that is...

I came across some news yesterday that just kind of hit me right between the eyes, and the light bulb went on, and so on... The news about the "Pay Czar", just got me thinking. ( I know that's a dangerous thing!)

Well... Too bad the new "Pay Czar" (man I hate that term "Czar"! I mean really, when did we become the Soviet Union?) any way... Too bad the new "pay czar" doesn't work for us in Congress! The new "pay czar" slashed compensation at 25 of the financial institutions that took Gov't. funds, lowering compensation by 50%!

But, he doesn't, and nor would his colleagues on "the Hill" like it very much if he started slashing their compensation! But wait! That's a great idea! When he's finished with the financial institutions, he can go to "the Hill" and start slashing compensation there Freddie Krueger style!

Because... Today, every dollar of growth comes with about 4 dollars of debt.

Again, the same dude sent me another email yesterday, telling me that I need to stop banging on the current administration, for deficit spending, it wasn't their fault the annual deficit went from $450 Billion in 2008, to $1.42 Trillion in 2009! AGAIN! I DON'T CARE WHO SPENT IT, WE DIDN'T HAVE IT TO SPEND! And once again, let me be perfectly clear about this... When the first $150 Billion of checks were sent to kick start the economy, I ranted and kicked and screamed... When the first TARP was introduced, I screamed to the heavens! I stated then, that I would NOT have bailed out anyone! I would not have spent the money we didn't have! I would have let those that could not stand on their own, fail... Think about that... The Big Ben's and Summers' of the world are telling you that "they saved the world"... Saved us from what? Financial ruin? We're freakin' broke now, what difference would it have made on that front? Job losses? Oh! And 10% (really 16%) unemployment is "saving us"? Or how about collapsing the markets? Well, I personally doubt that would have happened, folks... That's just a scare tactic they use...

Think about this for a minute... If we had done nothing... Like Ronald Reagan did after the stock market collapse of 1987, we would have suffered some great losses... But we would be past it by now... Instead, the same firms that took Billions from the Gov't, are still hurting... Did you see that Bank of America (BOA) booked a $2.2 Billion loss for the 3rd QTR! Even the Fed's Beige Book revealed that the Fed's regular report found that the overall economy is still plagued by weakness in banking and increasing unemployment.

Ok, I'm sorry... But once I get on a roll about this stuff, I can't stop! Just ask my kids... Their eyes begin to glaze over, they stare at the ceiling, and you can almost hear them thinking..."here he goes again with that deficit speech, when will he ever figure out that we heard it and understood it the first 50 times he's gone through this with us"! HA!

OK, back to the currencies... One currency you would have thought would have gone through the roof on the news that China's 3rd QTR economic growth was +8.9%, is the Aussie dollar (A$)... But NOOOOOOOOO! That didn't happen... Once again the thought here is that economies around the world can not withstand the removal of stimulus.... Starting right here in the U.S., but traveling around the world to China too... The thought process (strange as it might seem, and I do believe it's strange) is that if China grew this fast with stimulus the Chinese Gov't might see this as an opportunity to remove the stimulus, and when they do... All hell breaks loose!

While I don't disagree that stimulus removal in the U.S. would send our economy spiraling down the slippery slope of a double dip, I don't agree that it would be the same in China...

So... The A$ is about 1-cent cheaper than it was yesterday afternoon... Looks like, smells like, walks like, and talks like a cheaper buying level opportunity!

Remember when I thought that Sweden's Central Bank, the Riksbank, was prudent? Well, that all changed a few months ago, when the Riksbank joined the Bank of Canada in saying that they would not raise rates until the 2nd half of 2010... Well, the Riksbank repeated that line this morning after they left rates unchanged... I just don't get it... What the heck are these Central Banks thinking? I guess they just don't have a brain... The need to go visit the Wizard of Oz, I heard he's giving out brains! In fact, they're probably singing this right now!
I could wile away the hours
Conferrin' with the flowers
Consultin' with the rain
And my head I'd be scratchin'
While my thoughts were busy hatchin'
If I only had a brain

Oil is back to $80 this morning... Gold is $1,055... And that means the Canadian dollar / loonie is back on the rally tracks heading toward parity against the dollar once more!

And for those of you that like to take a walk on the wild side... The South African rand has really taken a blow to the mid-section in the past couple of days... You see, there was a rumor floating around that the South African Reserve Bank (SARB) was going "freeze" the rand, to keep it from getting too strong VS the dollar. It was rumored that the Economic Development minister, Patel, was going to propose that the rand be "frozen"... Both the ministry and the Central Bank have denied ever discussing this proposal...

Let's hope that they haven't! That would be awful! Just look at the damage the rand has suffered on the rumor! So... If the leaders in South Africa can calm down the markets, we'll see a rebound in the rand, and it will have been a case of "sell the rumor, buy the fact"...

Our office coordinator extraordinaire, Danielle Goodman, gave me one of those fake $1,000,000 bills yesterday and wanted to know if that was enough to buy a BRIC MarketSafe CD! She just wanted to hear me do Dr. Evil from Austin Power, and say with my little finger aside the corner of my mouth... One Mill-ion dollars... HA!

But that got me thinking about the hyper-inflation story I told you about the other day... Let's hope that we never have inflation that bad that $1,000,000 bills are floating around like $100 bills, c-notes, Benjamins...

The new Japanese PM is beginning to take some direction for his new Japan... For instance, this caught my eye... Prime Minister Yukio Hatoyama has advocated creation of an East Asian Community, modeled after the European Union, with China at its heart and the U.S. left outside. Hmmmm... The Big Boss, Frank Trotter and I did a report about 6 years ago for the Daily Reckoning, where we outlined this Asian Union, and called the new currency there the "Pan"... That would be truly amazing if that Asian Union came to reality!

But like we said then... The wounds run pretty deep between China and Japan, and it will take quite a lot of love and tenderness to get past that! Which country has the love and which one has the tenderness? HA!

Well... The euro has continued to push back against the dollar since I came in this morning... So, maybe it can get back to 1.50, which sure looks like a nice crooked number to me!

As I said above, Gold is $1,055 this morning having lost $5 this morning. Don't you just "love" all those commercials on TV these days with guys telling you to buy Gold? Where were they when Gold was $250, or $500, or $750? They were afraid that Gold's rise was not on terra firma, and they rolled up in a ball in the basement of their buildings, shaking with fear! HAHAHAHAHAHAHAHA! Nah... Just kidding... But I do find it weird that these guys are coming out of the woodwork like bugs now... Guys like Casey, Bonner, me, and the Mogambo Guru, have been here all along with the same message about buying Gold...

Speaking of the Mogambo Guru... I had the honor of exchanging emails with him the other day... He absolutely cracks me up!

The Data Cupboard finally yields some data worth looking at this morning, as the Weekly Initial Jobless Claims prints along with Leading Indicators... We're still seeing +500K new jobless claims every week folks... When will this stop? I contend that the U.S. economy can not sufficiently recover until the unemployment situation is addressed... Why is our Gov't trying to shove this, that and the other thing down our throats these days, and not addressing the unemployment situation? I mean, a tax cut for businesses would be a great move there don't you think? The other thing the Gov't is ignoring is the deficit... Instead they're thinking of new expenditures! I've written my congress people until my fingers won't write any longer about this... What have you done? Come on people! This is immoral what they're doing to our grandkids, and we just let them?

OK, I've got to get off that subject!

Let's go the recap and Big Finish now, as I feel myself getting all lathered up to scream at the walls about this stuff!

To recap... The euro traded past 1.50 yesterday for the first time since August 2008, then, however, it was going down, this time it was going up! The non-dollar currencies have given back yesterday's gains after China announced a +8.9% GDP for the 3rd QTR, thus making the traders think that stimulus worldwide will be removed and that would be bad for the U.S. and thus, we return to the stupid trading theme of rewarding the dollar when things are bad! UGH!

Currencies today 10/22/09: A$ .9235, kiwi .7545, C$ .9525, euro 1.4975, sterling 1.6550, Swiss .9915, rand 7.47, krone 5.5650, SEK 6.90, forint 177.30, zloty 2.2770, koruna 17.3250, RUB 29.0845, yen 91.30, sing 1.3970, INR 7.7497, China 6.8290, pesos 12.96, BRL 1.7320, dollar index 75.34, Oil $80.17, 10-year 3.39%, Silver $17.55, and Gold... $1,056.20

That's it for today, and this week for yours truly. I will be at the hospital most of tomorrow, for annual tests, scans, needles, etc. Let's keep our fingers crossed that all's well, eh? I don't get the results until Monday afternoon, so I'll have to find something to keep my mind off what's in the results this weekend! It's Homecoming at the University of Missouri this weekend. When our older kids were there, we used to go down to look at the house decorations on Friday night, and then stay for the football game on Saturday. I won't make it there this weekend, but I hear that the game has been picked as the location for the Tailgate Tour 2009! So, if you're going, stop by and check that out! My poor beloved Missouri Tigers are having a rough go of it this year... And they picked #3 Texas as their homecoming opponent! UGH! My little buddy, Alex has a football game Saturday too! OK... Let's say our goodbyes for the week... Goodbye... And get this out the door! I hope your Thursday is Thunderin' (good that is!) Thanks for reading the Pfennig...

