Daily Pfennig : Debt

The debt ceiling debate kicks off in a big way...

Chuck Butler — Tue, 15 Jan 2013 17:58:52 GMT

In This Issue.

* Debt ceiling debate shifts into high gear...

* Retail sales slow but steady in the US...

* Technical factors call for an increase in the euro...

* Precious metals continue to rebound...

And, Now, Today's Pfennig For Your Thoughts!

The debt ceiling debate kicks off in a big way...

Good day. I made it through Monday and I'm actually looking forward to having a great Tuesday! I will be writing the Pfennig again tomorrow but them I'm off to Colorado with my family so Mike Meyer will take over the writing responsibilities at the end of the week. My 'Sunday Pfennig' certainly seemed to generate some good conversation on the blog, I would encourage Pfennig readers to comment if something you read generates a reaction, one of the main reasons we get up early in the morning to write is to try and stimulate some good 'online conversations' regarding what is happening in the markets.

Did all of you catch President Obama's press conference on the debt ceiling debate yesterday morning? If you missed it, Treasury Secretary Geithner pretty much repeated it later in the day in an interview on Bloomberg and then Fed Chairman Ben Bernanke again spoke on the topic last night in Ann Arbor, MI. Not surprisingly, all three of these 'talking heads' were singing from the same song sheet. 'same as it ever was, same as it ever was, same as it ever was'. (thought I would throw that one in for Chuck.)

All three warned congress against letting the debt ceiling debate become another 'fiscal cliff' debacle. As they all correctly pointed out, the debt ceiling will absolutely have to be raised again, as we have already spent the money which this new debt is financing. Bernanke did an excellent job of explaining this to the folks in Ann Arbor last night: "Not raising the debt ceiling is like a family, which is trying to improve its credit rating saying, 'Oh, I know how we can save money; we won't pay our credit bills.'. It is very important that Congress takes the necessary action to raise the debt ceiling to avoid a situation where our government doesn't pay its bills." The President went on to say raising the debt ceiling is NOT akin to authorizing more spending, and that the debt which we are paying on is money which Congress has already authorized. On these points I think Bernanke, Geithner, and the President are right, America has to pay its bills, and congress gets a share in the blame for running these bills up.

But before you all start to typing a response to that crazy Gaffney who is advocating for more debt, hear me out. I am absolutely not supporting more spending or a continued increase in the massive amount of debt which we have accumulated. Many of you will remember my anecdote about the broken sewer line and raising the debt ceiling; I definitely think we should be reaching for the shovels instead of 'raising the roof'. But again the debt is money which has already been spent, and we have to meet our obligations.

I do understand where the Republicans are coming from, and they feel the debt ceiling is the only way they are going to be able to start forcing a slowdown in the level of spending which continues to grow. When you have a teenager who continually hits their credit limit on their credit card, the first thing you do is take away the credit card, and you definitely do NOT go out and get them another one so they can keep up their spendthrift ways. The Republicans are trying to use the debt ceiling debate to take away the credit card.

So I agree with forcing spending cuts on Congress and the Administration, as they just don't seem capable of spending cuts without them being forced. But the markets cannot and should not have to withstand another round of 'default roulette'.

So the debate has begun, but the markets largely brushed all the posturing aside (for now) and with no data releases, the dollar traded through Monday without much direction. Today the data cupboard is chock full, so the markets will definitely have something to trade off of. Retail sales for the month of December will lead things off, and the economists are calling for a very slight decrease in the overall level of sales compared to the month previous. The year end budget battle is expected to have worried consumers enough to weaken the final holiday shopping push. We will also get the PPI data which is expected to show prices have eased slightly when compared to a year ago. The PPI for December is expected to show a 1.4% increase in prices compared to a 1.5% increase during the month of November. The Ex food and energy numbers are expected to show a larger 2.1% increase YOY. Still, inflation continues to look like it is being held back by the lack of jobs and worries over the fragile economy.

Numbers released in Europe showed Euro-area industrial production unexpectedly fell in November adding to signs that the recession across the Atlantic probably deepened during the last quarter of 2012. Output dropped .3% from October when it declined at a revised 1%; so at least the numbers were slightly improved. Economists had forecast a slight increase, so the euro should have felt some selling pressure. But the 'good vibes' which were sent the Euro's way last week by ECB President Draghi's comments seem to continue to keep the single currency well bid. The euro held on to the $1.33 handle, but did trade down from the lofty levels of yesterday.

Technical analysts are predicting the Euro may continue to climb to $1.3835 after breaching resistance levels last week, according to a client note from analysts over at Credit Suisse Group AG. The 14-month high represents a 50 percent long-term Fibonnacci retracement, according to the analyst.

These same technical factors also show the US$ may start to climb vs. the Canadian dollar after a key support level remained in place. The US$ avoided slipping below 98.26 CAD/$, and the Fibonnacci numbers now indicate the dollar could appreciate to 1.004 CAD/$, a level which represents the 50 percent retracement of its previous decline.

Readers have to know that I am personally a bull on the loonie over the longer term, but I do pay some attention to these technical factors over the shorter term. One thing which I think should support a higher Canadian dollar over time is interest rate differentials. The Bank of Canada is expected to be one of the few central banks who will be raising rates this year, and as the global economy recovers, interest rate differentials will again become important to currency investors. And many of the currency strategists at the 'big banks' agree with my thoughts. HSBC sees the currency trading at .94 CAD/US$ by year end (remember the CAD is typically quoted in the currency markets using European terms, so a move lower is actually an appreciation of the currency).

Another commodity based currency which is poised for a move higher is the New Zealand dollar or 'kiwi'. New Zealand business confidence surged to the highest level in over a year according to a private survey released yesterday. A net 20% of the companies surveyed last quarter said they expect the economy to improve in 2013. More demand from a growing 'Chinese consumer' should bolster agriculture exports into Asia, and New Zealand is still the globes largest dairy exporter. And the RBNZ is another central bank which is expected to increase rates this year. The determining factor regarding a rate increase in 2013 will be inflation which is forecast to accelerate to 1.6% by the end of this year. New Zealand's jobless rate remains stubbornly high, a factor which could keep the RBNZ from moving on rates until the end of the year.

The Aussie dollar continued to slide back from last weeks quick surge, but the currency continues to hold around $1.055. Traders are a bit worried by a report to be released later this week which may show an increase in unemployment.

The South African rand recovered slightly from its sharp drop last week following a cut in its ratings by Fitch. The cut to BBB, the second lowest investment grade, was due to a widening budget deficit and rising unemployment. News overnight of a fairly large layoff by Anglo American Platinum Ltd. didn't help the rand. I guess the folks over at Anglo decided to shut down their platinum mine after the White House decided against issuing the $1 trillion dollar coin. But seriously, the South African economy is dominated by the mining industry, and any shutdown/strike will definitely hurt the prospects for a recovery in the trade and budget deficits.

While we are speaking about the metals, gold had another decent day yesterday, pushing up about $15 per ounce. The shiny metal has been slowly erasing the big drop which occurred at the start of the year, and is finally back above where 2013 began. Silver has pretty much mirrored the trading pattern of gold, and is also up slightly this morning.

Running late this morning, so I will skip the TTWT section. I promise to have a good one for you tomorrow!

To recap. All three of the administrations 'talking heads' were hard at work yesterday laying out their negotiating position on the debt ceiling. Basically it is 'just do it' and we can talk about spending cuts later. Retail sales increased in December, but at a slower pace than the previous month. Data showed the Euro-area manufacturing has stalled, and the recession continues. Technical factors show the euro will likely rise, and the Canadian dollar will fall in the short term. But I still think interest rate differentials will push the Canadian dollar higher in the medium term. Interest rates could also push the kiwi higher along with more demand from China. And the precious metals moved higher, erasing the losses booked during the first few trading days of 2013.

Currencies today 1/15/13. American Style: A$ $1.0549, kiwi .8423, C$ $1.015, euro 1.3345, sterling 1.6061, Swiss $1.0788. European Style: rand 8.7642, krone 5.5164, SEK 6.4623, forint 220.57, zloty 3.0859, koruna 19.1917, RUB 30.2353, yen 88.69, sing 1.2252, HKD 7.7529, INR 54.6125, China 6.2157, pesos 12.6532, BRL 2.0353, Dollar Index 79.586, Oil $94.07, 10-year 1.83%, Silver $31.26, Gold $1,681.14, and Platinum $1,692.15.

That's it for today. I had a relatively late night up at my son's high school last night, and I am expecting another late one tonight as we have parent / teacher conferences at my daughter's school. I will sound like a 'proud papa' but both of my kids are doing very well in school so these conferences are actually kind of fun. The winter is back, and temperatures are back near single digits again this morning. I wish I were down in sunny Florida with Chuck right now!! Thanks for reading the Pfennig and I hope you all have a Terrific Tuesday!!

Chris Gaffney, CFA

Vice President

EverBank World Markets

1-800-926-4922

1-314-647-3837

Oil Fuels Petrol Currency Rally.

Chuck Butler — Tue, 08 Jan 2013 16:47:57 GMT

In This Issue.

* Currencies & metals continue to recover.

* Krona gets sold on Riksbank minutes.

* A$ weakens on Trade deficit widening.

* Racing to the debt ceiling.

And, Now, Today's Pfennig For Your Thoughts!

Oil Fuels Petrol Currency Rally.

Good day. And a Tom Terrific Tuesday to you! It had been awhile, with vacations, and holidays that I greeted you with the Tom Terrific Tuesday. So, we've got that going for us today! Congratulations to University of Alabama, who routed Notre Dame for the college football National Championship last night. For once, I didn't have to go to bed wondering who was going to win, for Alabama was in complete control from the get-go. (they dismantled my beloved Missouri Tigers the same way!)

Well. the euro is about 1-cent stronger this morning than it was yesterday morning. most of the move higher came about during the day yesterday, with about 1/3-cent gained this morning. The added gains this morning, are surprising given the bad surprise that Germany got, when November Manufacturing Orders fell -1.8%... The negative print wasn't a surprise, as a negative -1.4% was forecast. the surprise obviously came from the strength of the negative print. But, apparently, the markets have shrugged off the data, and have pushed the euro back above 1.31 this morning.

I heard a quote from famous and well respected analyst, Marc Faber, who said that , "I'd rather be in U.S. dollars than euros". Hmmm. I have to differ with the good doctor here. and the markets sure would agree with me, given the fact that even after all the negativity last year that was heaped on the Eurozone and euro, the currency continued to be priced at a level much greater than the dollar!

Since the meltdown of the currencies and metals last Friday that came about from the FOMC meeting minutes, the dollar has retreated. This is where you have to be careful following the dollar index for the dollar's performance, because the dollar's weakness could very well be masked by weakness in the Japanese yen. And this is where, I rejoice in that the dollar index's relevancy is reduced, thus requiring us to look at individual currencies for their fundamentals as to their values.

The Swedish krona is the worst performing currencies (G10) overnight, after the latest Riksbank (central bank) meeting minutes revealed several members making a case for a 50BPS (1/2%) rather than the 25 BPS (1/4%) rate cut that the Riksbank delivered in December. This news has been received by the markets as more rate cuts are in the plans. I wonder why the markets have gone down this road, for if my memory serves me correct here, after the Riksbank announced the 25 BPS rate cut in December, they also said that rates were on hold for most of 2013. So, once again, the markets have decided to take a knee jerk reaction to something that's not really there.

Another currency finding it difficult to get some wind for its sails this morning is the Aussie dollar (A$), which saw their November Trade Deficit print wider than expected. (you have to take this stuff with a grain of salt, for it's so long ago!) The Aussie Trade Deficit widened to $2.6 Billion from A$2.4 Billion in October. I wouldn't get too caught up in this report, folks.. we all know that the Chinese economy seems to have turned the corner and onto recovery street, and also given what we saw yesterday with the increase in iron ore prices to the highest level since October of 2011, the Trade Deficit should narrow as the reports catch up with what's actually happening now.

The A$ is still at or above $1.05 this morning, so the "hit" it took wasn't exactly one with conviction! I guess traders there saw what I saw. Now wouldn't that be good thing! We'll get to see the color of the latest Aussie Retail Sales (again from Nov.) this afternoon. I expect the report to be bang on with expectations for a .3% increase, which won't be a currency mover.

I see on Bloomberg this morning that another forecast for the Indian rupee is going out on the limb. I like people that go out on the limb, for I've done that many-a-time. But this guy might not have picked out a big fat limb to go out on. Commerzbank, which had the closest estimates for currencies in the past 6 months, issued a report by one of their strategists, that calls for a 10% rally in the rupee based on his belief that inflows into equities and bonds will be the catalyst.

Now, you all may recall me writing about the inflows into China last month, and saying that these inflows had spilled over to India. But, come on. a 10% rally? We haven't see that from the rupee since 2006 when it gained 12.29%... unfortunately, since then the rupee has posted the not so good returns of -19.24%, +4.9%, +4.28%, -15.74%, and -3.07%... I used to say I like Indian rupees. but once bitten twice shy babe, right? Now, I do believe that the inflows will help the rupee, but going out on the 10% return limb is not for me.

The price of Oil has been on the rise again. the stronger Oil price has underpinned the petrol-currencies that include: Norway, Russia, Brazil, Canada, Mexico, and even the U.K. Oil seems to be gaining on renewed forecasts for consumption increasing in the U.S. and Eurozone. Of course it just happened to be my day for filling my gas tank this morning. to pay the highest price in 4 months! Timing. it's just not my forte!

You know that I've always considered the Russian ruble as an "oil play".. So, as the price of Oil goes, so goes the ruble.

Another currency that's been in the dumpster for over a year. The Brazilian real, has seen some positive movement lately and I'm sure it's tied to the move in the price of Oil. Sure, even after all the rate cuts by the Brazilian Central Bank, there is still a yield advantage in Brazil. but with the Gov't so hell-bent on driving the price lower, that yield advantage was being eaten up in a heartbeat. So, to me, this has to be an "oil move".

The price of Gold is stronger this morning by $9. But then, that's before the NY boy and girls arrive at their desks. Did you see the picture of the Indian man wearing a shirt made of Gold that weighs 7 pound and cost $230,000? Pretty interesting, eh?