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

Will History Repeat Itself?

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

..But First, A Word From Our Sponsor..
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* High upside potential
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Don't miss this unique opportunity. Deadline to buy the BRIC MarketSafe CD is Dec. 3rd, 2009. Apply today or learn more at http://www.everbank.com/001CertificatesMSBRIC.aspx?referId=11808
.

In This Issue..

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

And Now... Today's Pfennig!

Will History Repeat Itself?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

A Loss Of Confidence In the U.S.?

Chuck Butler — Mon, 19 Oct 2009 14:53:00 GMT

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

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

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

In This Issue..

* Non-dollar currencies rally...
* Euros and Aussie dollars lead the pack...
* $1.42 Trillion Deficit for 2009!
* TIC's data gets ignored again!

And Now... Today's Pfennig!

A Loss Of Confidence In the U.S.?

Good day... And a Marvelous Monday to you! Another "lost" weekend for our college and professional football teams! UGH! The sun finally came out this weekend. YAHOO! It felt so good to be in the sun again... The TICs data was something that needed to be dealt with on Friday, but once again the markets ignored it... I'm telling you, this smells like, walks like, and talks like a gag order... OK... Let's get going this Marvelous Monday!

The non-dollar currencies all drifted on Friday, with the dollar seeing a bit of buying... But that's all been thrown to the curb this morning, as the non-dollar currencies, for the most part, are in rally mode VS the dollar.

The Big Dog, euro, has really pushed the envelope this morning, rising from 1.4860 to 1.4945 as I write... The Aussie dollar (A$) is also working alongside the euro pushing the dollar down. I just put the finishing touches on both the Review & Focus monthly letter, and my "other letter", the Currency Capitalist, yesterday... I had some strong words for the Gov't now and in the past that has allowed this weakness in the dollar. And trust me, if the U.S. Gov't wanted a strong dollar, all they would have to do is say so with conviction, and not this wamby pamby stuff they try to get away with just to put a governor on the dollar's decline... Think about this for a minute... It's true, it's really true... Your Gov't doesn't care about the currency... The currency that we all use, and think it will always be there for us to spend...

WOW! I really got carried away there, eh? I don't need to get up on the soapbox already on a Monday morning! But... These are the things that need to be said, and I'll say them! Not like our wamby pamby media, that will talk about the weak dollar, but never what causes it!

The Gov't finally got around to printing their final Monthly Budget Statement that would end their fiscal year (Sept 30th)... The final total was $1.42 Trillion in the red... That's 10% of GDP! That's the highest level since World War II! And remember when I kept telling you that the expenditures for this administration in 2009 would come in at $3.5 Trillion dollars? Well, that's just about where they came in... And with revenues dropping 16.6% from 2008, we are left with this atrocious Deficit of $1.42 Trillion! And don't forget (here I go sounding like an infomercial again) that the next 10 years is forecast to add an additional $9 trillion to our national debt!

OK, so what's up with the TIC's data from Friday? Remember now... The TIC's data is an accounting of the net foreign purchases which are needed to finance that atrocious deficit... So how'd we do? Well... The big picture of all flows in and out for the last 12 months turned negative and is just shy of the worst level recorded, which was in 1982. OUCH! Central Banks seem to be buying about the same amount, which isn't a good thing when you consider the increase in Treasury issuance... But the real fall off has come from the Moms and pops... The private investors if you will... So... Is this just an aberration, or... It could very well be a loss of confidence of global investors in the U.S....

There was a hint of this loss of confidence on Friday in the China Daily newspaper... And it wasn't the fact that the story was in the paper, it was the fact that the story was front and center for everyone to read... It was a quote by Big Al Greenspan, our former Fed Chairman who said that he "fears the budget deficit of the U.S. more than the collapse of the dollar." Hmmm...

What the heck is Big Al talking about? He knows well and good that the Deficit is the cause of the dollar depreciation! And just the fact that the Chinese put it front and center on their daily newspaper tells me that they are making fun of Big Al, and at the same time telling their readers that they should avoid dollars... I don't know what it tells anyone else, but that's what it tells me!

Recently, I've talked about seeing signs of a return to fundamentals... I really do believe that we're headed in that direction once again, which would be like manna from heaven to your Pfennig writer! Fundamentals are much easier to understand that these crazy trading themes that go against normal logical thinking!

Well... The boys over at PIMCO, the world's largest bond fund, seem to believe that "Fundamental forces are set to put downward pressure on the dollar as the recovery gathers momentum. Those forces include massive budget deficits, bets the Federal Reserve will keep borrowing costs near zero for an extended period, and prospects for a double-dip recession in the U.S."

Sound about right to me! Given those fundamentals for the dollar, and take away the "flight to safety" trading theme, you've got a Betty Crocker award winning recipe for a dollar decline!

The Bank of Canada (BOC) meets tomorrow... I'm going out on a limb here, to say that I think the BOC will remove that statement they've repeated for a few months now that interest rates would remain at current levels near zero until the 2nd half of 2010... Why do I think that, when the BOC has been so adamant about this statement in previous meetings? Ahhh grasshopper... First of all Australia has already raised interest rates, and their central banker has already talked very hawkish about future rate hikes... The other "Commodity Countries" of Norway, New Zealand and Brazil, are also beginning to talk up rate hikes... So, in my mind, the BOC will begin to "feel the heat" of their Commodity Brothers raising rates, and the only way they'll be able to move then is to remove the statement about leaving rates unchanged... NOW!

Getting back to the euro for a minute... I find this move higher by the euro VS the dollar this morning to be quite impressive, given that the Financial Times (FT) had an article saying, "It was time for the ECB (European Central Bank) to get serious about an overvalued euro"... Funny, the timing of this article... The Eurozone Finance Ministers are meeting today... And in the face of all this... The euro rallies!

And as I mentioned earlier in the letter, the A$ is stronger this morning... It's my feeling right now that the negativity toward the U.S. dollar is really seen and magnified in the performance of the A$... And why not? You've got the country that was not affected by the financial meltdown, a country that was the first to raise interest rates, a country that is rich in the commodities that China demands, and on a sidebar, China is forecast to grow 9% in the 3rd QTR, and a country that has a Central Banker that has given the green light for appreciation of the A$ VS the U.S. dollar!

The data cupboard is full of 2nd tier data prints this week, so I really don't think the markets will get any direction from the likes of PPI, Housing Starts, etc. But maybe they will! You never know with these fickle dudes!

So... To recap... The TICs data last Friday indicated a loss of confidence in the U.S., the Budget Deficit for the U.S. was $1.42 Trillion for the fiscal year ending Sept 30th. The currencies, for the most part, are rallying this morning VS the dollar, and the data cupboard will fail to give the markets direction this week. Some Chuck speak on the soapbox on a Marvelous Monday too!

Currencies today 10/19/09: A$ .9225, kiwi .7475, C$ .9670, euro 1.4935, sterling 1.63, Swiss .9865, rand 7.35, krone 5.5910, SEK 6.9580, forint 178.50, zloty 2.8130, koruna 17.29, RUB 29.33, yen 90.80, sing 1.3915, HKD 7.75, INR 46.30, China 6.8268, pesos 13.07, BRL 1.7130, dollar index 75.50, Oil $78.13, 10-year 3.45%, Silver $17.52, and Gold... $1,055.40

That's it for today... Hey! I forgot to mention last week that I had the featured guest essay on the Daily Reckoning (www.dailyreckoning.com) last Wednesday! If you aren't a Daily Reckoning reader, you missed it... But, because of the technology available to us, you can click here to read it: http://dailyreckoning.com/bric-nations-the-fundamentals/ Congrats to my little buddy Alex and his 8th grade Flyers teammates for completing a weekend sweep! Two football games, two smashing victories! Well, it's that time of the year again... On Friday of this week, I'll be going through a ton of tests, scans, needles and other stuff to make sure I'm still on top of the cancer that took over my body 2 years ago. So, I'll be out on Friday... But you still have me for the next 3 days! We closed out our latest BRIC MarketSafe CD last week, and opened the door to another one! This issue has been so popular that we decided to extend the funding period! OK... Time to hit send... I hope your Monday is Marvelous indeed!

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

Dow hits 10,000 and the dollar is down...

Chuck Butler — Thu, 15 Oct 2009 16:12:26 GMT

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

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

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

In This Issue..

* Dow hits 10,000 and the dollar is down...
* Return of the carry trade?...
* Global Power Shift Index...
* Goldman predicts a further fall for the dollar...

And Now... Today's Pfennig!

Dow hits 10,000 and the dollar is down...

Good day... It is a Thunderin Thursday here as the rain continues for another day. We have had a very wet two weeks here in the midwest, but the cold rain is finally supposed to stop later today. The currencies continued to their thunderin stampede over the US$ yesterday with several reaching fresh highs. The Dow Jones average moved above 10,000 again, so everything must be alright in the world economy now, right?? This morning the dollar bounced back up, but it looks like profit taking and not a more permanent trend. Lots to talk about today, so I'll get right to it.

The dollar dropped again yesterday as investors continued to move money out of the 'safe haven' investments in favor of higher returns. The two places where investors sought refuge during the economic crisis were the US$ and Japanese yen. Investors felt a level of comfort in the currencies of these countries because they are the worlds largest and most advanced marketplaces. With the credit crisis gripping the globe, investors were satisfied pulling money off the table and 'parking' the funds in ultra low rate accounts in Japan and the US. With the latest data showing the global recovery taking hold, investors have moved out of these low rates and have sought out higher returns. Some of this money has flowed into the equity market in the US, pushing the Dow Jones average back above 10,000 (more on that in a second). The global recovery also has investors looking toward commodities, which were beaten down on fears of a global slowdown. The price of copper, gold, and crude oil have all run up on fresh signs of a global recovery. With commodity prices coming back up, the countries who are commodity rich should do well, and investors have returned to the currencies of Canada, Australia, and Norway.

Finally, investors who feel more confident have begun to take on a bit more risk, with many returning to what was once a very profitable trade: the carry trade. This trade dominated the currency markets for a number of years prior to the global economic crisis. While long term readers know all about it, I will give another quick explanation for those of you who are new to the Pfennig. The carry trade is simply a trade where investors borrow at low interest rates and then invest the borrowed funds at higher interest rates. The trade typically uses a high degree of leverage in order to make even a small interest rate differential profitable. The most popular funding currency of the carry trade had been the Japanese yen, as interest rates in Japan were held at near zero levels for several years. Investors would borrow the yen at 1%, sell the yen and use the proceeds to purchase New Zealand Dollars, and then invest these kiwis at a rate of 5%; earning the spread of 4% (before fees). As long as the currencies remained relatively stable, the profits rolled in. The risk to this trade occurs when the funding currency starts to move up vs. the investment currency, and the leverage used can make these currency moves pretty dramatic.

But enough of the history lesson, let me get back to where we are today. The US$ has replaced the Japanese yen as the most popular currency for the carry trade. Investors have been selling dollars and moving funds into the higher returns of Brazil, South Africa, and even Mexico. These countries have the attractive combination of high interest rates and commodity based economies which should do well in a global recovery. But as I mentioned above, investors in these carry trades can be a bit fickle, and can reverse these trades at the first sign of trouble. These currencies can be volatile, and should be viewed as the speculative portion of your currency investments.

The last few months have been a sort of 'perfect storm' for the currencies of Australia and Norway. Both have benefitted from the surge in commodity prices. Both also have strong governments which kept their economies from dipping too far into recession. Because of this fiscal strength, both countries are now raising interest rates, which continues to make their currencies more attractive. The Norwegian krone climbed to a one year high against the euro and the dollar yesterday as crude oil prices jumped. With Norway putting a percentage of their oil revenues to work rebuilding their economy, their central bank will probably start raising rates at their next meeting. The Norges bank governor Svein Gjedrem said last month the bank had considered raising rates at the Sept 23 meeting and will likely have to take a fairly aggressive stance on rates going forward.

Australia was the first to raise interest rates, and will likely continue to tighten. Reserve Bank Governor Glenn Stevens told reporters that the RBA can't be too timid in raising rates now that the threat of an economic crisis has passed. "If we were prepared to cut rates rapidly, to a very low level, in response to a threat but then were too timid to lessen that stimulus in a timely way when the threat had passed, we would have a bias in our monetary policy framework." Unemployment is falling, and consumer confidence continues to rise in Australia which will likely mean additional interest rate increases in the next few months.

Investors in our newest WorldCurrency Index CD have been perfectly positioned for these latest currency moves. We introduced the Global Power Shift CD back in July of this year and it has been one of our best performers. This CD combines Australia, Brazil, Canada, and Norway into one mighty index CD. Ty Keough mentioned the other day that he had spoke to one of the first investors in the Global Power Shift, and had calculated the customer had earned an amazing 12.5% during the first three months (that is a 50% annualized return!!). With commodity prices continuing to push up, and interest rates set to rise in both Norway and Australia, investors should continue to see good returns in this WorldCurrency Index cd.

As I mentioned above, the Dow Jones average moved back above 10,000 yesterday. Investors have apparently taken the same view as the Nobel Peace Prize committee and are betting on the 'good things to come'. I just don't see any concrete evidence of a sustainable recovery here in the US. Unemployment continues to hover near double digits, and US foreclosure filings have climbed to a record high. While 'less negative' numbers on the retail sales may have inspired some mis-directed optimism, the US economy is still in a very precarious position. I know equity investors always have to look at 'future' cash flows and purchase stocks on the promise of earnings coming in somewhere down the road, but I don't see where the current data supports a Dow at 10,000.

The retail sales numbers which were reported yesterday here in the US were 'less negative' than expected; dropping 1.5% vs. a predicted 2.1% drop. The press proclaimed the return of the US consumer confidence since this number was better than predicted. I guess as long as the data comes in a bit better than what the economists predicted, it is positive (no matter what the actual data is!). Today we will see data on consumer prices which are predicted to show inflation continues to be muted. The volatile Empire Manufacturing report will also be released this morning and will show another jump.

If the inflation data come in as expected, the news will give the upper hand to FOMC members who have said the central bank can keep interest rates low for a long time. The minutes of the FOMC Sept 22-23 meeting showed some members were actually calling for an expansion of the 'quantitative easing' program. Chairman Ben Bernanke said the Fed is prepared to tighten credit when the economic outlook 'has improved sufficiently'. But the minutes show the Fed is actually leaning toward a more expansionary program. There seems to be absolutely no fear of future inflation, so look for rates to remain low for some time to come. This will continue to keep downward pressure on the US$.

I wrote yesterday how the US is following the BOE lead when it comes to 'quantitative easing'. These programs had led to a drop in the value of both the UK Pound Sterling and the US$. But overnight, the pound sterling stormed back up vs. the US$ as the Financial Times cited the BOE Markets Director as saying policy makers would be more likely to pause asset purchases, giving themselves the option of 'doing more later', rather than stopping them. A report yesterday showed UK unemployment rose less than forecast last month causing some of those shorting the pound to reverse course. I have to believe a lot of the Pounds movement is simply profit taking after the sterling lost 3.5% v.s the US$ in the past month. I still believe the pound sterling will have a tough going as long as they continue with their QE programs.

I will end today's Pfennig with a prediction from Goldman Sachs. You may have seen where Goldman reported another quarterly profit of $3.2 billion yesterday. The profit is really no surprise when understand just how far 'inside' Goldman is with the administration. Given their position, I always like to read what Goldman is predicting for the currencies. Their latest report said the dollar is likely to extend drops against the euro and commodity-backed currencies over the coming six months (sound familiar?). The euro is now predicted to reach $1.55, revising previous forecasts of $1.45. "It now looks as though the dollar trough will be slightly deeper," Goldman analysts said.

Currencies today 10/15/09: A$ .9171, kiwi .7436, C$ .9694, euro 1.4883, sterling 1.6252, Swiss .9836, rand 7.2675, krone 5.5710, SEK 6.9361, forint 179.27, zloty 2.820, koruna 17.3585, RUB 29.36, yen 90.19, sing 1.3902, HKD 7.75, INR 46.16, China 6.8284, pesos 13.0673, BRL 1.7009, dollar index 75.38, Oil $75.04, 10-year 3.44%, Silver $17.48, and Gold... $1,050.95

That's it for today... Had an absolutely crazy day on the phones yesterday, as it seems everyone wants to purchase currencies and metals now that the Dow went over 10,000. Chuck, Michelle, Frank, and Jane Dulle will be heading back from Atlanta today after what was hopefully a successful planning meeting. My son's football game was cancelled last night due to a lack of players on both teams; it seems the flu has hit St. Louis schools pretty hard. We all got flu shots yesterday (hopefully in time), and the wellness fair continues today with visits from a massage therapist and nutritionist. I just hope the phones ease up a bit to enable us to take advantage of the free massages! Hope everyone has a Thunderin Thursday.

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

Central Banks Diversify Out Of The Dollar!

Chuck Butler — Mon, 12 Oct 2009 14:42:45 GMT

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In This Issue..

* Currencies rally VS the dollar...
* Reasons why the U.S. wants a cheaper dollar...
* Interest rate differentials...
* Trade Deficit narrows...

And Now... Today's Pfennig!

Central Banks Diversify Out Of The Dollar!

Good day... And a Marvelous Monday to you! An absolutely awful weekend for our professional sports teams, as the Cardinals, Blues, and Rams all lost! The Cardinals were swept out of the playoffs! UGH! Talk about a downer for yours truly... I sat there, at the game, with my little buddy, and beautiful bride, and saw the writing on the wall early in the game... No life from those redbirds... And so, another baseball season comes to an end here in St. Louis...

Friday morning, after drying out from Thursday nights drenching, no wait, super soaking at Faurot Field in Columbia, I sat down to breakfast, and read the Pfennig... I noticed that Chris was on a roll about Geithner... I thought that it was a good finish to the things I said about him the previous day! Chris will have the conn on the Pfennig Tuesday through Friday this week...