The Big Boss, Frank Trotter, sent me a story to read yesterday. It was an article by Bill Gross, aka the bond king from PIMCO. The title itself was classic, and I sat there and wished I had thought of it! "Money for Nothin' Writing Checks for Free". you have to sing that with the Dire Straits melody. you know. money for nothing and the chicks for free. OK. I guess it kind of loses its humor when I explain it all out. UGH! Oh well.. the gist of this discussion is that Bill Gross believes the "whole charade will soon hit a brick wall". This was after he called attention to the near $10 Trillion explosion in Global Central Bank money issuance since 2006, and the impending doom historically associated with a "money for nothing" monetary policy. The whole article can be found and read here: http://bullmarketthinking.com/bill-gross-fed-claims-to-own-a-few-billion-in-fort-knox-gold-with-nothing-in-the-vault-to-back-it-up-amazing/

Then There Was This. OK. last week, I gave you the timeline for the 3 things that were going to cause us here in the U.S. problems. One of them was that it was reported that the extraordinary measures implemented by U.S. Treasury Sec. Tim Geithner to keep us from shutting down the Gov't or going into default, since we were bumping up against the debt ceiling again, would last until March. Well, not so fast!

From the Washington Post. "The U.S. government may default on its debt as soon as Feb. 15, half a month earlier than widely expected, according to a new analysis adding urgency to the debate over how to raise the federal debt ceiling.

The analysis, by the Bipartisan Policy Center, says that the government will be unable to pay all its bills starting sometime between Feb. 15 and March 1. The government hit the $16.4 trillion statutory debt limit on Dec. 31 , but the Treasury Department is able to undertake a number of accounting schemes to delay when the government runs into funding problems.

"Our numbers show that we have less time to solve this problem than many realize," Steve Bell, senior director of economic policy at the Bipartisan Policy Center, said in a statement. "It will be difficult for Treasury to get beyond the March 1 date in our judgment."

Chuck again. yes, and leave it to our leaders to take this to the very last eligible day! Do we really need to raise the debt ceiling again? I mean, isn't $16.4 Trillion enough? Apparently not!

To recap. The currencies and metals are attempting to add to yesterday's mini-recovery. The Aussie Trade Deficit widened in Nov, but Chuck believes this to be too old of data to see what's going on now. The Riksbank meeting minutes stirred up the markets into believing another rate cut is coming, and thus selling the krona. And Chuck questions the size of the limb that the a currency forecaster went out on, when he forecast a 10% rally for the Indian rupee.

Currencies today 1/8/13. American Style: A$ $1.0505, kiwi .8360, C$ $1.0150, euro 1.3115, sterling 1.6095, Swiss $1.0850, . European Style: rand 8.5565, krone 5.5865, SEK 6.54, forint 222.70, zloty 3.1415, koruna 19.4655, RUB 30.22, yen 87.50, sing 1.2275, HKD 7.7515, INR 55, China 6.2235, pesos 12.75, BRL 2.0245, Dollar Index 80.22, Oil $93.42. 10-year 1.89%, Silver $30.40, and Gold. $1,655.70

That's it for today. Our Wealth Management Investment guru, Christie, is here this morning, I had to ask her if she couldn't sleep, since she was in so early! It's a good thing she's not on the currency trading desk, as we already have a Chris and a Christine! Good luck to my beloved Missouri Tigers as they begin their first SEC basketball season tonight VS Alabama. The Tigers are currently ranked #12 in the country, which is pretty exciting! I guess I wasn't very nice to the Notre Dame team at the top. they did finish #2, which isn't too shabby! Congrats to them too! Time to get this out the door. I hope you have a Tom Terrific Tuesday!

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

Is all debt bad???

Chuck Butler — Thu, 20 Dec 2012 17:33:29 GMT

In This Issue.

* A sticky question...

* Budget negotiations stall...

* BOJ to announce more stimulus...

* Gold and Silver reverse...

And, Now, Today's Pfennig For Your Thoughts!

Is all debt bad???

Good day. I was met with the above question as I walked through the door last night. As I came home from work my 14 year old asked me the answer to the question 'Is all debt bad?'. My daughter, Lauren, is in the middle of exams and she was upset that she had missed this question on a civics exam. She occasionally reads the Pfennig, and has listened in on enough of our dinner conversations to realize that much of the world is currently in a debt crisis. So when she was presented with a true false question regarding debt, she answered True - all debt is bad.

From reading your comments about yesterday's Pfennig, many of you would have given Lauren extra credit, but unfortunately I had to let her know that her answer is technically wrong. As I explained to Lauren, not all debt is bad. There are times when a country, company, or individual needs to borrow money. Debt can be used to fund all sorts of very good projects, and keeps economies rolling through slowdowns. But debt is meant to eventually be paid off, not accumulated in a never ending cycle. So yes, Lauren missed that question on her civics exam; but in a way I am glad she missed it as I don't think it is a bad thing that my daughter is a bit scared of debt. I just wish some of our leaders in Washington would match my daughter's concern over debt accumulation. But enough of my dinner table economics lecture, let's get to the currency markets.

It was a 'risk off' day in the currency markets, but the moves were dampened by the holiday thinned trading desks. The yen finally reversed its recent sell off, and the dollar also climbed a bit as US lawmakers moved further apart on a budget deal. President Obama told business leaders that budget talks have regressed and accused Republicans of wasting a lot of time with political posturing (perhaps a bit of the pot calling the kettle black).

Today we have an absolute plethora of data which will be released here in the US. We start off the morning with GDP projections for the 3rd quarter which are expected to show the US economy grew just under 3% compared to previous estimates of 2.7% growth. It is Thursday, so we will also get the weekly jobs numbers which are projected to show another 360k workers filed for jobless claims last week. Continuing claims are predicted to have increased to 3200k in another indication the labor market will be very slow to recover. This employment data will be followed up with existing home sales and leading indicators. Yesterday's data showed a drop in Housing starts (down 3% MOM) but an increase in building permits (3.6%MOM). Definitely some conflicting data, so the existing home sales may help give investors a better picture of the housing recovery. Finally, the leading indicators are expected to show a decrease of .2% during November following an increase of the same amount in the previous month.

The yen had dropped for three straight days as investors worried the new Prime Minister would successfully push for more aggressive rounds of stimulus. The BOJ ends their two day meeting today, and are expected to announce additional stimulus moves. Adding to the worries regarding the yen was a Japanese government report released yesterday which showed the trade deficit widened in November. Traditionally Japan has run a trade surplus, and the deficits have caused investors to re evaluate their demand expectations for the yen. A country which runs a trade surplus creates demand for their currency, while trade deficits will typically drive the demand for (and value of) a currency lower. The yen has bounced back a bit this morning as some investors apparently believe the three day selloff was overdone.

The euro continued to climb through most of the morning yesterday, moving just above $1.33 for a short period. But the renewed worries out of Washington caused it to give back some of these gains and it is now holding in the $1.32 handle. I had a reader scold me for not writing more on the Swiss Franc and its recent rise. I haven't mentioned the Swiss franc simply because of its peg to the Euro. So as the euro moves, so will the Swiss franc. The 3.44% increase in the euro over the past month has been matched with a 3.36% increase in the Swiss franc vs. the US$. As long as the Swiss National Bank defends the peg to the euro, there is really no need to talk about the Swiss as it is tied to the euro. Now it will certainly be interesting if/when the peg is relaxed, and you can bet Chuck or I will inform all of you when we start hearing any indications of that. Until then, readers can simply watch the euro.

Several readers asked me to comment on the big drop in gold prices over the past couple of days. Many of you pointed me toward various manipulation theories, but I think there are two possible explanations for the recent drop in prices. First, there was improved confidence that a compromise would be reached between the two parties over the fiscal cliff. As we approached the year end, demand for gold climbed as investors looked for an asset they could hide in if/when our leaders in D.C. took us over the cliff. A second possible explanation is year-end selling due to the probable increase in tax rates. Silver has had a nice 12 percent rise this year, and gold is up 6.72% so investors could just be taking these gains off the table before 2013. By the way, this will be the 12th consecutive year of gains in the price of gold.

No matter what caused the selloff, both metals rebounded yesterday as concerns over the fiscal cliff agreement returned. Negotiations in Washington have deteriorated, so my first theory on what caused the recent sell-off has been flipped and gold is now climbing again. Most of the gold refineries are also going into a end of year / holiday shutdown, so additional supply will be limited over the next couple of weeks.

On a longer term basis, I am confident that demand for precious metals will be increasing. The fiscal problems facing many of the Western nations will shake global investor confidence in 'fiat' currencies. And my thoughts on the 'rise of the Chinese consumer' also support higher metals prices. As consumers in both China and India see even a slight increase in disposable income, a percentage of that income will likely be invested into the precious metals markets. Gold and Silver are much more accepted as forms of wealth storage in the Asian cultures, so any increase in disposable incomes should lead toward an increase in demand. Just another reason I think precious metals should be a part of every investors diversified portfolio.

And then there was this. The Fed's holding of interest rates at record low levels have had a very different impact on two separate classes of investors. A story I spotted on Bloomberg this morning pointed out the dramatic divergence between savers and professional investors. The story, written by Bob Ivry starts out with this line "Deepak Narula's mortgage-bond fund is up 39 percent this year. George Sanchez's monthly annuity payout is down 41 percent." Ivry goes on to explain some of the unintended consequences of the FOMC's interest rate policies. "The near-zero interest rate the Federal Reserve charges financial firms, as well as securities purchases that will balloon the central bank's balance sheet to almost $4 trillion next year, have made it easier for Narula's $1.6 billion fund to thrive and more difficult for Sanchez, a former college library director, to enjoy retirement."

The story includes an excellent quote by Nobel Prize-winning Columbia University economist Joseph E. Stiglitz: "Monetary policy has been indirectly, surreptitiously helping the top and hurting the bottom." Stiglitz blames the Fed policies for starving money-savers of income and boosting certain asset prices, widening the gap between the rich and the rest of the country. Bob Ivry has written some excellent pieces on the Fed, and I always enjoy reading his take on things.

To recap. Debt is not always bad, but the constant accumulation of debt is! Budget negotiations hit a snag, sending investors back toward safe havens. Today will be a big day for data here in the US markets, but holiday thinned trading desks should keep volatility down. The BOJ is expected to announce more stimulus, but the yen has already been adjusted for the expected increase in supply. Gold reversed its recent sell off, and started moving back up on worries on the budget negotiations. And the FOMC's zero rate policies have caused a divergence in returns for savers vs. professionals.

Currencies today 12/20/12. American Style: A$ $1.0493, kiwi .8343, C$ $1.0113, euro 1.3255, sterling 1.6262, Swiss $1.0974. European Style: rand 8.5159, krone 5.5498, SEK 6.5114, forint 216.0, zloty 3.0708, koruna 19.0335, RUB 30.6835, JPY 84.10, SGD 1.2184, HKD 7.7501, INR 54.8544, China 6.2306, pesos 12.7715, BRL 2.0619, Dollar Index 79.163, Oil $89.88, 10-year 1.78%, Silver $31.22, Gold $1,670.62, and Platinum $1591.24.

That's it for today. Congratulations to Antione Lawrence as his lovely wife Brooke gave birth to a beautiful baby girl yesterday. It is the couple's first child, and the first of three babies on their way for the WorldMarkets desk (Both Mikes, Harrell and Meyer, are also expecting). We anxiously awaited the news yesterday morning after Antione let us know he and Brooke were headed into the hospital. Both baby and mom are doing fine, and I'm sure proud papa Antione is beaming! Sounds like we could see our first snow of the year, it is currently raining but the temps are supposed to drop and the rain should turn to snow later today. I will wrap up today's Pfennig on that great news. I hope everyone has a great day, and thanks for reading the Pfennig!

Chris Gaffney, CFA

Vice President

EverBank World Markets

1-800-926-4922

1-314-647-3837

A Jobs Jamboree Friday!

Chuck Butler — Fri, 07 Dec 2012 19:06:54 GMT

In This Issue.

* ECB & Bundesbank pull rug from under the euro.

* Relative calm over Eurozone is lifted, again.

* Sandy to affect jobs report.

* The debt ceiling revisited.

And, Now, Today's Pfennig For Your Thoughts!

A Jobs Jamboree Friday!

Good day. And a Happy Friday to one and all! I have a couple of things to discuss front and center this morning that don't have anything to do with currencies, commodities or economies. First, I want to apologize Big Time, for the error I made yesterday talking about the elimination of the penny and nickel. That turned out to be nothing but a hoax. Of course, we all know that the day is coming that those are eliminated, just not now. And then today is our first day of infamy. Pearl Harbor Day. If the movies that were made about that day are even close to what it was really like, I shudder. And then finally, today is also, EverBank Employee Appreciation Day. more on that in the Big Finish.

Well, I told you yesterday that the euro had been stuck in the mud for two days. But then along came the European Central Bank (ECB) meeting, which was nothing, really. but, then the statements began to spew out of the mouths of Euro-leaders. Geez Louise! What? The guys didn't like the direction of the euro, so they decided to bash it with words? That's the way it looks to me. And the euro took a quick ride on the slippery slope, losing 1- cent in value. and dragging all the other currencies down, was the call to order.

This morning, The Bundesbank (Germany's Central Bank) announced that they were cutting their forecast for the German economic growth in 2013. The Bundesbank or Buba as I used to call them, "back in the day", cut their 2013 growth forecast from 1.6% to .4%... That's awful folks, and has caused another ½-cent loss in the euro this morning. Well, that and the surprise that came from the printing of October German Industrial Production, which fell -2.6% from September. This data is in exact opposites with the Factory Orders data I told you about yesterday, so the German economy is mixed for sure.

But one thing that looks to be the case for sure in Germany, is that the Eurozone's largest economy is suffering right now. I read a story that talked about how the analyst didn't think the Bundesbank was as negative as their growth rate forecast cut would indicate. Hmmm. OK. had to stop to sing along with John Waite's song Midnight Rendezvous. That song will get your heart pumping in the morning! Ok, where was I? Oh, yeah, I was questioning the analyst that thought the Bundesbank was as negative as their growth rate forecast. What indicator would he use to say that? Well, the fact that Bundesbank is actually forecasting most of that cut early in the year, and a recovery late in 2013 and leads to strong growth in 2014. Ok. I'll give him that!

So. the relative calm that was draping over the Eurozone earlier this week, has been lifted, which seems to be the way things have been for the euro for the last couple of years. I know there are still calls out there for a complete collapse of the euro, and a break-up of the Eurozone. but I'm not buying them. I will agree that there could be a different look to the Eurozone roster of countries in the next couple of years, but a complete break-up just doesn't register with me. And a complete collapse of the euro? Hmmm. who thinks of these things? Any way. we're not there now, and won't be there next week, or the week after that.

Something that's been happening in the Eurozone that's troubling me though. the bond yields in Italy and Spain have been widening out. Whenever we see the relative calm removed from the Eurozone, we see these bond yields begin to widen again. But this is something that if not kept in control, could spiral quickly out of control. so, I hope the Eurozone leaders have their eye on this like I do.

So, with the Big Dog, euro dragging the rest of the currencies down this morning, the currencies will probably end the week on a down note. Shoot Rudy, even the Aussie dollar (A$) which yesterday was knocking on the door to $1.05, is feeling the downward pull of the euro . Yesterday, I said to the boys and girls, that I truly appreciate every day, not just today, that it was interesting that the two prior days saw the euro gain VS the dollar, but Gold lose value, but yesterday as the euro sank, Gold rallied. Both are anti-dollar assets, so it's always interesting to see divergence, even though it's difficult to explain.

Speaking of Gold. the divergence is over, and Gold is losing value this morning alongside the euro and other currencies. Right now, the markets are reacting to the news from Germany this morning, but in a bit the focus will shift to the U.S. because.. Drum roll please. today is a Jobs Jamboree Friday! And this will be a Jobs Jamboree that the reaction to it will be muted. (I think!) You see, any downside print of jobs created in November, will be explained away with commentary on Sandy. There's probably no arguing that the report will be affected by the devastation of Sandy. So, here's my suggestion. just skip the report this month! If what the Jobs Jamboree is going to report is not right, then why print it? OH! Chuck! Did you just think about what you just wrote before you typed it? For if you did, wouldn't you have made some funny comment about the Jobs Jamboree never has the right numbers and it prints every month anyway!

Here's how I think the Jobs Jamboree will play out. first of all, the initial forecasts were for 125,000 jobs created in November, but then someone reminded the "experts" making these forecasts that the report would be affected by the devastation of Sandy, and they lowered their forecasts to 85,000, thus making a negative allowance of 40,000 for Sandy. But, I see the BLS adding ghost jobs to make the report look brighter, new and improved! So. look for a number north of 85,000.

We do a little contest each month, run by our Swiss Miss Agnes, to guess what number the BLS will report as jobs created. and I've never won it! Back in the day. I remember standing around the bond desk and everyone making their guess on what Money Supply number would print. I almost always got those numbers right! That's because they were hard numbers, not ones that had "adjustments" made to them!

OK. onto other things. did you see that the President and House Speaker are now meeting one-on-one to discuss the Fiscal Cliff? The Speaker thought that there was just too much "noise" from the Senators and others in the room. So, it's mano-y-mano. and maybe there will be something come of it. I'll tell you this. the lawmakers were scheduled to leave for their holiday vacations next Friday 12/14. I can't think of anything else that could motivate them more than the threat of delaying their holiday vacations if this Fiscal Cliff isn't dealt with....

You know. I talk about the Fiscal Cliff and how I see lawmakers not allowing the Fiscal Cliff to happen, because that's what they always do, kick the can down the road. But I really don't know if they will avoid the Cliff now. But, wouldn't it be better to deal with the Cliff now, than in a couple of years, when the fall will be steeper?

And I know I got everyone lathered up late last month, when I talked about us hitting the debt ceiling limit around now. But there's been no talk of it, has there? Strange, to me, for sure. We are now just $153 Billion away from reaching the ceiling. the actual U.S. Debt is way past the ceiling.. but there are things in the total debt that aren't subject to the limit. It took me a couple of tries to figure that one out! HA!

And then I wanted to mention on Gold. I hope everyone got to read that snippet I had in yesterday's Pfennig from James Turk. There were some questions sent in about his comments so I thought I would give you my take on what he said. Basically, he was saying that the price manipulators are loading up on Gold at discount prices that they created, so that when the dollar collapses, and a new currency system is put in place using Gold, that they will be in the catbird's seat.

The other thing to think about here, is that whenever Gold gets cheap (considering where it's been) the Central Banks of China, Russia, and others begin to line up at the door to buy at these cheaper levels. Now, this isn't saying to "expect" them to do that again, it's just saying that's what's happened before, we'll have to wait-n-see if it happens again. I personally believe it will, but then that's my opinion and I could be wrong.

Then There Was This. I found this on a very frequented site I go to: ZeroHedge.com . "Just yesterday, Goldman Sachs suggested its clients should sell their gold (to them?) as the precious metal cycle had turned. It seems Morgan Stanley disagrees; the firm's preferred fundamental metal exposure for 2013 is Gold.

Expecting Silver to outperform also (given its 'cheaper' store of value), MS believes nothing has changed on the fundamental thesis for owning gold as the adoption of QE 3 (and 4...) and the ECB's commitments (and BOJ) remain the most important factors for a continuation of weakness in the TWI (trade weighted Index) trend for the US Dollar.

They also add that low nominal and negative real interest rates, ongoing geopolitical risk in the Middle East and continued mine supply issues are also supportive."

Chuck again. I always wonder about Big Financial Institutions getting into cahoots with each other on stuff like this. OK. I'm NOT saying this is happening. I'm just "wondering" if Big Bob, calls Big Mike and says, "hey, I'll tell my customers to sell, and you tell them to buy, and we'll both make a killing". Just me wondering. not pointing fingers, not accusing anyone of anything, just wondering.

To recap. The euro got pulled out of the mud it was stuck in for two days, yesterday, as ECB leaders began talking about rate cuts, and slowdowns, and then the euro got piled on to by the Bundesbank who took a big cut off their growth rate forecast for 2013. The euro is dragging all the other currencies down today, and it appears they will end the week on a sour note, unless. the Jobs Jamboree here in the U.S. does a Bullwinkle and pulls something out of its hat.

Currencies today 12/7/12. American Style: A$ $1.0465, kiwi .8320, C$ $1.0070, euro 1.2920, sterling 1.6015, Swiss $1.0695, . European Style: rand 8.6960, krone 5.6815, SEK 6.6765, forint 219.70, zloty 3.1995, koruna 19.5040, RUB 30.92, yen 82.30, sing 1.2210, HKD 7.75, INR 54.47, China 6.22, pesos 12.88, BRL 2.0795, Dollar Index 80.44, Oil $86.15, 10-year 1.58%, Silver $30.95, and Gold. $1,695.22. and it's a Friday so here's the link to check out the U.S. Debt Clock. click here: http://www.usdebtclock.org/index.html

That's it for today. As I said at the top, today is EverBank Employee Appreciation Day. I have 10 people that report directly to me, and I truly appreciate their loyalty, professionalism, personalities, the fun we have on occasion, and this division that we have built with tons of difficult work. I think I tell them that each month. OK. I'm looking forward to a weekend without a lot going on and not a lot to do. Speaking of music getting one's heart going in the morning. Choo-Choo Mama by Alvin Lee and 10 years After will do the trick! I saw my regular doctor yesterday, and he believes the infection in my leg, while still there, is finally leaving. I said, "I sure hope so, it's been 3 freakin' months!) He laughed at me. and reminded me that the infection was probably in my leg for over 6 months before it flared up. And with that. I thank you for reading the Pfennig, and Hope you have a Fantastico Friday!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837

Brazil Cuts Rates Again!

Chuck Butler — Thu, 31 May 2012 16:00:13 GMT

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In This Issue.

* More blood in the streets yesterday.

* Brazil cuts rates and signals for more cuts!

* Got Debt?

* Calls for more Aussie rate cuts get louder.

And, Now, Today's Pfennig For Your Thoughts!

Brazil Cuts Rates Again!

Good day. And Tub Thumpin' Thursday to you! I'm so mad at myself this morning! I arrived here at my normal time this morning, only to realize that I walked out of the house without my key-card, that allows me to get into the building and office! What a twit! It was sitting right there on the kitchen island where it is every morning, but this morning, I was in such a hurry to get a banana and get out the door, that I left without it. UGH! So. I had to turn around once I got here, and go back home. It's not like I live next door to the office! Double UGH!

So. obviously, this is going to be later than usual. But, as they always tell me on airplanes, "I'll try to make it up in the air". HA!

Well. yesterday's price action left more blood in the streets, with the euro losing the 1.24 handle, and the Aussie dollar (A$) reaching a 2012 low. The Brazilian Gov't and Central Bank continue to do their best to unravel the markets, by cutting interest rates again this morning and crowing that there are more rate cuts to come. Oh, by the way, the internal rate in Brazil was cut by 50 basis points (1/2%) to a record low level of 8.5%... For those of you keeping score at home, that brings the total of rate cuts since August last year to 4%...

And there was nothing in the Central Bank's statement to give anyone the idea that the Central Bank was nearing an end to the rate cut cycle. Central Bank President, Tombini, continues to point to the fact that industrial output has declined in 8 of the last 12 months. So, they try to give the appearance of attempting to stimulate growth, when in reality folks. they are debasing the currency so it can be competitive in the global exports game. Brazil was the first to say it was a currency war, and they have been one of the leaders of this war.

The euro is back above 1.24 this morning, but not by much. it received a boost when the latest polls show that Irish voters will approve measures to ease the Eurozone's debt crisis. I had read recently that the Irish President had appealed to the Irish people to vote yes, because more uncertainty in the Eurozone is not what's needed now.. Good move on his part.

The euro's decline in May alone has been 6% VS the dollar and 7.3% VS the yen. I find it very difficult to reconcile this. Yes, there are problems with debt in the Eurozone, but, have they not, at least addressed it and attempted to implement measures to cut it off at the pass? What have we done here in the U.S. to address our debt problem, which I'll add stands today at : $15,749,000,000,000 (that's $15.7 Trillion, folks), and the real debt called the "unfunded liabilities" is: $119,084,000,000,000 (that's $119 Trillion, folks). or. what has Japan done to address their Gov't debt problem? Nothing, nada, nil, zilch, zero, a big fat goose egg!

But, it's a "euro" problem. according to the traders, and hedge funds. I call it a circuit breaker. What am I talking about now? Ahhh grasshopper. do you see those numbers above? $119 Trillion in unfunded liabilities? Well, bonds will be issued when the time comes to finance this debt. and how will those bonds, that will have higher yields on them, get their debt servicing (interest payments) paid? Well, we've been through this many times, but there are tons of new readers, so here you go.

The U.S. will be able to increase their revenue, which means higher taxes, or they can debase the dollar to a level that allows them to pay the interest on the bonds with cheaper dollars. Or, as I've said many times. we'll have to do both! And that's why I fear what's ahead for my kids and grandkids. OK, so anyway. whenever the dollar goes on one of these bear market rallies (see 2005, 2008, 2010 and now) I call them circuit breakers. you see not that long ago, the dollar was teetering on the cliff, but not now. it has received a circuit breaker. And these are needed, because, even if the U.S. Gov't knows they need a much weaker dollar to pay back their debt servicing with cheaper dollars, they can't have it fall off a cliff now, or any time soon, they need everyone to play this game with them for as long as they can keep it going.

OK. I'm not saying that the Eurozone is devoid of problems. and the euro shouldn't be weaker than it was. What I'm getting to, and hopefully won't make you wait any longer than this. is that this Risk On, and Risk Off stuff is giving me a rash! It's all a bunch of dookie! We need for currencies, and other asset classes like stocks and commodities, to trade on fundamentals, like they did before the financial meltdown of 2008. If we were simply looking at fundamentals, and not all this Risk On, Risk Off bull dookie, currencies like, the Norwegian krone, the Swedish krona, the Canadian dollar, and a host of other good fundamental currencies wouldn't be getting caught up in the Risk Off selling that's going on right now.

It's all about the flight to so-called safety. U.S. Treasury 10-year bonds hit a record low yesterday of 1.63%... and the Japanese yen is trading with a 78 handle again. I bet that ticks the Japanese Gov't off to no end! All the Trillions of yen they've spent to weaken the currency to no avail. poor, poor Japanese Gov't. Don't you feel sorry for them? HA!

OK. I told you near the top that the A$ dropped quite a bit yesterday. It felt the pull downward from the euro, and their weak data that continues to pile up. Like last night's printing of a report showing home-building approvals unexpectedly dropped in April. This got the rate cut campers all lathered up, and the calls for more rate cuts became shouts! And once again, bond buying in the A$ was strong, pushing yields of 10-year Aussie Gov't Bonds to a record low of 2.856%... It's going to be difficult to reverse this move in the A$, folks. OZ, as we call Australia, has the wicked witch of the west flying overhead right now, and even though Glenda the good witch is there to protect OZ, everyone runs for cover. that's what's happening here.

Well. the Chinese renminbi continues to slide weaker every day. The renminbi has lost nearly 1.5% in May. So, what gives here? Well. the Chinese economy is moderating, and that means the Chinese Gov't's efforts to diversify their economy, and gain more domestic demand, runs into a roadblock. So to keep things going, China needs to ramp up the exports again. Uh-Oh. global growth is slowing, so demand for Chinese goods is weaker. So, the Chinese weaken their currency to make the exports more competitive and appealing in price.

And, with most currencies weaker, at this point, the Chinese are just playing along with the games that countries are playing with their respective currencies. We'll have to see just how weak the Chinese leaders are willing to take the renminbi.

Gold put in a strong performance yesterday, closing up $8, but it was up near $12 at one point in the day. the shiny metal looks strong this morning too, with it trading up $3, as I write. You know, I've gone on record as saying that this drop in the price of Gold has been counterintuitive and just doesn't make sense. Here's something to think about and I mean think about folks. The U.S. (as reported in the Wikileaks cable) fears that buying of Gold & Silver is going to replace the dollar, and they can't handle that because they can't print Gold & Silver. So, when it looks like Gold & Silver is ready to really go mainstream last summer, along comes these afterhours takedowns of the prices of both metals.

So.. you don't think that.. Nah. that can't happen! Or can it? I talked about this a bit above. The U.S. debt problems are astronomical, the Eurozone and Japanese debt problems are nothing to laugh about, so the currencies of these countries should be weak, and investors should be flocking to Gold & Silver. and the demand for these two is still good on a retail basis, but that's not what moves these prices.

So, it's not all seashells and balloons for Gold & Silver owners these days. but, as I've said before. I'm not selling. for I do believe that this will all be in the rear view mirror in a few years, and those that sold will be scrambling to buy again.

The U.S. data cupboard is chock-full-o-data today. Not all of it is 1st tier data, but still the prints today would choke a horse. Some of the major prints include: Challenger Job Cuts, ADP Employment change, 1st QTR final GDP, Weekly Initial Jobless Claims, and the Chicago PMI (manufacturing index). So, we could see quite a few swings today with each economic data print.

Tomorrow is the Jobs Jamboree for May. Can you believe tomorrow we turn the calendar to June? OMG! So. the ADP report today should be an indication of what the Jobs Jamboree will look like tomorrow. Right now, the experts are of the mind that 150,000 jobs were created in May. Hmmm, maybe they need to read the Pfennig, because I'm going to touch on this in the TTWS section of the letter today!

Then There Was This. from CNBC.com. "Small businesses hired fewer workers in May and cut hours for those on their payrolls, an independent survey showed on Wednesday, raising prospects of another disappointing employment report.