OK... 3rd paragraph in before I get to the currencies, but Hey! Good things come to those who wait! HA! Well... The non-dollar currencies are back on the rally tracks VS the dollar this morning, after giving back some ground on Friday. The story that I brought to you on Thursday morning, about Central Banks diversifying, is really going around the block this morning... In case you forgot, the gist of the story was that Central Banks added to their currency reserves in the last quarter, and that they had put 63% of that new cash into euros and yen... For those of you keeping score at home, that's more than $80 Billion in one quarter!

No wonder, the euro and yen were taking liberties with the dollar in April, May and June... Of course, these two have continued taking liberties with the dollar in July, August and September, but we won't get the Currency Reserves data for another 3 months! But we all know what happened, and what has happened since March 1st of this year... Round and round we go, where we stop nobody knows!

Well... That is short-term wise, which over the years short term prognostications for currencies have proven to be very difficult to get right... Long term? Well, currencies for the most part make long sweeping moves, not one-way streets mind you, but long sweeping moves... And this long sweeping move by the dollar downward, is being aided by the U.S. Gov't! That's right, the U.S. Gov't, has shown a willingness to allow the dollar to weaken... Oh, yes, they carry on about a "strong dollar policy" and all that, but they don't back it up one iota... And, when we get down and dirty regarding U.S. dollar policy, it is my opinion, that the Gov't sees no way out... That they only chance they have to pay back debts, is with a cheaper dollar... That's it in a nutshell... The Gov't wants, and needs a cheaper dollar...

However, they don't want it overnight! They don't need it overnight! The debts aren't due right now... So, that's why you see them spit out stupid statements about a strong dollar policy, they all know that that's not what they really want, but they can't be seen as no willing to defend the dollar...

OK... I've given you Chuck speak... This is what I tell audiences all over North America that care to listen to me... It's all there in front of you... The deficit spending, the quantitative easing, the bailouts, the stimulus, the zero rate interest policy, the corporate scandals that go unchecked leaving foreign investors weary about their investments... And on and on and on... And then there's this little ditty, that should give you all the information you need to make the decision to diversify a portion of your investment portfolio out of the dollar... THE U.S. WANTS CHINA TO ALLOW THEIR CURRENCY TO GAIN VS THE DOLLAR!

When lawmakers, Central Bankers, U.S. Treasury Secretaries all go the China year after year, and beg, and plead, and whine, to the Chinese authorities that the renminbi needs to get stronger VS the dollar, what's a currency investors supposed to think? That's right, that the U.S. wants a weaker dollar, period.

Oh! And one more thing that's really scaring the bejeebers out of foreign investors including Central Banks, is the fact that the U.S. has this enormous national debt, and doesn't seem to care... U.S. lawmakers are oblivious to the deficit... In fact, they continue to look for new ways to deficit spend! UGH! This stuff just gets me going folks... If you could be here to see me pounding on the keys, shaking my head, and yelling at the wall, you might think I had gone crazy... Well, not as crazy as spending another, whatever, when we don't have it!

Last week, we had the former Fed Chairman, and the man I believe is at the roots of this whole financial mess we're in, Big Al Greenspan, talking about the economy, and the growth prospects, and what have you... I have no idea why anyone would listen to this guy... If you read Bill Fleckenstein's book on the Fed (Ignorance at the Federal Reserve... Greenspan's Bubbles) you'll have a Big Al's track record of wrong decisions, that go back to his days before becoming a Fed Head... Well... Ty sent me a note from James Kunstler's newsletter, where he jumped all over the Greenspan comments last week... This is a snippet of what James Kunstler had to say...

"Greenspan's greatest success may be to drive economics into such disrepute that it will be cut loose from the universities and only be taught by mail order or internet subscription from the same outfits that offer PhD's in astrology."

Now that's funny!

Alright then... Let's take a look around the horn, and see what's moving this morning... As I told you, the non-dollar currencies were back on the rally tracks VS the dollar this morning, and so, the Big Dog, euro, is moving higher, along with the Aussie dollar, Canadian dollar / loonie, and Norwegian krone...

Let's take the euro... Last week, The European Central Bank (ECB) met, and left rates unchanged, as suspected they would, and the risks were with ECB President, Trichet, after the meeting... When asked about the euro's strength, he simply repeated his statement from the previous meeting... Something about, the need for U.S. dollar strength... But nothing new, here folks, nothing to see, move along... I think his non-new statement was a indication that he's not willing to fight for dollar strength any more than he has, if the U.S. is not going to step in and join the fight! Memo to Trichet... You had better figure out who's going to be in that foxhole with you before you jump in! Bernanke? Geithner? YIKES!

The Aussie dollar (A$) continues to push the envelope of strength that a currency can gain by raising interest rates 25 BPS! I knew in my heart of hearts that a rate hike would underpin the A$, but didn't think it would be as beneficial as it has been... But then, maybe the thought that I shared with you last week, is gaining some credence... That thought? OH! I guess it would help if I reminded you what it was, eh? The thought, was that with the latest employment report showing such strength, that the Reserve Bank of Australia (RBA) would be back in November for another rate hike of 25 BPS!

The interest rate differentials just keep widening to the dollar, folks... And while, as I always say, interest rate differentials are the "end all" of currency valuation, it does go a long way toward attracting investment, and attracting investment goes a long way toward currency valuation! You know, the hip bone is connected to the leg bone, the leg bone is connected to the knee bone, etc., etc...

And while Canada certainly doesn't have a rate differential to the dollar, it does have the commodities, that are associated with energy... Oil, natural gas, and coal... If the prices of those commodities begin to rise it won't be long before we see the Bank of Canada (BOC) hike rates, whether the economy is ready for the rate hikes or not! And that thought has lit a fire under the loonie recently...

And finally, the Norwegian krone... Norway's Central Bank, The Norges Bank, resisted cutting rates to the bone, and while they never did get as low as the U.S. and Canada, they did get pretty low... But, remain higher than those in the U.S. and as I've said over and over again in the past couple of months, the Norges Bank will raise rates in 2009, so... That means the rate differential will widen.. And again, being forward looking, the currency markets' participants have taken the krone higher VS the dollar.

On the data front... Friday, the Trade Deficit narrowed for the first time in a couple of months... The thought is that the cheaper dollar during August, was the main reason for exports outpacing imports... While, a cheaper dollar won't cure the Trade Deficit completely, it certainly can put a major dent into it... So, here's another reason the U.S. Gov't would love to see a weaker dollar! Talk about "killing the golden goose"! If the U.S. Gov't were to talk up the dollar, it could very well, kill that golden exports goose!

We're still waiting for the Budget Statement to print folks... I'm always of the thought that the longer you have to wait for a piece of data to print, the more it's getting cooked, massaged, "adjusted"...

Wednesday this week, we'll see Retail Sales for September... The Butler Household Index (BHI) tells me that Retail Sales will be OK... Not negative, but OK... Not strong, but OK... Shoot Rudy, I even spent some money in September! But, my buying is small potatoes in the BHI!

Chris will bring you the results of the Retail Sales data along with the other data due this week...

So, to recap... The currencies are stronger this morning, with the euro leading the charge VS the dollar. The Central Banks diversification story that I told you about last Thursday, is really getting around the block, and causing dollar weakness. We went over the reasons for this diversification, and the willingness of the U.S. to just ignore their deficit, and spend more! Aussie, Norway, Canada's respective currencies join the euro with gains of their own VS the dollar... And... How the U.S. doesn't want to kill the golden goose... You'll have to read the entire report to get the details!

Currencies today 10/12/09: .9060, kiwi .7345, C$ .9680, euro 1.4760, sterling 1.58, Swiss .9725, rand 7.4150, krone 5.6390, SEK 6.96, forint 182.50, zloty 2.88, koruna 17.49, RUB 29.52, yen 90.10, sing 1.3970, HKD 7.75, INR 46.48, China 6.8228, pesos 13.21, BRL 1.74, dollar index 76.22, Oil $72.97, 10-year 3.38%, Silver $17.89, and Gold... $1,053.92

That's it for today... Happy Columbus Day! Did you know that bricks and mortar Banks are closed today, along with Federal offices, including the Post Office? Then why am I here? Oh! That's right, we're an internet/ direct bank! It will be a short day for us though, as we'll get everyone out of here early afternoon, hopefully. I'm headed to corporate meetings this week... I'm like the bull in the China Shop when it comes to being "corporate"! It rained so much here last week... The rivers and creeks were all over their banks... But the weekend was beautiful fall weather, ruined just a wee bit by the play of our teams! But, I won't go into that any more! It rained so much that my little buddy, Alex's, football game was postponed, now this weekend he has a game on Saturday and Sunday! OK... Onto my "other job"... HA! I hope your Columbus Day Monday is Marvelous!

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

A Jobs Jamboree for Friday 10/02/2009!

Chuck Butler — Fri, 02 Oct 2009 14:14:00 GMT

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In This Issue..

* The dollar remains well bid...
* G-7 to hand currencies off to G-20?
* Car Sales collapse...
* Auditing the Lehman cash movements...

And Now... Today's Pfennig!

A Jobs Jamboree Friday!

Good day... And a Happy Friday to one and all! Yesterday, I welcomed you to October. I had been prepared to tell you about a famous radio station here in St. Louis, that has long called October... Rocktober... But forgot, as usual! But anyway... It's the first Fantastico Friday of Rocktober!