Businesses added 40,000 new jobs, after increasing payrolls by an upwardly revised 60,000 jobs in April, according to Intuit, a payrolls processing firm. April's job count was previously reported as 40,000.

The survey's findings contradict expectations of a pick-up in job gains in the broader economy this month as the weather-related distortions that held back employment growth in March and April dissipate."

Chuck again. Yes, there are a lot of economists that are making some bold predictions for the Jobs Jamboree tomorrow. I'll wait until tomorrow for my thoughts on the data. although it sure would help to know how many ghost jobs the BLS will add before making any forecast!

To recap. There was more blood in the streets for the currencies and stocks yesterday. Chuck goes ape over how the euro gets bashed because of the debt crisis, when the U.S. and Japan have their hats in the ring for debt problems too! The A$ falls on fears of additional rate cuts after weaker recent data. Brazil cuts rates again. and the Chinese renminbi has lost 1.5% this month, and Chuck gives his thoughts on why that has occurred.

Currencies today 5/31/12. American Style: A$ .9740, kiwi .7550, C$ .9730, euro 1.2410, sterling 1.5510, Swiss $1.0335, . European Style: rand 8.5115, krone 6.0605, SEK 7.23, forint 242.65, zloty 3.53, koruna 20.6925, RUB 33.15, yen 78.80, sing 1.2855, HKD 7.7640, INR 56.10, China 6.3680, pesos 14.13, BRL 2.0150, Dollar Index 82.85, Oil $88.21, 10-year 1.63%, Silver $28.06, and Gold. $1,566.05

That's it for today. Can you believe that tomorrow is June? Remember when you were young, and time seemed to stand still? Now, for me, it seems to fly by. Darling daughter, Dawn, called to make sure I was OK last night. Nice of my kids to do that. Little Delaney Grace will turn 5 in August, and Dawn, who was a good swimmer and then a swim coach, already has her on the swim team! I received my "smokenater" last night. Now I'll really be smoking a lot of meat this summer! And with that. I had better get the process to get this out the door going. I hope you have a Tub Thumpin' Thursday!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837

More Baby Steps For China.

Chuck Butler — Thu, 10 May 2012 16:54:49 GMT

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In This Issue.

* A few currencies attempt to rebound.

* China stops buying Eurozone debt.

* Could they stop buying ours?

* Norges & BOE leave rates unchanged.

And, Now, Today's Pfennig For Your Thoughts!

More Baby Steps For China.

Good day. And a Tub Thumpin' Thursday to you! Hey! Here's your second reminder. this coming Sunday is Mother's Day. Don't you dare forget! The Cardinals will be in town this weekend, making the Sunday game a Mother's Day Game. When I was a young man, and played baseball, we always began our season on Mother's Day. These days, the baseball season for youngsters has been going on for over a month!

Well. thanks for sitting, or standing, or whatever though that beginning, sometimes I just don't know where a certain thought is going to take me.

I also don't know what the markets when they flock to dollars and yen, the two big dogs when it comes to debt creation. But it is what it is. and so we carry on, and look for other things that make sense!

Like the Chinese buying Eurozone Gov't debt. I explained this all previously, but for those of you new to class. The Eurozone is China's largest export destination. Did that surprise you? I bet you thought it was the U.S.. But no, it's the Eurozone. Well, China is making progress with its attempt to switch from being a country that depends wholly on exports to drive its economic growth, to one that shares the load of driving the economy with domestic demand, but. they aren't there just yet, and therefore, exports remain very, very important to the Chinese. Therefore, they cannot afford to lose their biggest customer.

And this is part of the plan, folks. China's plan to replace the dollar standard. The Chinese have become the world's financier taking that away from the U.S., and they have also made big inroads to removing the dollar as the settlement mechanism in terms of trade, by signing currency swap agreements with a boat load of countries. These currency swap agreements allow China and the country they are trading with, to exchange each other's currencies and not use dollars, as the way it was done since the end of WWII.

Last year, I told you that the New York branch of the Bank of China had begun allowing deposit accounts in CNH. The new deliverable Chinese currency. The account size is limited, but the idea of deposits was what stirred the drink, folks.

Well, now there's word that the U.S. Fed had approved an application by ICBC (Industrial Commercial Bank of China) to acquire retail bank branches in the U.S. ICBC will pay $140 million to buy an 80% piece in Bank of East Asia USA.

Remember the movie from the 60's. The Russians Are Coming... Sure, people that should know better are not making a big deal of this, and saying things like: "this is too small to be concerned with" and so on. But, it's a foot in the door, folks.

And, just another baby step for China to remove the dollar as the reserve currency of the world.

OK, after going through all that, I see a news story go across the screen that says "China's Sovereign Wealth Fund (SWF) stops purchasing European sovereign debt". Let me try to break this down. And let this be a warning to the U.S. Obviously, China has bought enough European Sovereign Debt (ESD) to fill their desire. If The Chinese SWF can back away from its biggest customer, then it should have no problem backing away from its 2nd biggest customer (the U.S.). I think that China will attempt to invest in Europe to help keep the ship afloat, they just won't make a big deal of it.

OK. I didn't mean for this Tub Thumpin' Thursday Pfennig to carry on about China for the whole letter. So, I'll stop there, and return to our regularly scheduled programs.

Well, the dollar's mighty hammer stopped swinging so wildly yesterday, and in the overnight markets, we're actually seeing a handful of currencies that are attempting to gain back some lost ground to the dollar in the trading days since last Friday's Jobs Jamboree disaster.

The Norges Bank, Norway's central bank, is meeting as my fat fingers fly across the keyboard. I don't think the Norges Bank is going to cut rates today, so it will be interesting to hear what the Norges Bank has to say.

You see, right now, I'm not a fan of the Norges Bank, when normally I am a fan. What has soured my taste right now is the fact that the Norwegian economy and fundamentals are calling for higher interest rates. But the Norges Bank has been struggling with a strong krone (to the euro) for some time now, and a rate hike would only make their struggle more difficult. But, in Chuck's world of "when I'm the head of a Central Bank", I wouldn't let those kinds of things bother me. Especially if I were head of Norway's Central Bank.. They have Oil revenue coming out of their ears, they have to offset the inflationary problems that Oil revenues bring, and they can do that with a combination of a strong currency and appropriate interest rate levels.

OK.. back to reality. I kind of feel like Tooter Turtle, and Mr. Wizard the Lizard is bringing me back from my trip to Norway to be the head of the Norges Bank. "Twizzle, Twazzle, Twozzle, Twome, time for this one to come home" "always, always I tell you, be just what you is, not what you is not!" (the Twizzle, etc. sure played heck with spell check!)

Ok. now that was fun, right? For you youngsters that have no idea what just happened. Sorry. but Tooter Turtle was a fave cartoon of mine as a youngster!

I see where global investors have given Fed Chairman Big Ben Bernanke a 75% approval rating. Of course they did! Big Ben has been responsible for keeping the stock market ship out to sea with his Quantitative Easing, and ZIRP (zero interest rate policy). Of course with this highest rating for the Fed Chairman, comes the EXPECTATION that he take further action this year to accelerate a revival in U.S. financial markets.

I wonder what these people will say in a few years, when we see the unintended consequences of Big Ben's policies. I doubt they give him a 75% approval rating then, but on the other hand, maybe they will, for we could be talking about QE4 or QE5 or QE10!

The price of Oil seems to have found a bid at $96, as it has held that figure for three consecutive days now. The Petrol currencies of: Norway, Canada, Russia, Brazil, the U.K. and even Mexico breathe a sigh of relief if $96 is the bottom for this sell off.

While I like seeing the price of Oil lower, I know in my heart of hearts that this sell off was overdone. You see, it all started with the Jobs Jamboree disaster last week, and has continued until reaching $96. That's a fall of $8 in a week. talk about overdone!

Gold had a very interesting day, as the price dropped, recovered, dropped, recovered, and finally gained a bit. When I see this happening, I think that the "price manipulators" are being matched by the Chinese and Indians, taking advantage of the cheaper price. And talk about a sell off being overdone! But when the "price manipulators" smell blood they attack, and attack they did this past week. I would love to give these "price manipulators" my version of Jackie Gleeson on the Honeymooners. One of these days, price manipulators, to the moon!

The Eurozone has approved the next scheduled payment to Greece. There was some thought going around yesterday that Eurozone leaders would hold up the payment, as penalty to the Greeks for attempting to elect an "anti-euro" Government. Of course that Gov't didn't have enough seats, and couldn't put together a coalition that worked, so it dissolved, and the Greeks will have to vote again.

There are renewed calls for Greece to leave the euro. I still don't think that will happen, as the problems for Greece would multiply not be reduced by leaving the euro and going back to the drachma. But, hey, that's never stopped leaders of a country from doing stupid things before!

I would think the euro would be better off without the baggage in the long run.

The Swiss franc continues to be strong. not as strong as a year ago, but strong nevertheless. and that's killing the Swiss National Bank (SNB). The cross to the euro remains stuck at around 1.2015. spittin' distance to the floor set by the SNB last September. I'm surprised that the markets haven't tested the SNB's resolve here. But they haven't, so life goes on in Switzerland.

The Bank of England (BOE) just ended their meeting today. The BOE left rates unchanged. No surprise there, what can they do? They've cut rate to the bone, they've increased their version of QE/ bond buying. and yet the economy does a double dip in the recession pool.

I told a small group of people yesterday that just like the euro and dollar are an ugly contest, so too is the British pound sterling and the euro.. and here, the euro loses. But, really? Investors think that things in the U.K. look better than in the Eurozone? Really? Maybe they are, but I sure would be looking elsewhere in Europe. (remember, Norway, Sweden, Switzerland, Poland, Hungary and the Czech Rep. don't use the euro!)

Then There Was This. One of my fave reads on Bloomberg is the author and columnist, Caroline Baum. She always makes sense to me, and you don't find many writers on economics that do that! Her latest column on Bloomberg is about the labor picture here in the U.S. titled: "Government's Snake Oil Won't Cure Jobs Ailment".

In the column Ms. Baum talks about how the jobs problem could be structural. "What if the Fed, through all its efforts, can't buy more employment? What if unemployment is structural, with an inadequately trained workforce or labor immobility preventing employers and job seekers from hooking up? Signs are pointing in that direction."

She goes on to say: "Structural unemployment, like the nation's other fundamental deficits, is a tough challenge for policy makers all around. Jobs are a big issue in the Presidential election. No elected official wants to see the public suffer, financially or emotionally, from being unemployed. There a strong desire to do something even if nothing is the lesser of two evils.

On the fiscal front, attempts to correct long-term structural imbalances with short-term tax-and spending are doomed. Cyclical medicine leaves the patient with more debt and the same old ailments.

What happens if the monetary authority misdiagnoses the cause of high unemployment and uses its usual tool, the printing press, as a cure? For the same money, the Fed will buy itself more inflation and less growth. That's the sort of jolt the economy can do without."

Chuck again. yes, like I've said since the financial meltdown, and the jobs problem began, that a lot of those jobs were not going to return. It appears that I hit that one bang on.

To recap. a few of the currencies are showing some life this morning, while the majority are still under the spell of the dollar and the flight to safety that began after the Jobs Jamboree disaster last week. China gets approval to buy a U.S. bank.. another baby step folks. The Norges Bank meets today and will probably follow the lead of the Bank of England and leave rates unchanged. and we have a special treat with a snippet of a column by Caroline Baum!

Currencies today 5/10/12. American Style: A$ $1.0098, kiwi .7865, C$ .9985, euro 1.2930, sterling 1.6150, Swiss $1.0765, . European Style: rand 8.0375, krone 5.8560, SEK 6.92, forint 223.80, zloty 3.2760, koruna 19.4870, RUB 30.19, yen 79.65, sing 1.25, HKD 7.7630, INR 53.37, China 6.3142, (first gain in a week) pesos 13.49, BRL 1.97, Dollar Index 80.16, Oil $96.29, 10-year 1.85%, Silver $29.24, and Gold. $1,591.55

That's it for today. Cardinals gain their first sweep of the year. It's about time! The had won the first two games of several series to begin the year, and couldn't win that last game until last night in desert. I sure hope they can keep this going at home this next week! If you're one of those that only read the last paragraph, here's another reminder that this coming Sunday is Mother's Day. a much better day on the desk yesterday. and then I got to go home and see little Braden Charles crawling around the floor. He gets so excited about stuff, it's fun to watch. He'll be turning one in a couple of weeks. WOW! Where did that year go? Oh well. Mike's here, which means this has to get out the door! I hope you have a Tub Thumpin' Thursday!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837

Oil. The New Anti-Dollar?

Chuck Butler — Fri, 24 Feb 2012 16:40:00 GMT

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In This Issue.

* Euro climbs back to 1.34!

* Loonie is stuck in the mud.

* The Debt Generation.

* Do you have enough Gold & Silver?

And, Now, Today's Pfennig For Your Thoughts!

Oil. The New Anti-Dollar?

Good day. And a Happy Friday to one and all! Because I've got friends in low places, where the whiskey drowns, and the beer chases my blues away. No Wait! Apparently, an email friend, named Craig, send a letter to the Bank of Canada pointing out the perils of the Bank's low interest bias, and guess what? He received a reply from the Gov. of the Bank of Canada, Mark Carney! WOW! So, I guess Craig actually has friends in High places!

Well. no beating around the bushes this morning. Since yesterday, we have an all-out currency rally going on. Yesterday, the euro was flirting with 1.33, and today it is sending love notes to 1.34. The single unit actually touched 1.34 overnight, but currently sits just below that figure. Unbelievable right? Well, it just shows to go you that even a the ugly currency gets taken out, and dined! I called it an ugly currency, because many of you know that I've referred to the dollar / euro as an ugly contest. Right now, it appears that the dollar is winning the ugly contest. But, as we all know all too well, that can change in a heartbeat.

OMG. the wind is blowing so strongly outside that the building just moved I think. the light standard above my head is swaying back and forth! Should I stay or should I go now? If I go there will be trouble, and if I stay it will be double!

Sorry, but that's the song that popped into my head, as I can feel the building moving. But, I've got to have faith in U.S. builders! We're on the top floor of our building, (It's only 7 stories tall), so we're bound to feel this movement every now and then.. But It's still scary.

Well. the price of Oil has soared again, this time passing $108! When I saw that this morning, I immediately shifted my focus to the currency screens to see where the Canadian dollar / loonie was trading. And much to my surprise, the loonie is trading in yesterday's clothes, and in fact, the same clothes all week! What's going on here? The price of Oil is really pushing the envelope once again, and the loonie is stuck in the mud? Hmmm.

I think that the fear that this rise in the price of Oil is going to be a tax on the nascent recoveries in the U.S. and other countries, is keeping a lid on the loonie right now.

One other thought on the rise in the price of Oil. maybe I'm looking at this incorrectly! Maybe Oil has become another anti-dollar. So, the price of Oil is rising because the dollar is falling? Something to think about anyway.

It's not keeping a lid on the Aussie dollar (A$) though! Earlier this week, I talked about how the A$ was searching for wind after having it knocked out of it on Monday by the RBA minutes. Well, I think the A$ finally found its wind overnight. I told you when I first talked about the RBA minutes that we've seen this scenario before, and it only took a couple of days for the calmer heads to prevail and start pushing the A$ up again. Well, looks like that happened again. And even though the RBA kept their "easing bias". I'm of the opinion that they are finished with this current rate cut cycle. And once the markets get wind of this, (it will take them longer because they have to read it here first! HA!) the A$ will be back on terra firma!

The other petrol currencies from Norway, Russia, Brazil, and even Mexico, are all seeing a rally on the back of the rise in the price of Oil.

I wrote earlier this week about the Norwegian krone appearing as though it had broken the spell that the euro held over it. Now, even with the euro rallying, the krone is still outperforming the euro. I sure hope the spell has been broken for good, because fundamentally speaking, the krone should not be tarred with the same brush as the euro!

Do you remember the song, Mercy, Mercy, Mercy by the Buckinghams? I heard that song on the I-Pod this morning, and it took me back to the late 60's, and there I was, playing my guitar in a band called the Soul Wonders Revue, and Mercy, Mercy, Mercy was a staple for the band! WOW! Sorry for going here, but, when you have a flashback you have to share it with someone! And you are the lucky someone this morning!

Did you see the story from yesterday where 200 Billion yen of pension assets held by money manager AIJ (in Japan) are missing? The Japanese SEC suspects that AIJ faked investment reports to clients. So. the corporate scandals that the U.S. is known for, have spread to Japan. Which is not what the Japanese yen needs right now.

I saw a video yesterday that really got me thinking. The video was a quickie about all the young kids that voted in the last election. They have become the "Debt Generation". for more than $4 Trillion in debt has been added to our National Debt, in the past 4 years. The "Debt Generation". My oldest son, Andrew, actually shows the movie I.O.U.S.A. to his class and quizzes them on it. But think about this for a minute. I.O.U.S.A. was made 4 years ago. Imagine if my friend, Addison Wiggin, was to make that movie / documentary now?

Where is the Tea Party? Have they faded away? I say this because I saw this story in the Washington Post yesterday. "The national debt is likely to balloon under tax policies championed by three of the four major Republican candidates for president, according to an independent analysis of tax and spending proposals so far offered by the candidates.

The lone exception is Texas Rep. Ron Paul, who would pair a big reduction in tax rates with even bigger cuts in government services, slicing about $2 trillion from future borrowing."

So. as I've said for a couple of years now. There's no political will to cut spending. no matter who is leading the charge.

I read that story, and immediately went to my account, and checked on Gold & Silver holdings. Why? To see if I have enough! With all that spending going on, the dollar is going to lead the fiat currency system to land of failed fiat currencies. Of course that's just my opinion, and I could be wrong.

And the thing I like to point out whenever I'm on the road and I make a statement like that, is that, while the fiat currency system is faltering, the dollar leads the way, so there will be currencies that remain stronger than the dollar. again, just my opinion.

Gold (& Silver) had another nice performance yesterday, and is now a stone's throw from $1,800. I'm told by a chartist, that $1,803 is the next psychological figure for Gold. Should it trade past $1,803, the charts say a HUGE Rally could follow.

G-20 Finance Ministers and Central Bankers are going to meet in Mexico this weekend. Do you think the Eurozone's debt situation will be discussed? You bet! Of course, I would prefer them to talk about what to do about debt everywhere, not just the Eurozone!

Fed Head, Dudley, who's always good for sound bites on the economy, will be speaking today, along with Fed Heads, Plosser and Bullard and Williams. You know, that it was revealed about a month ago, that Fed Head Dudley owned a ton of Gold. Which is curious to me, as to the call by the Fed for more inflation. Hmmm. Oh well, move along Chuck, these are not the droids you're looking for!

Not much for the data cupboard today. New Home Sales and U of Michigan Consumer Confidence. yesterday's cupboard showed us that Weekly Initial Jobless Claims remained at 351,000.

Then there was this. Speaking of the Fed Heads this morning, I saw this story on Reuters and thought it would fit well here: "Seeking to make good on past threats in Congress to rein in the Federal Reserve's powers, a prominent Republican lawmaker said on Thursday he will introduce legislation to focus the U.S. central bank on a single mandate to fight inflation and protect the dollar's value.

Representative Kevin Brady, vice chairman of the Joint Economic Committee, said in a statement his "Sound Dollar Act" aims to "maintain the purchasing power of the dollar in order to foster long-term economic growth and stability." He plans to formally introduce it in early March."

Chuck again. good luck with that "sound dollar act"! Brady might want to wait until March 17th, so he could have the Luck of the Irish on his side! But like I said earlier, there's no political will to cut spending, and to cut spending and lower the national debt is the only way to a "sound dollar" in my opinion.

To recap. The stabilization of the Eurozone continues, and is fueling a currency rally that has gone on for two consecutive days now. The euro has climbed back to 1.34, and Gold is now a stone's throw from $1,800. the price of Oil is above $108, and the petrol currencies of Russia, Norway, Brazil and Mexico are enjoying that move, while the loonie is kept out of the rally. And the A$ has found its wind again.

And then one more thing. Yesterday, I referred to the Aussie Foreign Minister, who stepped down, Rudd, as the Finance Minister. my faux pas. I didn't realize I had so many Aussie readers! They all let me know my mistake, as they should have!

Currencies today 2/24/12. American Style: A$ $1.0735, kiwi .8385, C$ $1.0025, euro 1.3410, sterling 1.58, Swiss $1.1132, . European Style: rand 7.5920, krone 5.5885, SEK 6.58, forint 215, zloty 3.1050, koruna 18.6280, RUB 29.26, yen 80.50, sing 1.2560, HKD 7.7550, INR 48.94, China 6.2975, pesos 12.79, BRL 1.7090, Dollar Index 78.51, Oil $108.29, 10-year 2%, Silver $35.56, and Gold. $1,780.55. and as tradition has it. our weekly peek at the U.S. Debt Clock. you can see it by clicking here: http://www.usdebtclock.org/index.html

That's it for today. Well.. this weekend, the position players report to Spring Training, so now the gang's all here! And. my beloved Missouri Tigers travel to Kansas to play KU. if the Tigers can pull a rabbit out of their hats and beat KU, they would be on their way to a Big 12 Championship. But, that's going to be a tough row to hoe for the Tigers. My beautiful bride's uncle passed away this week, and she's on her way, with her mom, to the Baltimore area this weekend for the memorial service. So, Alex and me this weekend without supervision! YAHOO! HA! Did you see the numbers for the cost to drive a Chevy Volt electric car VS a gas powered car? If you haven't you should check them out, you'll be amazed, like was. the electric car is more expensive to drive! Ok. time to get this to the reviewers. I hope you have a Fantastico Friday, and wonderful weekend!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837

The sleeping lion awakens

Chuck Butler — Thu, 29 Dec 2011 13:30:00 GMT

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In This Issue...

*Enter volatility...
*It's all about the euro debt...
*Gold and silver knockdown...
*China and Japan chat...

And, Now, Today's Pfennig For Your Thoughts!

The sleeping lion awakens

Good day.and welcome to the last Thursday of 2011. The markets have been in a slumber since last Friday, but that all changed yesterday when the sleeping lion, i.e. volatility, decided to rise and take a stroll around the terrain. We began the day as any other with not much to speak of during the Asian and European trading sessions, but traders in the US markets had a much different idea. There's a lot to talk about so let's jump right in.

As you can see from yesterday's currency round up, most currencies and metals were still wearing the same clothes from the previous night. When I fired up the currency screens yesterday, the euro was in a tight range trading around 1.3070 with gold hovering around $1590 and silver right around $28.60. I was getting a little worried as to what I would talk about today since it looked as though Wednesday was going to be another blow off day in the news department. It didn't take long for that to change.

As soon as 8:30 rolled around, the wheels immediately fell from the wagon and everything dropped like a rock and didn't look back at all. The US markets were definitely risk averse as the euro promptly fell by over 0.50% and gold sold off by $10. It didn't stop there. After just an hour into the trading session, and maybe about the time that second cup of coffee was being poured, silver was already down $1.00, gold was down nearly $20, and the euro was trading into the 1.29 handle.

I'm sure you're asking yourself what in the wide world of sports caused such a stir when no data was released in the US, or any other major economy for that matter, and the absence of any damaging news headlines that would have sent investors running to the hills. Well, a lot of it had to do with a thin trading market but if we had to nail it to one item, it was renewed fears about the European debt crisis. This topic is going to continue to be a thorn in the side of all financial markets until uncertainty subsides. There are some big question marks that remain, as I touched on yesterday, and the markets aren't particularly fond of uncertainty.

Things were looking decent on the day as the Italian bond auction of six month Treasury bills, which some were concerned with on Tuesday, ended up with a successful outcome. Italy sold 9 billion euros of 179 day bills at a demand of 1.7 times, which means there was more demand than what was actually available, and eclipsed the previous demand rate of 1.47 times. Another bit of good news that occurred had to do with the yield. In fact, the yield dropped to 3.251% from the 6.504% that resulted in the previous auction on November 25.

The reason traders have been making a big deal about a rising or falling yield has to do with the ability of the issuer, in this case Italy, to pay out the principal or interest and avoid default. If yields rise to the point that the capital needed to repay the debt obligation, as a result of higher interest payments, there may not be enough to pay principal or vice versa. Since Italy can't print more euros to avoid default, investors can demand higher yields for the higher risk. The US doesn't have that problem, in theory, since the Fed can just run the printing press, but the euro countries don't have that luxury.

The shorter maturities aren't really the concern. We will have the longer maturities auctioned today and will be a good test to see where things actually stand. The all important 10 year bond is approaching the point of concern. In fact, yields of at least 7% in Greece, Ireland, and Portugal all foreshadowed subsequent bailouts so the previous Italian yields pressing above 7% sparked speculation of a possible bailout at some point going forward.

The other bit of concern surrounded the size of the ECB's record high balance sheet as it rose to 2.73 trillion euros ($3.55 trillion) after it lent financial institutions more money. They decided earlier in the month to offer banks unlimited cash, or loans, for three years in an attempt to ensure enhanced access of the banking sector to liquidity. 523 banks were awarded a record 489 billion euros to encourage lending, but so far, they are just parking the money. Sounds pretty familiar, doesn't it.

We're seeing the same thing that happened here in the US, in that, banks are taking these loans but not exactly using the money for its intended purpose. These European banks are just sitting on the cash instead of lending it out in order to keep credit flowing in somewhat of a functional manner. If banks continue stockpiling capital in an effort to shore their own balance sheets, we could see the credit markets feel pressure once again and was some of the fear floating around the markets yesterday. Both events weren't exactly new revelations, but these thin markets can be swayed easily.

Talk about a rough day. Gold and silver took the brunt of the sell happy market yesterday as they both lost about 2.5% and 5.5% respectively. By the time I left the office last night, gold was hovering around $1550 and silver was trying to stay above $27. In fact, silver traded as low as $26.86 on the day and except for the sharp drop in September, we haven't seen these levels since January. I looked at a one year chart for silver and the volatility has been unbelievable, taking into consideration we've seen a high in April of $49.79 and a low of $26.07 back in September.

Aside from the overall risk aversion, gold had some additional pressures that pushed it down nearly $40 on the day. Fundamentals are definitely not in play and haven't been for quite a while as economic worries would normally push gold prices higher. The stronger dollar had a hand in the cookie jar but news that gold imports from India, the world's largest gold jewelry consumer, could fall as much as 50% this month since the rupee has dropped quite a bit against the dollar. Commodities, in general, are priced in US dollars so a weak rupee and a stronger dollar looks to be enough to hamper demand.

I also saw a report that China restricted gold trading in the spot and futures market, the Shanghai Gold Exchange and the Shanghai Futures Exchange, to crack down on illegal buying and selling of commodities in that nation. Since there was evidence of lower demand in two of the world's largest markets, prices consequently fell. If you throw in a thin market and the selling of gold to cover losses in other investments, you get this type of scenario. Gold should end the year in positive territory, as is currently sits on a year to date return of 8%, but we could see more pressure through the end of the year as investors try to lock in gains.

Since there weren't any damaging economic reports released abroad, the foreign exchange market took a hit as a result of risk aversion and flight into the US dollar. All of the non-euro European currencies finished the day with losses of around 1% while the high yielders and commodity currencies saw losses in the neighborhood of 0.50%. The global economic report pipeline is pretty barren for the rest of the week so risk tolerance in either direction should set the trading tone in these final days of the year.

Taking a brief look at Switzerland, we did have a couple minor reports that included a gauge of consumption and leading indicators for December. Both of these reports pointed toward a continued slowdown for the Swiss economy as leading indicators fell to the lowest since August 2009. The Swiss National Bank also lowered their growth projections for 2012 down to 0.50% from 0.90% and said they will enforce the exchange rate ceiling of 1.20 vs. the euro with the utmost determination. Switzerland is still trying to overcome the franc's rise of nearly 37% against the euro in the 12 months before the ceiling was introduced in September.

When I came in this morning, the dollar was adding to its gains from yesterday as most currencies along with metals continue on their downward trek. We did have a bit of positive news from the Italian bond auction as the average yield of 10 years dropped to 6.98%, down from the previous 7.56% yields. A measure of Italian business confidence fell to the lowest level in 2 years so the negative vibe surrounding Europe is still present. The euro has lost the 1.29 handle and is trading at levels we haven't seen since September 2010, while gold tries to stay above $1500 and silver tries to remain above $26. Let's see if the US economic reports due this morning can offset some of these European woes.

As a pseudo then there was this, Chuck sent me a link to an interesting article that appeared in the New York Times earlier in the week, which he promptly coined as "all in all, it's just another brick in the wall." You can click on the link to see the whole story, http://www.nytimes.com/2011/12/27/business/global/china-and-japan-in-currency-agreement.html?_r=1, but it discusses an agreement between China and Japan to directly trade their currencies in an attempt to move away from using US dollars. While a timetable has not been agreed upon as of yet and specific details such as volumes and other nuances haven't been worked out, this is still another strike for the long term future of the US dollar as the reserve currency.