Today is a Jobs Jamboree Friday too! And... I'm not getting a good feeling about today's labor report at the Jobs Jamboree. The forecast is for jobs losses to fall from -216,000 to -175,000, but the unemployment rate to tick up to 9.8% from 9.7%... I got the feeling, baby, baby, I got the feeling... Oops, a little James Brown on Fantastico Friday never hurts! But what I was saying was I'm getting the feeling that there are risks to this forecast... And that the job losses could come in higher, which would really be a BAD thing for the recovery flag wavers and risk takers, I'm sorry to say...

You see, the recovery flag wavers and risk takers are wishing, and hoping, and thinking and praying that the data in the U.S. continues to show some sign of life. Any signs that the U.S. economy could be slipping backwards, would deep six stocks for sure, and if last year's trading tells us anything, it would have an adverse affect on Commodities and Currencies too!

So... This is a BIGGIE, today, folks... So strap yourself in, and make sure you keep your arms and legs inside at all times during the ride!

Yesterday's currency trading left a lot to be desired... There was little movement from the overnight sessions which tomahawked the non-dollar currencies. That's a good thing... But the downside risk today is just too much for me right now... Maybe after 7:30 CT I'll be able to breathe again, for that's when the Jobs Jamboree prints... Again, Japanese yen enjoys the sun from both sides of their house... When the dollar is weak, yen rallies with the other non-dollar currencies... When the dollar is strong, yen rallies alongside the dollar! It's good to be the yen! (that is before the Ministry of Finance in Japan begins to intervene!)

Hey! Remember when I bashed the Cars for Clunkers scheme, I mean program, and exposed it for what it was, and what it would do to future sales of automobiles? Well, as they say... The proof is in the pudding!

Yesterday, it was reported that General Motors had posted a 45% drop in September U.S. light-vehicle sales, while Chrysler's sales fell 42%. Ford saw a much more modest drop of 5.1%. Among Japanese auto makers, Toyota said its September U.S. sales declined 16% from a year earlier, while Nissan saw its results fall 7% and Honda said its sales slid 23%. The auto industry was hurt by the expiration of the U.S. government's "cash-for-clunkers" rebate program.

Yes... I told you this would happen... I also think that any Gov't program to prop up the economy is just falling into the ghost of Japan's hands... I've explained this before, about how when Japan experienced a HUGE market correction after their go-go 80's, they panicked and began throwing money at the problem, instead of just letting the markets run their course... The Japanese introduced stimulus package after stimulus package, and Gov't program after Gov't program, like Quantitative Easing... And look how well that's worked out for them!

So the ghost of Japanese recoveries that never panned out, is haunting the U.S. Gov't now!

Today is also the start of a G-7 meeting in Istanbul... Istanbul was once Constantinople! Or so the song goes... Any way... The rumors coming out of the pre-meeting stuff is that G-7 will no longer make a statement or issue a communiqué' regarding currencies, as they now feel that the only group that should have that responsibility is the G-20, which last week took the world economies watchdog title from G-8...

Currency traders have long used these G-7 communiqué statements as a tool that indicates direction for currencies... And while that has actually come to fruition a handful of times over the years, for the most part, G-7 was nothing but a boondoggle!

One thing that's out there that you won't see a lot of people talking about is the vote going on in Ireland today, on the Lisbon Treaty, which the Irish people voted down last year... This Lisbon Treaty changes the way the European Union works, and would amend the Maastricht Treaty... It was intended that all member European Union states would ratify this before now... So, this vote is like the Sword of Damocles hanging over the euro for Monday morning...

You see, the vote will be taken today, counted tomorrow, and announced Sunday, which will cause a knee-jerk reaction to the euro trading on Monday... Right now, the polls show the Treaty will be accepted this time by the Irish. If passed, it goes to Poland and the Czech Republic, and if they vote yes then it would lead to ratification, which would be a good thing for the euro... A no vote would be bad thing, just like it was in June of 2008, when Ireland voted no the first time around.

Yesterday, the IMF issued a report on Currency Composition of Global FX Reserves... And this is quite telling I believe, for the report showed a continued diversification away from the dollar, in the 2nd QTR of this year... I had to laugh last year, when I was on the FXU Currency Tours, and one of the guys there said that the fall of currency reserves allocation of dollars from over 80% to 64%, was nothing but currency appreciation by the euro... I would point to the these IMF reports, when I talked so that I didn't make a big thing out of it...

Did you see the story in the Wall Street Journal (WSJ) regarding Lehman Brothers? This story has conspiracy stamped all over it, so you know me, I was all over this story like a cheap suit! Here's the gist of the story from the WSJ... "An examiner is looking into how the Federal Reserve was promptly repaid billions of dollars in cash and securities it lent to Lehman Brothers before the bank filed for bankruptcy, while other creditors are still owed money. The court appointed Anton Valukas, chairman of Jenner & Block and a former U.S. attorney, to explore whether the Fed received improper preferential treatment."

Chuck again... Now, you, me and the lamppost all know what went on here, just by that description in the WSJ... But, we'll wait for the report, I guess...

The U.S. stocks really got taken to the woodshed at the close yesterday, and the futures in the overnight markets are weak... So... Guess where the money goes when they sell stocks? That's right, U.S. Treasuries... So, just about the time you think that the mom and pop's of the world that went to Treasuries last year in the so-called Flight to Safety, had taken on enough losses, and were going to get out... Here comes the stock correction that I've been talking about... Or maybe not... Maybe this is just a couple of days of selling... Or maybe it is the correction...

So, if dollars are flowing into Treasuries, the yields of those Treasuries are going down once again... UGH! This just doesn't make any sense to me! Didn't these people that went to the so-called Safety of Treasuries last year, but lost money, learn anything? Or did enough time pass and they've "forgotten the pain"?

Oh Heck! This just feeds more air into the Treasury Bubble... Which means that it grows larger and larger, and also means that when it does POP, the losses will be severe and all across the board... I mean, isn't that what we've learned about what happens when a bubble POPS in the past?

Yesterday, the data cupboard was busy... We had the Weekly Initial Jobless Claims post a higher number than was expected, coming at 551,000, VS last week's 534,000... I always love it when the Jobs Jamboree follows a Weekly Initial Jobless Claims repot... Because... The Weekly report shows that, in this case, that 551,000 jobs were potentially lost last week, and today's monthly report by the BLS will show something far less...

We also saw that the U.S. Consumer continues to spend more than they make, as Personal Spending was up 1.3%, while Personal Income was only up .2%...

And then finally we saw the U.S. ISM Index (manufacturing) come in weaker than expected, but remain above 50, at 52.6... That's a weaker number than the August figure which was 52.9... And I would think that someone would have noticed this... But we had the TV on all day, and I had it one when I got home, and never saw mention of this anywhere!

And then there was this... Colleague, Aaron Stevenson, called me yesterday morning, trying to beat the deadline for stuff to add to the Pfennig... He missed... So I have it for today... Remember yesterday morning, when I announced that BOA CEO Ken Lewis was retiring, and that I thought that to be strange?

Well, Aaron was all over this, telling me that he worked for BOA for a number of years, and sat in on meetings with Ken Lewis, and that Ken Lewis was not the kind of person to take "early retirement"... In fact, Aaron says, "that 4 months ago, I heard an interview with Ken Lewis, and he said I'm 62, I'm not ready to retire." Aaron said that he was a "no surrender, no quit, kind of guy." Hmmm... I wonder what changed in 4 months? Well, Aaron thinks, and I agree, that he was forced out by the Feds, for speaking his mind on the BOA / Merrill Lynch deal that was brokered by the Fed and Treasury...

OK... To recap... Today is a Jobs Jamboree Friday, and I'm getting the feeling that it will be disappointing VS the forecast of 175,000 job losses. G-7 meets this weekend, and there might be a change in the what they say after each meeting. The ghost of Japanese recoveries, is at work in the U.S. Ireland votes on the Lisbon Treaty today, and the dollar remains well bid VS the non-dollar currencies... Except yen!

And this... On Monday next week, I will be doing an educational presentation for the folks at DTI... You can find out more here: http://www.dtitrader.com/trading_education_MMM_everbank.htm

Currencies today 10/2/09: .8630, kiwi .7130, C$ .9175, euro 1.4550, sterling 1.5850, Swiss .9620, rand 7.72, krone 5.8250, SEK 7.0420, forint 186.20, zloty 2.9185, koruna 17.4750, RUB 30.20, yen 89.30, sing 1.4170, HKD 7.75, INR 47.75, China 6.8265, pesos 13.77, BRL 1.7860, dollar index 77.20, Oil $69.69, 10-year 3.15%, Silver $16.25, and Gold... $996.75

That's it for today... A Big Day for investments, so hang on to your hat! That was a much better display of baseball yesterday by the Cardinals. They have 3 games left in the season, to get on a roll before the playoffs! I had a brain drain the other day, when I gave you the link to the Sovereign Society for the Offshore Academy Conference... I'm sure once you all figured that out, you just went to Google and got to the site! UGH! OK, my little buddy, Alex, plays football tomorrow morning against another top rival... He told me it's payback time, as his team lost to the rival last year... I told him, talk is cheap... You have to back it up on the field. OK... Enough! It's a Fantastico Friday, and we're in Rocktober! Time to get working on making this Friday, Fantastico!