As Chuck has mentioned many times in the past, the Chinese still have a lot to do before the renminbi can become a viable replacement choice for the world's reserve since it's not a fully convertible currency. I think Professor Kupchan of Georgetown phrased it well in an interview by saying the currency pact is more symbolic than significant right now for the United States. It hardly unseats the dollar as the world's dominant currency but it's a clear sign that China is headed in the direction of internationalizing the renminbi. In addition to another chip in the armor for the USD as the world's reserve currency, this agreement would reduce the need for these countries to invest in USD.

If this agreement does materialize into any type of significant event, we definitely need to be concerned with how our debt would be financed going forward. China and Japan are the two largest foreign holders of US debt so if they don't have a need to hold as many US dollars or purchase US Treasuries, that would certainly present problems as we currently depend on them to meet our debt obligations. While the dollar would weaken if there was less demand, any broad reduction in holdings from China and Japan would result in some very large shoes to fill. We had several readers forward this article as well and wanted to get our thoughts, so there you go.

Recap.Volatility during US trading hours sent most asset classes into the red. As the financial markets are still dealing with thinner volume, renewed concern over the European debt crisis steered the ship. Fears of a lackluster bond offering in Italy, which turns into future fears of a bailout, and the record high amount of debt on the ECB's balance sheet caused widespread risk aversion. Gold and silver took the brunt of selling pressures and thoughts of lower demand for gold out of China and India just perpetuated the situation. Switzerland stands ready to defend its currency ceiling and talks of a currency swap agreement between China and Japan are just another brick in the wall.

Currencies today 12/29/11. American Style: A$ 1.0066, kiwi .7667, C$ .9765, euro 1.2888, sterling 1.5387, Swiss $1.0583. European Style: rand 8.1610, krone 6.0228, SEK 6.9324, forint 241.51, zloty 3.4470, koruna 20.1170, RUB 32.2205, yen 77.84, sing 1.3043, HKD 7.7738, INR 53.0562, China 6.3190, pesos 13.9917, BRL 1.8777, Dollar Index 80.722, Oil $99.58, 10-year 1.92%, Silver $26.68, and Gold. $1532.50

That's it for today.Well, so much for that quiet ending to 2011. I guess it's just par for the course in an otherwise extremely volatile year. It had its fair share of ups and downs but the long term focus hasn't changed. The University of Missouri recently switched conferences from the Big 12 to the SEC and the new football schedule was released for the upcoming season. I was looking forward to see Alabama make the trek into Columbia in mid October but my wedding, hi Sara, actually shares the same date so it looks like I'll have to catch the Tide on the next go around. On that note, it's time to get the day started, so until tomorrow.Have a Great Day.

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

Euro moves higher after a positive IFO index and a successful Spanish debt auction...

Chuck Butler — Tue, 20 Dec 2011 16:30:57 GMT

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

Announcing EverBank Wealth Management, Inc.

Led by you. Guided by experience.(sm)

It all starts with a conversation...877-613-EVER (3837)

http://www.EverBankWealthManagement.com

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In This Issue.

* Euro pushes higher after an upbeat report...

* Spain's debt auction finds a host of buyers...

* Sweden cuts .25%...

* A tax to cap income???

And, Now, Today's Pfennig For Your Thoughts!

Euro moves higher after a positive IFO index and a successful Spanish debt auction...

Good day. Another rainy day here in St. Louis, it feels like we haven't seen the sun in days. A few degrees colder and we would be in the middle of a blizzard. I didn't have to deal with being locked out this morning, so it is starting out as a better day.

The euro sure enjoyed a better night rebounding from close to its annual low vs. the US$. A surprisingly upbeat IFO business climate index combined with a pledge of more funds for the bailout and a positive Spanish auction to send the common currency higher. The IFO Institute's index, based on a survey of 7,000 German business executives, rose to a three month high of 107.2 from 106.6 in November. Economists had expected the index to drop to 106. November's number had surprised on the upside also, so this month's value certainly seems to confirm a trend which indicates Germany's economy may be able to push through all of the credit crisis to remain on a solid growth path.

The euro rose back above $1.30 after dipping into the $1.29 handle a couple of times last night. Spain sold 5.64 billion euros of 3 and 6 month bills compared with a target of 4.5 billion euros. This was a very successful auction, albeit of short term paper. The average yield on the Spanish debt was just 1.735% compared with 5.110% when the bills were issued in the last week of November. The six month yields were also lower at 2.435% compared with 5.227% in November.

The EU helped to insure a successful auction by boosting their anti-crisis efforts, pledging additional 150 billion euros to the IMF. Four countries not using the common currency also pledged to add to the IMF, but the UK pushed themselves further away from the EU by refusing to commit to a specific funding amount. UK officials will define their contribution in early 2012. It almost seems as if the UK is wanting to see the euro problems continue, and their refusal to commit funds kept the EU from reaching their target of 200 billion euros of additional capital. The UK is certainly making it difficult for the EU, and it will be interesting to see if there are any long term repercussions if/when the Euro zone begins to recover. I've already see that the French central bank president is suggesting the ratings agencies should focus on the UK instead of spending so much time in central Europe. Apparently he was upset with Fitch after they lowered France's credit outlook.

The pound sterling weakened against the dollar after a report in the UK showed home sellers cut asking prices for a second consecutive month. Even though the UK would like to think they can stay out of the Euro-zone fray, they are dependent on the European mainland for a majority of their trade, and all of their recent posturing isn't going to endear them to their neighbors to the east.

As I mentioned yesterday, ECB President Draghi has thus far refused to increase the bank's direct purchases of sovereign debt. Draghi and the ECB has instead focused on keeping European banks flush with liquidity. We will see just how much liquidity the banks need tomorrow when the ECB opens up a 3 year lending window. Unlimited cash will be offered up to European banks at the benchmark rate of 1% for three year terms. The ECB has also loosened collateral requirements for the loans which should encourage more borrowing by the banks. The only question is whether these banks, which already have been burned by the sovereign debt crisis, will decide to invest some of these new funds back into the debt market. Readers will recall the Fed opened up the vault doors to US banks during the mortgage crisis, but these banks used the additional funds to shore up their balance sheets instead of going out and lending or purchasing mortgage debt. While the banks will look healthier, I'm not so sure the additional liquidity will be able to do much to keep yields down in the sovereign debt markets.

Sweden's Riksbank cut rates as expected. The .25% cut from 2% to 1.75% was the first cut since 2009, but as I said yesterday, the move was predicted by a majority of economists. Sweden's krona rallied after the cut as investors looked at the rate cut as a positive indication of future growth. There was also many who had thought the cut would be even larger, so the .25% move was seen as a reason to move back into krona investments.

The commodity markets have been gyrating like a young Elvis' hips, with oil swinging higher in the past two days. US crude stockpiles declined for a second week, and there is speculation that the Gulf Cooperation Council which meets in Saudi Arabia this week will reduce supplies from Iran. Sanctions against Iranian oil are being discussed as a response to Iran's nuclear program, and a cut in supply from OPECS second largest producer would definitely impact the price. Oil is inching back up toward $100 per barrel after falling down to just over $92.50 last week.

The move higher has helped boost the Canadian dollar and Norwegian krone, both big oil exporting nations. But another big commodity producer, Brazil, saw their currency fall for the first time in three days after worries over the impact of the death of Kim Jong Il caused investors to exit 'risk trades'. The Brazilian central bank has done an 'about face' recently regarding the value of the real. Chuck warned that the policy makers in Brazil would rue the day they decided to depreciate their currency, and recent actions suggest they have seen enough. The central bank held an auction yesterday to sell dollars, buying reals. These were repos, so the dollars will be bought back as soon as one month from now, but the immediate impact is to strengthen the real. This is a 180 degree turn from the back in September when policy makers took action to limit the appreciation of the real. They should have listened to Chuck's warnings!!

The data cupboard was pretty bare yesterday, and housing starts and permits for the month of November will be the only releases today. Since this is a bit later than usual, I am able to tell you the housing starts for the month of November came in slightly higher than expected at 685k, a large 9.3% positive move from October. Building permits were also higher at 681k, a 5.7% gain from October. This is definitely a step in the right direction, and an indication that the US may just be able to muddle through at a stepped up pace. Tomorrow we will get an indication of how the existing homes are selling.

Then there was this. Frank sent me his thoughts on an op-ed piece which ran in the NY Times over the weekend. It definitely generated some talk on the desk this morning, and Frank has a good take on it. So here's Frank:

The phodder one finds on editorial pages both left and right are often a flight of fancy. Harebrained proposals for this or that which even on a cursory reading suggest little analysis or attention to unintended consequences. The good news is that nearly all are ignored and relegated to the ash bin. But these articles can be an indicator of political mood and even if not adopted outright we should view them at least as the smoke indicating a fire out of sight.

Here's one that really caught my attention - In a New York Times op-ed Sunday Ian Ayres and Aaron S. Edlin propose - and I've read it a few times to be sure - that a tax be created such that net after-tax income for any filer is limited to 36 times the gross median household income. There are conceptual errors in the presentation such as comparing averages to median which changes some of the answers by a factor of 3x - but let's move past the sloppy academic work and on to the impact.

Using the most recent IRS data we have the median US household income is about $51,000 (versus an average of about $80,000). Using the formula presented by the authors this would result in a marginal tax rate of 100% on any amount resulting in after tax income of $51,000 x 36 or $1,836,000. I'll let that sink in for a second, but note that this would actually impact only about the top 0.3% or about 480,000 households.

Now aside from hitting the US Senate and some in the House in their own pocketbook this will not be received well by the likes of our own recently departed Albert Pujols ($25.4 million per year will be cut by about $23 million), any one of a number of Hollywood notables, but of course the key target - business people - are likely to have a significant change in behavior which I'll let you predict. This is made even more unusual since one of the authors has written a book on incentives which I need to go out and obtain to understand what I have missed on that topic.

I'll assume that if called for a vote the Senate would veto this out of self preservation but forecast that we see something like this over the coming years as the US struggles to deal with budget issues and an increasing inability to raise revenue or slice expenses. And I'll leave Chuck and Chris to determine where that takes the US dollar.

Both Frank and I agree that this stands no chance of getting through the Senate, where quite a few Senators would be hit by the cap. But it does illustrate that the larger than life problems we face are going to generate some pretty dramatic proposed solutions. Our debt and deficit problems here in the US or those in Europe won't be fixed by small little steps, and our current habit of just kicking the can down the road only serves to make the problems even larger.

And I will close out today's Pfennig by thanking all of the readers who sent me messages about yesterday's Pfennig. I agree with most of your comments, the politicians in Washington DC are the ones who should be brought to justice, not just the Wall Street bankers and scapegoats at the mortgage giants. Thanks again for reading, and for sending me your comments.

Recap. The euro was able to push higher after Spain found more than enough buyers for their debt. German business leaders are positive, and the EU countries pledged 150 billion euros to the bailout fund. The UK refused to commit funds, and the pound sterling dropped as home prices continue to fall. The Riksbank cut Swedish interest rates by .25% causing the krona to move higher. Finally, oil prices have been moving up, bringing the CAD$ and NOK along with them.

Currencies today 12/20/11. American Style: A$ 1.0038, kiwi .7654, C$ .9704, euro 1.3110, sterling 1.5682, Swiss $1.0768, European Style: rand 8.25, krone 5.8807, SEK 6.8473, forint 228.99, zloty 3.4002, koruna 19.4191, RUB 32.049, yen 77.81, sing 1.3007, HKD 7.7824, INR 52.89, China 6.3466, pesos 13.7669, BRL 1.8485, Dollar Index 79.729, Oil $96.16, 10-year 1.87%, Silver $29.40, and Gold. $1,611.30

That's it for today. Spent a late night at my son's hockey game which he won 3-2, and he has another this evening. As I mentioned in the opening paragraph, the rain continues here in St. Louis, and is expected to last through most of the week. We had a good day on the trading desk yesterday, and it looks like today will be another busy one. Hope everyone has a Terrific Tuesday, and thanks for reading the Pfennig!!

Chris Gaffney, CFA

Vice President

EverBank World Markets

1-800-926-4922

1-314-647-3837

Weekly jobs data is positive, pushing the dollar lower...

Chuck Butler — Fri, 16 Dec 2011 17:17:00 GMT

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In This Issue.

* Weekly jobs data is positive...

* China is buying less US debt...

* High yielders rally...

* Indian rupee rebounds...

And, Now, Today's Pfennig For Your Thoughts!

Weekly jobs data is positive, pushing the dollar lower...

Good day. Chuck is headed out for his annual Christmas shopping trip today, but first he will be stopping by his daughter Dawn's class to read a Christmas story to her students. I've worked with Chuck for over 20 years now, and one thing about him has never changed; he absolutely loves Christmas! I've been able to spend the last few days back out on the desk, as we are 'rebuilding' a testing environment for the new computer program I have been working on. Yesterday was almost like old times; the phones were busy but we still had time to have a few good laughs before Chuck headed out for his Christmas vacation.

As mentioned in yesterday's Pfennig, we had a long list of data released yesterday, and most of the numbers indicated the US economy may be picking up a bit of steam. Produce prices came in right where they were expected, increasing .3% MOM and 5.7% YOY. The 'core' figure, (ex food and energy) is the one the Feds monitor and both showed modest increases over last month. The biggest surprise came in the form of the Empire Manufacturing number which came in at 9.53 on December vs. 3.00 last month. This number reflects manufacturing activity in the NY region, but has a history of being very volatile and therefore an unreliable indicator of future manufacturing growth.

Initial jobless claims were 24k lower than expected last week, with 366k first time claims. Continuing claims increased slightly to 3603k vs. last week's adjusted 3599k, but the number was still lower than economists expected. Another big surprise came in the form of the Net Long-term TIC Flows which were expected to be $62.5B, just slightly lower than last month's $68.3B. But the actual amount of International Capital coming into the US in October was just $4.8 billion! Demand for US debt fell in October as investors moved out of their 'safe havens', selling US Treasuries. But November brought renewed worries regarding the European debt crisis, so most economists believe the TIC data will be back up near $70B next month.

Capacity Utilization, which is one of our favorite indicators of future growth, came in right where it was expected; unchanged at 77.8%. The Industrial Production data was the sole piece of data which was negative, dropping .2% in November vs. October's .7% increase. But this was the last piece of data released yesterday, and the markets basically ignored it focusing instead on the weekly jobless claims which for once showed a move in the right direction. The weekly numbers weren't outstanding, but the equity markets are desperately looking for something to spark a 'Santa Claus' rally so the pundits jumped all over the 19,000 fall in the number of applications for unemployment payments. It wasn't as if we had more people going to work, but instead the stock jockeys are getting excited because the rate of firings is slowing down. But the markets were desperate for any good news, and jumped all over the better than expected weekly jobs numbers.

Chuck was busy trading for the last time in 2011 yesterday, but still took some time to analyze all of the numbers as the plethora of US data releases came across the Bloomberg. He sent me the following to include in this morning's Pfennig; so here's Chuck:

Ok... Chris mentioned that Capacity Utilization fell .2% from 78 to 77.8... I told the boys & girls on the desk, that Capacity Utilization (Cap U) is one of the few forward looking pieces of data, and when Cap U begins to bog down, it tells me that the economy is bogging down. We might not see it in other stuff for a couple of months, but we can see it right here, right now... And for the current stuff, Industrial Production decreased .2% in November... Yes, October's number was strong (.7%), but you have to remember that the economy was still breathing on the $2.1 Trillion in stimulus that the Fed has put into the economy the past 3 years, in October... and probably proved once again that a star burns brightest right before it burns out!

the number of hours worked is falling... and to me... the wheels are beginning to come off the economy again... and like Steve McCroskey in Airplane... the economy picked a bad time to have the wheels come off of it! This IS going to be an election year... Good luck with that!

Well. the TIC's data gave us some interesting news yesterday. according to the U.S. Treasury, China bought less Treasury debt (Treasuries) in October and their total foreign holdings of Treasuries dipped for the first time since July. China, the largest foreign holder of U.S. Treasuries (remember our own Fed is the largest holder of our debt) bought 1.2% less in October to bring their total holdings to $1.13 Trillion. Could this be a signal? Probably not, as we also saw declines in July and August, only to be reversed in September. But. this eventually is going to happen, folks. China will say no mas. and all hell will break loose. are you ready for that to happen?

remember years ago, in the fall, during Bonanza, Chevy would introduce their new lineup of cars? And they used to play that song... See the USA in a Chevrolet... OK... for people of my age and older, that song is now in your head... now use these words to that music...

Here we go again, deficit spend again, it's the only thing our lawmakers know how to do...

Congressional negotiators signed off Thursday evening on a sweeping $1 trillion spending agreement for federal agencies, just 28 hours before a deadline that would have led to a government shutdown. Boy... aren't we lucky to have these guys working for us? Where else could you find lawmakers that were so willing to deficit spend to make our lives easier? Ahem... did I hear someone say, .... Greece?

Thanks as always to Chuck for his thought provoking contribution to this morning's Pfennig.

The dollar started falling after the data releases yesterday morning, and continued in overnight trading. Currency investors moved out of the 'shelter' of US$ holdings and went hunting for yield. Those currencies with the greatest interest rate differentials were the leaders yesterday, with the NZD$, AUD$, and BRL leading the way. Brazil's real moved up over 1% vs. the US$ as the central bank said it will lend dollars to help exporters, adding to the supply of the US currency. The central bank will do 'repos' to add US liquidity to the markets, and pulling BRL out.

The Swiss franc joined in the rally with the 'high yielders' after the Swiss National Bank stayed on the sidelines. Currency traders were expecting another move by the SNB to weaken the currency, but after they refrained from intervention giving traders a green light for further appreciation of the CHF. The SNB kept the franc's minimum exchange rate at 1.2 per euro and also maintained its benchmark rate at zero.

The euro rallied from an 11 month low against the dollar after Spain's debt auction met with more buyers than supply. Spain sold more bonds than its maximum target at rates which were high, but still within expectations. The Spanish government was able to sell 6.03 billion euros of bonds compared with a maximum target of 3.5 billion euros. The yields were 5.545%, just slightly higher than the 5.433% it paid when it auctioned 10 year bonds at the end of October. Another report showed European manufacturing and service industries contracted less this month than economists forecast.

One of the surprise moves by currencies on the day came from the Indian rupee which had been one of the worst performing currencies in Asia this year. The big move up in the rupee came after India's central bank curbed trading in rupee forwards and Prime Minister Manmohan Singh pledged to open up the retail industry. The central bank said it will reduce the amount of open positions dealers can maintain overnight, helping to prevent speculators from pushing the currency lower.

Then there was this. Peter Mason sent me the same link to a story from our friends over at Casey Research regarding 'Re-hypothecation' which is the newest buzzword surrounding the fall of MF Global. This story does an excellent job of explaining what this word actually means, and clearing up some of the confusion regarding the competing claims for gold held at HSBC for customers and/or counterparties of MF Global.

http://www.caseyresearch.com/articles/abcs-re-hypothecation-gold-and-securities-markets-what-you-need-know

Thanks to Peter for brining this article to my attention. Peter joined EverBank last year as a member of our Infinity Elite Plus group, and has really been a great addition to our customer service team.

To recap. The bunch of data released yesterday in the US was not stellar, but the markets were looking for a reason to rally. Investors went hunting for yield and the NZD, AUD, and BRL all rallied. The Swiss National Bank stayed on the sidelines and allowed some appreciation for the CHF. The Indian government curbed forward trading, helping to bounce the rupee back up. And our friends over at Casey Research explain why 'Re-hypothecation' is the new buzzword.

Currencies today 12/16/11. American Style: A$ 1.00, kiwi .7630, C$ .9672, euro 1.3068, sterling 1.555, Swiss $1.0681, . European Style: rand 8.3528, krone 5.9566, SEK 6.9076, forint 232.92, zloty 3.4362, koruna 19.384, RUB 31.8438, yen 77.81, sing 1.3010, HKD 7.7832, INR 52.745, China 6.3508, pesos 13.79, BRL 1.8434, Dollar Index 80.008, Oil $94.26, 10-year 1.90%, Silver $29.615, and Gold. $1,591.06

That's it for today. I sure hope Chuck is successful on his shopping trip today. In years past we would share Christmas gift ideas for our wives, as we both have trouble figuring out something to give them (what do you give someone who already buys themselves whatever they want / need?). This year my wife helped me out and actually let me know what she wanted; a Kindle. I have already bought and wrapped it, so no last minute shopping trips for me. Chuck already mentioned this, but I wanted to wish Jennifer a very happy birthday! Jen and I have worked together for so long that I think of her as my younger sister (not that much younger anymore as she tomorrow she is passing a big milestone). Happy Birthday Jen!!! Thanks for reading the Pfennig, and I hope everyone has a Fantastic Friday, and a wonderful Weekend!!

Chris Gaffney, CFA

Vice President

EverBank World Markets

1-800-926-4922

1-314-647-3837

Waiting For Downgrades.

Chuck Butler — Mon, 12 Dec 2011 17:46:00 GMT

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

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In This Issue.

* Euro breaks range to the downside.

* Moodys warns the Eurozone.

* Comparing the U.S. & Eurozone debts.

* The Treasury Bubble.

And, Now, Today's Pfennig For Your Thoughts!

Waiting For Downgrades.

Good day. And a Marvelous Monday to you! It's beginning to look a lot like Christmas. The houses are all decorated, and that sparkle in the faces of people like me that simply love this time of year is really showing. The gift that keeps giving for the Eurozone, their sovereign debt problem, continues to cause problems for the risk markets. and that's where we'll start today.

But first, I want to say that today's letter is going to ask you to check out a couple of links, one to an article that my friend, David Galland wrote this past weekend, and second to a short video on Silver. By all means I don't demand you check these things out, but when we get right down to the heart of the matter, this letter is not just about reporting prices and trends. It's about making you think, so you can make better informed investment decisions.

So, right out of the starters blocks this morning, the euro has broken through that trading range it held last week (1.3350 - 1.3450), to the downside, as the ratings agency Moodys warned the Eurozone that it will begin to review each member. I told you on Friday, that I didn't believe that the Eurozone leaders had done enough to satisfy the ratings agencies. And this is the first step of downgrades all across the board in the Eurozone. And most likely a double notch downgrade for France.

While the ratings agencies are at it. they could take a look over here at the U.S. and ask the question of: Where's the $1.2 Trillion in automatic cuts to discretionary spending? Because, as I've point out before. The Eurozone as a whole, and the U.S. both generate about 20% each to global GDP. So. if the Eurozone, which is at least addressing the matter, albeit too late, is getting downgraded, why isn't the Eurozone's kissin' cousin the U.S.? The U.S. debt is worse than what's going on in Europe folks. but don't let that get in the way of a media fire storm to point all the focus on the Eurozone.

So. I'm not saying that the Eurozone shouldn't be downgraded. they made their bed, now they have to lay in it. All I'm saying, is if the Eurozone's debt scares the rating agencies, then they should be frightened out of their skin by the U.S's debt.

You do realize that our debt is now greater than the GDP of the country? Our debt is greater than $15 Trillion, and our annual GDP is about $14.5 Trillion. And, the question I have for the ratings agencies is this. When will you make the U.S. address this, and not the way they have proposed to do it? Don't know what I'm talking about? Well. you know that $1.2 Trillion in discretionary spending that's supposed to get cut? It's all back end loaded, and. here's the big thing. it doesn't really "cut" spending. it cuts the proposed increases to spending! So, the U.S. is saying, in 10-years we'll not add to our spending as much each year. That's not cutting the spending folks.

But then. in I personally doubt we, as a country ever get to 10 years going status quo. In other words. the you know what will hit the fan on U.S. debt issuance long before we get to 2021. I've written about this several times in the past, and even did a video on it over a year ago, for the Sovereign Society, regarding the bursting of the U.S. Treasury Bubble. It's all tied to when the foreign creditors say, "no mas" on buying our debt.

I actually read this weekend that the credit guru, Martin Weiss, is now saying the same thing. Talk about being surprised as to who has now jumped on my bandwagon! Mr. Weiss believes this "event" could happen soon.

As soon as this week's auction of $78 Billion of Treasuries? Probably not. but each auction adds to the weight of debt issues already in the hands of foreigners. One can never tell which auction is going to be the one that breaks the backs of foreign buyers, but it's coming.

So. here we are on December 12, 2011. and the two largest economies in the world, have debt up to their eyeballs. Where does someone that has money that they just don't want to have sitting around earning next to nothing do in each of these countries? Well. like I tell people whenever I speak in public. I would tell the people of any country I was in. If I was in Canada, Switzerland, the U.K., Australia, Singapore, it doesn't matter. for I would tell the people in each of those countries the same thing. do not hold 100% of your investment portfolio in your base currency. You should diversify using currencies of other countries and precious metals.

And that leads me to. precious metals. I see that Gold is down below $1,700 this morning. it just doesn't make any sense to me. on a fundamentals basis, Gold should be trading greater than $2,000. The price manipulators continue to throw a spanner in Gold's climb to $2,000. But, I truly believe that the price manipulators can be used to our advantage, for every time they drive the price of Gold & Silver down, they provide us with buying opportunities!

Demand for the precious metals continue to climb higher, and another thing I tell people when I'm out on the road, and talking about metals is this. Demand remains strong for the metals, and supply continues to slow, which is a problem, because miners can't just go into a cave and flip a switch and have Gold & Silver appear!

Here's a video on Silver supply with some very good facts for you to consider. Again, this should just be one of the things that you use to make an informed investment decision.

http://www.youtube.com/watch?v=xCCuLMgyUgY&feature=youtube_gdata_player

So. I guess I don't have to tell you that with the euro getting hammered this morning that all the other currencies, save the Chinese renminbi, are getting sold too. But there! I told you anyway!

Speaking of the Chinese renminbi, which happens to be the only currency gaining VS the dollar this morning, it looks like the Chinese Gov't is back to allowing appreciation again. It took them longer than normal, to come around and begin the appreciation of the renminbi again. You know. I never, ever, say that an asset is a "one-way street". And the renminbi is probably the best illustration of that, for all things considered, a person might think that the renminbi is a one-way street to greater appreciation. But, that isn't the case. from August 2008 to June 2010, the currency held steady Eddie, and was not allowed to appreciate. In June of 2010, the Chinese Gov't issued a communiqué that called for a faster appreciation of the renminbi. Since June 2010 to today the renminbi has gained almost 7%... But there have been periods of weakness and non-movement, like we recently experienced. So, while the renminbi may look like a one-way street, it's NOT! Should the appreciation continue? Probably, as long as Asia's domestic demand remains unaffected by the slowdown in Europe and the U.S.

The data cupboard here in the U.S. is pretty barren today, with only the Monthly Budget Deficit expected to print. However, some months, this data is held up by someone or something. Nevertheless, the Budget Deficit for November is expected to be around $140 Billion.

Tomorrow, we'll see the color of the latest Retail Sales for November. I have to say that this time of year, I see tons of packages being delivered to our house, so. the Butler Household Index (The BHI) tells me that Retail Sales will be strong for November.

And don't forget the FOMC meeting that will take place tomorrow! Geez Louise, how could I almost forget about the FOMC? Just because I would like TO forget them, doesn't mean I can forget them! This meeting will be a non-event folks. But, as always, it will be interesting to see / hear what Big Ben Bernanke has to say. Not that I find what he has to say interesting! But the markets seem to think it to be important, so since I'm in "the markets" I play along.

The Swiss National Bank (SNB) meets this week. remember, they want to implement negative interest rates on deposits. And The Eurozone will see their up-to-date PMI's (manufacturing index reports), which should show more weakness.

So. besides waiting for the ratings agencies to downgrade the Eurozone members. There's not much on our plates this morning and this week, my last week of work this year!

And that gives me an opportunity to talk about my friend, David Galland. David is THE Best writer in the markets, but if he decided to do novels he would be the best at that too! David writes a weekly letter about "stuff" . Sometimes it's the markets, sometimes it's about things that we deal with everyday. He makes people think, something that I hope I've learned from him.

So. this week, David is talking about the ever expanding Gov't and what he thinks is going on. you can read his letter here: http://www.caseyresearch.com/cdd/man-vs-morlock

But. you should sign up for the letter while you're there!

Then there was this. Well. David's letter this week he uses a lengthy excerpt from a book written in 1955 by Milton Mayer, a reporter who studied the lives and attitudes of ordinary Germans leading up to and through the Hitler regime.

I read the article and kept coming back to this paragraph because, this reminds me of my fight against deficit spending and the growing debt that I began many years ago, and people would look at me like was crazy... I knew the "end" and was trying to alert people of the beginning...

"And you are an alarmist. You are saying that this must lead to this, and you can't prove it. These are the beginnings, yes; but how do you know for sure when you don't know the end, and how do you know, or even surmise, the end? On the one hand, your enemies, the law, the regime, the Party, intimidate you. On the other, your colleagues pooh-pooh you as pessimistic or even neurotic. You are left with your close friends, who are, naturally, people who have always thought as you have."

Chuck again. yes. but my "close friends", who think like me, continues to grow. As I said in San Francisco a couple of months ago, in 2001, I spoke in a room that was empty except for our family members that came to listen. These days, they don't have enough seats in the rooms they have me speak in. And Pfennig readers. the numbers continue to grow. and this is organic growth folks. I have never gone out and "bought a list of names" . The Pfennig is: by word of mouth. and for that. I thank you, dear readers!