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

G-7 To Discuss Currencies?

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

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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

Whiplash Wednesday!

Chuck Butler — Wed, 30 Sep 2009 14:24:25 GMT

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

* Currencies rebound VS the dollar...
* Aussie and kiwi lead the currencies higher...
* Data and Central Bank speeches today...
* Gold rebounds back to $1,000!

And Now... Today's Pfennig!

Whiplash Wednesday!

Good day... And a Wonderful Wednesday to you... Instead of a "turn around Tuesday", we're seeing a whiplash Wednesday! And for once in a month of Sundays, the Big Dog, euro didn't lead the other little dogs (currencies) off the porch to chase the dollar down the street!

No... This time it was the currencies of Australia and New Zealand that led the charge VS the dollar... The euro has taken up the charge since opening the doors to a new day of trading in Europe, so... It looks like it's a "take the dollar to the woodshed day"...

OK... Let's start first with the goings on yesterday and then build to a big crescendo! Yeah, right, like I can do that! HA! Any way...

As a reminder, yesterday we had the Russian rate cut, and the Japanese Fin Min giving the dollar a boost... We then saw some data that at first glance seemed to be good, but a quick look under the hood told the markets otherwise... Home Prices fell in July VS June, but are still down 13.3% VS last year... And Consumer Confidence surprised everyone by falling this month. It was expected to gain. So... As the day went on, it just didn't look like the U.S. data would be strong enough to cause dollar selling...

But then, overnight, we had a strong Retail Sales report in Australia, and a strong Business Confidence report in New Zealand, and the "global recovery thoughts" were back on! Game on, as Wayne and Garth would say! Yesterday morning, the Russian rate cut said "step back on the thoughts for a global recovery"... And then overnight, the reports from Australia and New Zealand said, "step forward on the thoughts for a global recovery"!

And so it is... We end the month, and quarter with the dollar on the losing end VS many currencies... This marks the second consecutive quarter of dollar losses... Does that sound like a trend to anyone? To me, I do not consider this to be a "new trend", but instead, simply a return to the underlying weak dollar trend, that went dormant for 6 months while the world sorted out the financial meltdown.

This is where, when I go out on the road and speak to people, I say that trends are not One Way Streets... There can be volatility within the trend. And thus this explains the 6 months from August of 2008 trough Feb of 2009... For most people that got into diversification using currencies and precious metals, they saw it for what it was, and simply battened down the hatches, and looked for deep discounts to add to their diversification... For some people, who got in for all the wrong reasons, and never thought about diversification, then they panicked and sold out at losses... For those that battened down the hatches, they were rewarded with this latest 6-month move... And that's all I'm going to say about that!

The boys and girls over at the IMF are trying really hard to keep the currencies in check and not let this become another rout on the dollar. The IMF issued a statement saying that there are still risks in the global recovery... Unfortunately, for the IMF, nobody is listening to them, judging from the dollar selling I've seen since I came in this morning!

Hey! I don't give the French much credit for anything... But I did see last night that they are cutting taxes on business! WOW! What a novel idea! And one that I think would behoove the current U.S. administration to follow... This is really a great way to get real traction in the economy... Give Businesses more room to breathe, and they will hire people, expand capital purchases, etc. Good show!

Yesterday, I was interviewed by Reuters for a story on dollar / yen... I was then quoted in a story that ran later in the day. I had said when I hung up the phone, that it would have been easier if the writer had just read the Pfennig that day! All I did was tell them what I had already told you in the Pfennig much earlier in the day! But... It was great to see my name in a national story anyway, eh?

OK... Getting back to Aussie and Kiwi... The Aussie Retail Sales report for August climbed .9%, erasing the -.9% loss in July! This report plays well with the recovery story and the thoughts that the Reserve Bank of Australia (RBA) will raise rates before year-end...

New Zealand saw their Employment Confidence Index climb to 103 last quarter, from 96.1, the previous 3 months... The report showed that 32.2% of companies surveyed, expected sales and profits to rise over the next 12 months... I know that doesn't sound like a resounding vote of confidence, but the previous number was 26%... So that's quite a jump!

Of these two, I expect The RBA to lead with the rate hikes, while the Reserve Bank of New Zealand (RBNZ) will drag its feet... They don't need the kiwi to start rising aggressively, as exporters in New Zealand are having a tough time now, with kiwi as strong as it is now!

Whenever the Commodity Currencies of Australia and New Zealand have good performances VS the dollar, the other Commodity Currencies get to play along... So that means the performances VS the dollar of Canada, South Africa, Norway, and Brazil have been good.

There is some risk in the currency markets today though... First, we have some data due, and second we have Fed Vice Chairman Donald Kohn, and European Central Bank (ECB) President, Trichet, due to speak today... Could this be more Central Bank parlance for propping up the dollar, that is seen as being on the skids again this morning? I think it just might... Especially, if Kohn doesn't mention that the Fed is going to keep rates at near zero for some time to come. If we don't hear that... Then I think the "con" is on to prop up the dollar...

But don't let that bother you too much... These guys can only affect the currencies for short periods of time with their verbal jawboning... After that, they need to walk the walk with coordinated intervention, if they're going to talk the talk!

Speaking of the data... We'll see the color of the 2nd QTR GDP, and the wild and wacky ADP Employment Change reports... The Chicago PMI (manufacturing for that region) will also show its colors... All of these are expected to show improvement in the U.S. economy... And, if the trading pattern remains in place... Any signs of improvement in the U.S. economy normally results in more dollar weakness!

So... In the end, the data inducing dollar weakness, might be offset by the Central Bank jawboning... In which case, we'll spend the day in a tight trading range for sure! But what happens if Kohn and Trichet, don't support the dollar in their speeches? Then it will all be up to the data!

This morning, Canada will print their latest GDP report... The forecasts are for a very weak report... I'm going to go out on a limb, yes it will be a big fat one to support me, and say that I expect Canada's GDP to surprise on the up-side... If so, the loonie would look to add to gains it already has booked this morning VS the dollar.

With the Commodity Currencies on the rise this morning, Gold has returned to $1,000! Gold remained below $1,000 for about 5 days, in which there were ample opportunities to buy the dips below $1,000...

And... As we close out the month and quarter, the Russian rate cut is all but forgotten about, which is exactly how I told you it would play out... The global recovery theme is back with a vengeance!

OK... I'm going to step up on the soap box now, so if you do not care to listen to another Chuck soap box rant, then skip ahead two paragraphs!

You know... We wouldn't be having these discussions about dollar weakness every day, if the Budget Deficits weren't piling up on top of other deficits... Hey! Remember when I used to take the previous administration to the woodshed for piling up $450 Billion dollar Budget Deficits? Well, that certainly seems to be but a drop in the bucket of the nearly $2 Trillion Budget Deficit that will post this year, and the forecast for $9 Trillion more in the next 9 years...

That all leads me to this... We need to express to our representatives in Washington D.C. that is very important, and the they should focus their attention on this first and foremost! I doubt that we'll ever get there again, but, wouldn't that be nice for our grand kids? I just don't understand why we go around spending money on this that and the other things, and don't ever stop to think about the immoral things we are doing to our future generations... I guess I mean to say that the "we" I'm talking about is not you and me! It's the knuckleheads in D.C... That is, other than Ron Paul, who seems to be the only person in D.C. that understands all this deficit spending...

Ok, down from the soap box now... You're free to move about the Pfennig!

To recap... Aussie and kiwi lead the currencies higher VS the dollar overnight, after each respective country printed a strong economic report, thus putting the global recovery thoughts back on track. We have data, and Central Bank speeches to navigate through today. The non-dollar currencies close a second consecutive quarter of gains VS the dollar, and Gold has returned to $1,000....

Currencies today 9/30/09: A$ .8835, kiwi .7220, C$ .9330, euro 1.4665, sterling 1.61, Swiss .9725, rand 7.4240, krone 5.7675, SEK 6.96, forint 183.90, zloty 2.88, koruna 17.1570, RUB 30, yen 89.50, sing 1.41, HKD 7.75, INR 48.11, China 6.8264, pesos 13.48, BRL 1.7870, dollar index 76.56, Oil $67.78, 10-year 3.31%, Silver $16.48, and Gold... $1,003.45

That's it for today... I had to take my car in for service yesterday, and they gave me a Grand Marquis to drive... Because of my mini-handicap, I have a difficult time getting in and out of a car like that... But what was funny was when my little buddy Alex came home and told me that it looked like a car that is given to a 16 year old by their grandfather to drive... HA! Hey! It's transportation! My dad drove a Crown Victoria, that's much like this car... As soon as I climbed in the car, I thought about him, and that car... That Tsunami that hit American Samoa sure looked deadly... Our thoughts should be with those people today... OK... Memo to Cardinals... Just because you clinched your playoff spot early doesn't give you the right to forget how to play baseball! Get back to work! And with that, I bid you farewell for today... Be sure to make today a Wonderful Wednesday!

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

Catching Up With Richard Duncan...

Chuck Butler — Wed, 23 Sep 2009 14:35:09 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..

* Non-dollar currencies give back very little...
* The Unemployed are remaining unemployed...
* FOMC puts away the board games today...
* China invokes a "Public Morals" defense...

And Now... Today's Pfennig!

Catching Up With Richard Duncan...

Good day... And a Wonderful Wednesday to you! Well, the Fed Head put away the board games today, and make an announcement this afternoon... Yawn... Norway's Norges Bank will also make an announcement with theirs coming this morning. I still contend that the Norges Bank will keep rates unchanged and give a hint as to when their rate hike cycle will begin. If that were to happen as I think, then it would be very bullish for the krone...

Well! The non-dollar currencies held ground gained yesterday, giving back, oh-so-little to the profit taking. The euro didn't hold 1.48, but it's so close it could spit in the 1.48's back yard! The negativity toward the dollar, and all that goes with it, like Huge Deficit Spending, low yields, economic depression, inflation fears, and more, just keeps mounting... All these pundits with their "discovery" that the dollar has bad fundamentals, just make me laugh. Welcome to my world! In this world, we don't wear rose colored glasses... We call dolts for what they are... And we fully understand the bad affects of building deficits...

HEY! One of the first books I ever read about the dollar, was written in 1972, by a guy named Gerald Krefetz, called, "The Dying Dollar"... But, the one that really pushed things to the forefront in 2003 was Richard Duncan's "The Dollar Crisis"... For the longest time, when someone would ask me what book they should read to get started, I would give them Richard Duncan's "The Dollar Crisis"...

The Dollar Crisis was followed by two books by Addison Wiggin and Bill Bonner, "Financial Reckoning Day" and "Empire of Debt"... Addison also wrote "The Demise of Dollar", and then Craig Karmin wrote, "The Biography of the Dollar", in which he writes one chapter around my story... All of these have done a wonderful job of explaining things to people that normally wouldn't understand all that's going on, financially...

The reason I brought this up is that Richard Duncan was in the news last night, as he gave an interview in Hong Kong yesterday... Let's listen in to Richard Duncan...

"The bad news is at the end of a 10-year period we're still not going to have fixed the problem. Eventually it will lead to high rates of inflation well down the line and really destabilize things to the point where they may be irreparable damage. A kind of "Fall of Rome" scenario."

Of course Mr. Duncan was talking about the U.S. Budget Deficits, which he feels will continue to pile up in the next decade, eventually reaching an unsustainable level that may result in an economic collapse...

I think it would behoove us to listen to Richard Duncan, for in his book, "The Dollar Crisis" published in 2003, he told us that persistent Current Account Deficits by the U.S. were creating an unsustainable boom in global credit that was destined to break down, resulting in a worldwide recession... Hmmm... Does he have everyone's attention now? Good!

Ok... Enough of the "book tours"! I was listening to the Evening News while icing my knee last night, and something that Brian Williams said struck me as strange... He said..."The poll of more than 1,000 adults, taken within the past week, shows growing optimism that the economy has begun to turn around." Hmmm... I guess they didn't ask one of the 7.4 Million people that have lost their jobs!

I've got two things to talk about here with this... 1. is that people would be listening to Big Ben Bernanke which is where I believe this "optimism on the economy" is coming from... I have a YouTube video at home, that you can find, I'm sure, that's titled "Bernanke" that has shot after shot of him saying something that was so completely wrong, that you have to wonder how the heck he kept his job! Any way... I can't get to it here at work, you know they would never want me "wasting my time looking videos of the Fed Chairman!"

And then 2. is the question that I have regarding those people surveyed... How could they have optimism when 7.4 million Americans have lost their jobs during this depression (what they call a recession)... But that wouldn't be bad if these 7.4 million Americans turned around and found jobs right away, eh? Well... Unfortunately... The average duration of unemployment at 25 weeks is now the longest since the Department of Labor started tracking the data in 1948. By the end of August, nearly five million people had been unemployed for longer than six months...

Whew! Now that was a depressing piece... Hmmm... What can I talk about that brings the smiles back on everyone's faces? I've got it! Gold!

I was telling Jen yesterday that the commercials for Gold on TV are really starting to add up... You've got Gordon Liddy, Jay Johnson, and others telling you how Gold is a store of wealth, and inflation fighter, and more dependable than fiat currencies... And of course you should buy Gold where "they buy their Gold"! I really think we should have our own Gold commercial, and say, "yes, you can buy it from those other guys, but why pay more for your Gold?"! HA! Now that would get 'em!

But seriously... There is a guy, well known guy, out there right now, writing about how the price of Gold is about to collapse... So... At least you know that I give you both sides of the story, eh? I don't agree with this side of the story, but there it is for you!

OK, now we're back on the "happy tracks"! So, let's head to the South Pacific! New Zealand pushed out of their recession in the 2nd QTR, after seeing its economy contract for five consecutive quarters... Now, don't get too lathered up over this initial news... The New Zealand GDP only increased slightly less than 0.1%. But! That technically ends the nation's worst economic downturn in three decades.

This was very bullish for kiwi, as now the markets are beginning to talk about a rate hike in New Zealand... I would say that's a little premature, wouldn't you? I mean, they have barely climbed out of the red, and the talk turns to a rate hike? Yes, definitely... That's premature... But! The talk has kiwi on the rise... Let's hope that traders don't get disappointed too quickly!

And then back in the Eurozone... Germany's Manufacturing PMI came in less than forecast, but! Hit a 13-month high of 49.6! Still not above 50, but the trend is Germany's friend right now in the manufacturing sector! Tomorrow, we'll see the think tank IFO's Business Climate, and I truly believe this will be strong, and these two together, strongly suggest that the euro is trading at a proper level!

I'm still waiting for news from the Norges Bank...

I read some real disheartening news last night regarding foreclosures in the U.S. It seems that they are really backlogged... As of July, mortgage companies had not begun the foreclosure process on 1.2 million loans, according to LPS Applied Analytics. Also, 1.5 million seriously delinquent loans were still caught up in the foreclosure process... Hmmm... You don't think the processing of these foreclosures are being held back by someone do you? I mean, what better way to get people "feeling good again" than to not have them hear "bad news"...

OK, that's just the conspiracy blood in me... Sorry...

Things have been quiet in Japan since the election... And the Japanese yen has range traded... Waiting for a direction from the new Gov't... What will they do? Will they promote growth? Will they continue to authorize intervention to keep the yen weak? Lots of questions here in Japan...

I had a reader send a note that made me chuckle... He asked if the Chinese were going to sell Treasuries to buy the IMF's Gold... He called it... "junk for Gold"... HAHAHAHAHAHA!

Speaking of China... Have you noticed that the renminbi has ever-so-slightly gotten stronger VS the dollar? This is micro-moves... But, "moves" nonetheless! And not weaker!

Further with China... Did you see where China was arguing their position in the World Trade Organization (WTO) regarding not allowing Hollywood Movies, and other Western media into their country? The Chinese invoked a defense of "Public Morals"... We'll have to keep an eye on that to see how that turns out!

I'll come back to North America, before I head to the recap and Big Finish...

Yesterday, I told you that Canadian Retail Sales was the only "real" data to print that day... Well, I might as well, tell you what printed, eh? Canadian Retail Sales backed off the consecutive gains of 1.1% in May and June, and posted a negative -.6% in July... This won't do anything to get the Bank of Canada off their duffs... However, one would have thought that data like this would hurt the currency, in this case the loonie... And it did... But only for a short time... The loonie is back on the rally tracks this morning!

OK... So... The FOMC ends today, we're still waiting for the Norges Bank's announcement, and the dollar is holding on for dear life! The negativity toward the dollar has returned, and Richard Duncan gives us his latest forecast...

Currencies today 9/23/09: A$ .8740, kiwi .7250, C$ .9365, euro 1.4780, sterling 1.6440, Swiss .9775, rand 6.8250, krone 5.8225, SEK 6.83, forint 183.50, zloty 2.8275, koruna 17, RUB 30, yen 91.30, sing 1.4125, HKD 7.7505, INR 48.02, China 6.8261, pesos 13.35, BRL 1.7925, dollar index 76.14, Oil $71.15, 10-year 3.47%, Silver $17.13, and Gold... $1,014.45

That's it for today... Cardinals' magic number is now 2... This will be their 7th trip to the playoffs in since the 2000 season... That is if they win 2 more games! That's a nice run! I forgot to mention above that Addison Wiggin also wrote an update to the Demise of the Dollar book, for which I wrote the foreword! One of these days, when I retire, maybe I'll sit down and write a book.... And then, maybe not! Probably not! We've had a visitor this week to the trading desk, Megan Davis, is here from our Islandia office... We've been on our best behavior for her too! Our little Christine surprised everyone yesterday, and brought in coffee drinks for the coffee drinkers... She brought me a decaf, as I really try to not partake in caffeine drinks any longer, except... When I'm camping! OK... Enough of that, let's get to work, and make this a Wonderful Wednesday!

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

The Dollar Gets Ambushed!

Chuck Butler — Tue, 22 Sep 2009 14:43:15 GMT

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In This Issue..

* Non-dollar currencies soar!
* Weber gives the green light...
* Is the Fed buying more Treasuries?
* China considering IMF's Gold!

And Now... Today's Pfennig!

The Dollar Gets Ambushed!

Good day... And a Terrific Tuesday to you! A Tuesday that needs no "turn-around", as the currency actions VS the dollar overnight are amazing! The dollar got ambushed overnight, as the euro shot right straight through the 1.47 handle, and has just traded 1.48! Hmmm... Didn't I say yesterday that the I didn't think the dollar strength we were seeing was any change in the recent trend? ... I love it when a plan comes together!

Traders have found a "soft spot" in the dollar, and are really going after it! I don't recall the last time I saw this kind of a move overnight. It must have been back when the dollar was getting sold like funnel cakes at a state fair, almost every day in the spring of 2008... But, I really don't recall... But, that doesn't put a damper on this morning's move! No way!

The only thing I can think of, or find in the news, that brought about this HUGE move in the currencies VS the dollar, is the fact that European Central Bank (ECB) Council Member, Axel Weber pretty much gave the "green light" to traders, when he said in an interview that the euro's strength is not out of line with fundamentals... That's right! The way I read that is this... It's Central Bank parlance for... "go ahead and drive the euro higher!"

Weber also said, "There were some stronger data coming from the Eurozone compared to some other regions. So, I think that the behavior of the foreign exchange markets is not out of line with these developments over the recent months."

Now... These comments carry even extra weight due to the position Axel Weber holds as President of the Bundesbank... Buba, as I used to call them, is Germany's Central Bank, and has always held a position of influence on the ECB...

So, Axel Weber says the euro's rally is OK with him... That's Big Folks... For, currency traders like to know that they can run up or down a currency and not fear that the Central Bank is going to step in with currency intervention to stop the run. And, for all intent gives them the Green Light...

OK... Now that the euro has pushed the envelope to 1.48, I expect to see some strong profit taking when the U.S. traders arrive... But, keep this in mind... The euro hit 1.48, and therefore, we now know that traders will take it there a few times before they give up... So, if the euro falls back into the 1.47 handle, look for it to bounce, at least a couple of times. I've explained this trading before... It really comes down to how badly the euro bulls want to push the envelope... Or the dollar bears want to push too!

The euro isn't the only currency gaining VS the dollar... Euro, Swiss francs, kiwi, and Swedish krona have all hit 2009 highs overnight, with kiwi gaining to .7215... A quick look at yesterday's currency round-up shows that kiwi was trading at .7040... Using my "new math" talents... That's a 175 pips move! WOW! New Zealand received some very good news on their deficit problem, as their annual deficit fell from 8.1% of GDP to 5.9% of GDP... Still too high, but moving in the right direction!

For once, it seems, the Aussie dollar (A$) followed its kissin' cousin from across the Tasman, kiwi, higher... It's normally the other way around!

You know what I think? I think that the markets are beginning to look at the man behind the curtain at the Fed, and realize he's just pulling levers, and creating special effects...

OK, I'll explain... Yesterday, I talked to you about the "new record" in size of Treasury Auctions will be shoved down the throats of the markets this week, to the tune of $112 Billion worth of 2, 5, and 7 year notes...

Well... I came across this yesterday, from Morgan Stanley...

"Households reduced Q2 Treasury purchases from their blistering pace in Q1 Foreign accounts reduced Q2 UST purchases as the Fed ramped up Q/E ops. Bank Q2 purchases remained anemic."

In normal speak, what that's saying is that Mom and Pop buying of Treasuries has backed off... You may recall me telling you many months ago that Mom and Pop buying of Treasuries had taken up the slack from declining foreign purchases... The Mom and Pop buying was credited to the "flight to safety", when the walls came crashing down last fall...

So... If Mom and Pop buying is backing off, and it was used to offset declining foreign purchases, who's left at the table to buy the Treasury's issuance this week and in a couple of weeks, and a couple of weeks after that?

Well... It's the Fed... I read this, and just couldn't believe my eyes! The Fed is taking on more and more.. I read where it is believed that about 50% of U.S. Treasury issuance in the 2nd QTR saw Fed intermediation... $164 Billion in the 2nd QTR ended up on the Fed's books, while foreigners bought $101 Billion and Mom and Pops bought $29 Billion... When you add in the Primary Dealers, the total of Non-Fed buying was $158 Billion...

Let me be perfectly clear on this... This is only speculation at this point... But it certainly makes sense doesn't it?

Now... Why isn't the main media all over this? Where are the questions about how the upcoming record amounts of Treasury issuance will be taken, and by whom? Why am I the only one asking these questions? It's just little old me (yeah, right! HA!), and my laptop... Oh, and let's not forget that the Administration has already given us the bad news that $9 Trillion in Budget Deficits will need financing in the next 10-years...

This all makes me sick to my stomach... I mean come on! This Deficit Spending has got to stop! And We've got to say NO to any additional new Deficit Spending! Stop it, right here, right now! Cut government in half... Get rid of non-Constitutional agencies... Audit the Fed, and turn this around!

OK... I've got to talk about something else before I throw my keyboard! I used to throw my keyboard, slamming it down on the desk all the time, and break them... The IT people would laugh, and just bring down a new one for me... But, since I got sick two years ago, I don't throw my keyboard any more... But, I was tempted... I could have gone into a song by The Squeeze there, but I didn't...

Remember last week, when I told you about the IMF wanting to get permission to sell quite a bit of their Gold? And at that time, I said... "China, are you ready to buy?" ... Thinking, of course, that China would be the only country that could / would buy up the 403 tons of Gold that the IMF is putting up for sale...

Well... Guess who answered my call? That's right, China! It is reported this morning, that China is considering buying the Gold that the IMF is offering. It's not clear whether they want just "some of the offering" or "all of the offering"... My guess would be the latter... As this would just add to China's goal of diversifying their U.S. dollar reserves...

And... If China does take down 403 Tons of Gold, that will take away from their Treasury purchases, don't you think?

But, I'm not going down that Treasury road again... I'm staying on the high road with Gold! Which at one point yesterday morning, looked weak... I even mentioned on the desk that it looked like Gold was getting spanked, as it was down over $10... But, later in the day, the shiny metal had come back and was on the positive side of the ledger for the day! And now, this news that China is considering buying the IMF's offering of Gold, has Gold on the high road too... Gold is up $12 this morning, back to $1,016!

So... Throwing stones at the dollar this morning on two fronts... The currency and Precious Metals fronts... Hey! I'm not throwing the stones! The markets, traders, investors, etc. are doing the throwing!

You know, each day, when I'm writing the Pfennig, the currencies are all trading, except... The Brazilian real... The real is still not a floating currency, as it goes through a "fixing" each day, but then the markets take it over, and trade it the rest of the day. So... When you have an overnight market like we've just had, when the non-dollar currencies have all spring-boarded higher, I sit with anticipation for the "fixing" for real, and then watch as the markets play catch-up... The move will be stunning, I'm sure... As real is much like South African rand, when it come to the wild swings...

There's not really any data in the U.S. cupboard this morning... In fact, the only thing I see globally is July's print of Canadian Retail Sales... And with it being so delayed, I doubt it will mean much when it does print!

I thought I would play a game of "Remember when?" Here's how it goes... Remember when the Swiss National Bank said they would intervene to keep the franc weak? Or... Remember when the Brazilian Central Bank Gov. said that he would do everything in his power to keep the real above 2? OK, I'll stop there... Oh... Swiss francs? They have gained almost 15%, and Brazilian real? Well, it's trading at 1.82... So let's just say that the "2" thing wasn't in the cards!

So, what am I getting at here? Well... I've told you for years now that Central Bank intervention can stop currency runs for short periods of time only... And that Central Bank jawboning will only last as long as traders want it too, for if the Central Bank doesn't back up the jawboning, then just like a child, Traders will then push the envelope...

OK... Maybe some day we'll play again, only with Big Ben Bernanke!

So... Traders have ambushed the dollar overnight, and Axel Weber has given them the green light to do so. Could the Fed be the major buyer of Treasuries? China may be the buyer for the IMF's Gold sales, and no data today to speak of...

Currencies today 9/22/09: A$ .8740, kiwi .7215, C$ .9375, euro 1.48, sterling 1.6340, Swiss .9775, rand 6.8250, krone 5.8350, SEK 6.8275, forint 183.30, zloty 2.80, koruna 17, RUB 30.12, yen 91.40, sing 1.4110, HKD 7.75, INR 47.96, China 6.8269, pesos 13.30, BRL 1.8240, dollar index 76.13, Oil $70.80, 10-year 3.49%, Silver $17.26, and Gold... $1,017.10

That's it for today... Cardinals' magic number to win their division is 3... Pretty amazing, eh? With two weeks left in the season! Hey, Californians... Did you see the little blurb in the L.A. Times quoting yours truly? Yes, there was a story in the L.A. Times this past weekend regarding "Foreign Currency Investing"... I spend a good amount of time on the phone with the writer, Kathy Kristof, who seemed quite interested in what I was saying! Today, is the first full day of Autumn... YIKES, you and I know all too well what follows Autumn! Oh well, maybe we can make Autumn last longer than usual! HA! So... Welcome to Autumn! And with that... I'll hit send, and get this on the delivery truck to your computer! I hope you can make this Tuesday totally Terrific!

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