To recap. The euro has finally trades outside the range it held last week, to the downside though, as Moodys sent out a warning that they will review each Eurozone member for a possible downgrade. We're still waiting for S&P to announce their downgrades, as the Eurozone leaders didn't do enough to satisfy the ratings agency. With the euro getting hammered this morning, the rest of the currencies, save the renminbi, are also weaker. Gold is down $30 this morning, and providing us a cheaper level to buy for sure!

Currencies today 12/12/11. American Style: A$ 1.0115, kiwi .7670, C$ .9765, euro 1.3265, sterling 1.5625, Swiss $1.0750, . European Style: rand 8.2350, krone 5.81, SEK 6.8175, forint 230, zloty 3.4220, koruna 19.2665, RUB 31.56, yen 77.80, sing 1.2975, HKD 7.78, INR 52.83, China 6.3606, pesos 13.75, BRL 1.8180, Dollar Index 79.21, Oil $98.14, 10-year 2.02%, Silver $31.28, and Gold. $1,680.10

That's it for today. A pretty laid back weekend for yours truly. That was the calm before the storm though, as this weekend will be jam packed with fun, and the following weekend is Christmas! Friday is my annual "shopping day" with my friends. We've done this for about 15 years now. Next Saturday, my long time friend, and colleague, Jennifer, will celebrate her birthday, and then Ty Keough will also celebrate a birthday. I'll be gone, so I wish them a Happy Birthday now. I was released by the radiation doctor on Friday. So, now I go back to the oncologist for the next phase. and with that. I'll end this, and get it out the door. Don't forget though. that the prettiest sight to see, is the Carol that you sing, right within your heart.

I hope you have a Marvelous Monday!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837

You Won't Believe Who Had a Failed Auction!

Chuck Butler — Wed, 23 Nov 2011 17:15:31 GMT

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

Announcing EverBank Wealth Management, Inc.

Led by you. Guided by experience.(sm)

It all starts with a conversation...877-613-EVER (3837)

http://www.EverBankWealthManagement.com

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In This Issue.

* A failed auction, and no it wasn't the U.S.!

* Euro gets slammed.

* Global growth hopes fade.

* More Accommodation in store for us?

And, Now, Today's Pfennig For Your Thoughts!

You Won't Believe Who Had a Failed Auction!

Good day. And a Wonderful Wednesday to you! Tomorrow is Thanksgiving, so in keeping with the tradition I started years ago on the day before Thanksgiving. here's Adam Sandler to start your day.

Turkey for me, Turkey for you, Let's eat the turkey, In my big brown shoe Love to eat the turkey, At the table, I once saw a movie, With Betty Grable And the song goes on. but now that you're in the mood, we'll go on to the task at hand. More Thanksgiving stuff in the Big Finish, so don't despair!

What's interesting to me this morning, is that, when I went back to the archives to pull out that Thanksgiving message, I noticed that the first line of the "meat" of the letter, talked about dollar strength, and how it was so strong. WOW! Is this an annual thing? As we head to year-end, does the dollar rebound? Well, it did last year, and it sure is doing it this year too! But beyond that, I would say these two years are the exception. But then there's this dollar strength to talk about this morning, eh?

Well. right out of the starters blocks this morning, we have news from German that's not good. In fact it's downright awful. No it's not a weak data print. And it's not more Eurozone downgrades. What it is, is something I've had nightmares about happening here in the U.S.! Ok, with no further beating around the bush. Germany failed to get sufficient bids at their auction this morning for 10-year bunds. 35% of the maximum sales target of 6 Billion euros went unsold! Uh-oh! What's the problem? Ahhh grasshopper. Germany was attempting to auction these bunds at 1.98%... The markets simply said, "we need a higher yield to buy".

This is just the beginning, folks. the bond vigilantes they are called. They demand higher yields, when a country gets too lose with their debt, and have to issue more and more. Now, one has to wonder why the bond vigilantes haven't gone after U.S. Treasuries, or even U.K. Gilts (their treasuries) for that matter. Hmmm. But, the problem today is all about Germany's inability to sell debt at 1.98%, so, they'll have to come back to the markets with a higher yield. And the news of this failed auction, which is what it is, has hammered the euro into the ground.

The poor euro, got hung out on a line, and beaten for Germany's failed auction. It was so surprising that Germany, of all countries, had a failed auction, and that amount of surprise is being taken out on the euro. But. think about this for a minute. It remains to be seen what the yield is that will be the key to selling these bunds. But if it doesn't get too out of hand, it could very well be a reason to go back into euros for investors when the yield rises, for the yield differential that the Eurozone currently holds over the U.S. and Japan, would widen. The key here is that it doesn't get too out of hand. Like say, Italy & Spain, that keep fighting the 7% yield bug. They may be able to deal with 7% yields now, but eventually that ability will fade.

I mentioned above that I have had nightmares about a failed auction here in the U.S. and we've actually probably had a few in the past couple of years, but only technically, for the Fed finds a way to buy up the unsold bonds before the paint dries on the auction. So. you can see what damage it does to a currency, when a country's auction fails.

And the difference here is that the European Central Bank (ECB) didn't step in to buy the failed piece of bunds. are they right to do that? Or. are we in a "time that fundamentals forgot"? and a central bank needs to do everything to keep the markets happy? Well. I do believe that we have been in a "time that fundamentals forgot" since 2008, but, I'm still not signed up on the roster of those that believe a Central Bank should be like the Fed. or the Bank of England, as long as we're calling out Central Banks that have done everything to keep the markets happy.

Speaking of the Fed. Their FOMC meeting minutes printed yesterday. And I've got something on that in the TTWT section of the letter today. The thing that I want to talk about here is something that I've been thinking long and hard about. And that is. I think they are missing the point with their willingness to expand their balance sheet with more mortgage backed bonds. The point is this. if banks didn't want them, what makes them so attractive to you?

This balance sheet explosion of the Fed's is very troubling to me, folks. and then when you see the TTWT, you'll be scratching your heads, and wondering just what is on the minds of the Fed Heads.

OK.. Enough of that! I see where Sweden's Riksbank (central bank) issued a communiqué that said they will go back to cutting interest rates if the Eurozone sovereign debt problem persists. Well, then you may as well take the dust covers off the rate cut machine! And soon, all the euphoria that was in the world that surrounded global growth, and countries raising interest rates in concert with their growth, will be gone!

The poster child country for global growth, Australia, is seeing their interest rates get cut, and the A$ get slashed. You know. I have lost my zeal for global growth, which is going to hurt the BRIC countries the most. But I haven't lost my zeal for Asian growth. And, IF (notice the Big IF), the Asian countries truly have developed domestic demand and markets, this is the only place we'll see growth in the next few years.

And that, is good news for Australia, for Australia is so close to all the Asian countries. But, until it's proven that Asia can withstand a Western Slowdown, the Aussie dollar (A$) is going to suffer. But, for those that are willing to take a bet on Asian growth, they'll use the selling of A$'s as an opportunity to buy more, and a cheaper price!

The news is spotty this morning, in that, there's not a whole lot of it to sift through. Yesterday afternoon, after coming home from a doctor appointment, I read a story about how the IMF had introduced a program to help Europe's stronger economies facing risk from the sovereign debt crisis. The euro rallied on this news, and as I looked at the overall landscape of the currencies, things looked a little better.

But that was before this morning's news of the failed auction! Speaking of an auction and something that really speaks to what I was talking about earlier. The Fed auctioned $35 Billion in 5-year notes yesterday at a yields of .937%... OOOOHHHHH. where do I get my hands on some of those? Do you really think that in the next 5 years, that interest rates aren't going to be going up? What are these people thinking, buying these bonds? Oh well. move along, these aren't the droid you're looking for.

China printed a manufacturing index report last night, which continues to show that the Chinese economy is slowing. but not collapsing, as many have said for over two years now. The Chinese manufacturing index fell to a 48 figure, which represents contraction (anything below 50). This is the first time since March of 2009, that the index was this low. I would say, that we should look for clues that the Chinese Gov't is directing funds to correct this slowdown. that's what they did in 2008, and it worked.

The U.S. data cupboard is chock-full-o-data this morning. We start the day with Durable Goods Orders for October, which will be weak. That is followed by two of my faves. Personal Income and Spending. Then comes the Weekly Initial Jobless Claims since tomorrow is a Holiday. And then we get the U of Michigan Confidence report for the first two weeks of November.

After your head stops spinning from all the data prints this morning, one thing will be certain. that things aren't as rosy in this "2nd half of the year", as the Fed Heads kept telling us would be the case earlier this year.

Then there was this. from Bloomberg. "Some Federal Reserve policy makers said the central bank should consider easing policy further, according to minutes of their Nov. 1-2 meeting. A few members indicated that they believed the economic outlook might warrant additional policy accommodation. "

Chuck again.. Hmmm. well. it sure does sound like there's more "accommodation" in whatever form that is, on its way to us, eh?

To recap. The euro is getting slammed this morning, after a brief rally yesterday afternoon, when the IMF announced a new plan. But the rally was short-lived when German saw their auction of 10-year bunds fail this morning! 35% of the auction went unsold, which indicates to Chuck that Germany is going to have to raise the yields they are willing to pay on the bunds to get them sold. The euro is getting slammed and bringing all the risk assets with it.

Currencies today 11/23/11. American Style: A$ .9740, kiwi .7425, C$ .9595, euro 1.3390, sterling 1.5585, Swiss $1.0885, . European Style: rand 8.4450, krone 5.83, SEK 6.8850, forint 231.30, zloty 3.3360, koruna 19.1355, RUB 31.03, yen 77.20, sing 1.3070, HKD 7.7930, INR 52.37, China 6.3577, pesos 14.05, BRL 1.8350, dollar index 78.77, Oil $96.24, 10-year 1.93%, Silver $31.67, and Gold. $1,691.90

That's it for today. Chris is going to pick up the conn on the Pfennig for Friday, and no I won't be out shopping. I'll be at home with my feet up watching football! Saturday is the possible last Big rivalry game between my beloved Missouri Tigers and Kansas (KU doesn't want to play us any more). And we will also celebrate the 1st birthday of Everett, the EverBaby! I just call him E, or buddy. or bud. Little Delaney Grace was so darn cute in her pilgrim hat yesterday. I had "a feast" with her at her school, and then the kids all sang to us. and with that. I think I'll give you my usual Thanksgiving poem, and hope you have a Wonderful Wednesday and a very Happy Thanksgiving. We all have a lot to be thankful for, my list would go on, and on. so I won't bore you with it!

MAY YOUR STUFFING BE TASTY,

MAY YOUR TURKEY BE PLUMP.

MAY YOUR POTATOES 'N GRAVY HAVE NARY A LUMP.

MAY YOUR YAMS BE DELICIOUS.

MAY YOUR PIES TAKE THE PRIZE,

MAY YOUR THANKSGIVING DINNER STAY OFF OF YOUR THIGHS!!

Happy Thanksgiving to one and all!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837

Greek and Italian...

Chuck Butler — Wed, 09 Nov 2011 17:38:09 GMT

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In This Issue...

* More turmoil in Europe.

* Berlusconi steps down.

* Risk off type of day.

* China inflation slows.

And, Now, Today's Pfennig For Your Thoughts!

Greek and Italian...

Good day...And a wonderful Wednesday to one and all. Right off the bat, this is going to be super short and sweet this morning as Chuck was feeling under the weather last night and asked me to step in with some of the market headlines from this morning and last night. The market moving headlines yesterday and through today so far have been primarily European in nature as Italy is beginning to steal the spotlight away from Greece in the debt crisis du jour. Since Italy is a bigger fish in the euro zone than Greece, the levels of concern have been on the rise.

All of this turmoil has caused the euro to drop about 2 cents so far this morning and is now just trying to hold onto the 1.36 handle. The markets have been so very fickle over the past couple of months that things could easily turn on a dime in US trading if there are any positive comments or developments that come out of Europe as the day progresses. We saw this happen yesterday as the markets were pleased with the decision from the Italian Prime Minister, Silvio Berlusconi, to step down.

His decision wasn't necessarily of his own will, but instead, it seems that pressure from the markets had backed him into a corner and forced his hand. He was also on the receiving end of a strong round of criticism, both internally and externally, so the calls for his resignation have grown louder and louder. Italian borrowing costs have risen sharply over the past several days as the interest rates on bonds have risen to the highest level since joining the euro.

The currency market has, in turn, marked the euro down quite a bit this morning since the Italian economy can be thrown in the too big to bail out category as they don't see a clear plan for appropriate austerity measures. The rising yields have cast fears with investors that Italy won't have the ability to meet the interest obligations, and therefore, need some type of bailout or a default would result. Austerity measures are currently the topic of discussion for Italian politics, so I'm sure there won't be a shortage of things to talk about.

Moving over to the United States, its going to be another quiet day as we only have the weekly gauge of mortgage applications and the measure of September inventories to contend with so not much to speak of today. We'll see data tomorrow that will actually have some teeth with the September trade balance and the October budget statement, although the markets are all but comfortable with these disappointing figures. We'll also see if the weekly jobs numbers can remain south of that stubborn number of 400k or if this was just a temporary jump.

With the euro down about 1.5% this morning, all of the other currencies, except for the yen, are showing up in the red column. We have the Swedish krona, Norwegian krone, and South African rand bringing up the rear this morning. Since the euro pretty much sets the direction for most of the other European currencies, Sweden and Norway have been pushed down even though they aren't a part of what's wrong in Europe. Since a majority of their trade is within the European Union, they get punished as if they were a part of the euro and are labeled as such. I wouldn't say that its justified, but its just market perception and eventually fundamentals will prevail.

This is definitely a risk off type of day, so most of the financial markets find themselves in the red at this point. The high yielders, commodities, and stock futures are all off so far on thoughts global growth will wane and a European spawned credit freeze could ensue. As we have seen for the better part of this year, the markets take a statement or a situation and interpret it to one extreme or the other. In other words, one positive data report means the US economy is in the clear or as we see today, a roadblock or challenge in the euro zone gets interpreted a death blow for the currency and world economy.

Chris Gaffney sent me some thoughts to include, so here you go:

"China's efforts to tap the brakes seems to be working. Consumer inflation rose at an annual rate of just 5.5% in October, the smallest monthly increase in almost 3 years. A 5.5% inflation rate would certainly be of concern here in the US and in Europe, but China continues to have near double digit economic growth, so higher inflation would be expected. The government's efforts to slow the Chinese economy was a source of a lot of market angst in the last several quarters, as many believed they would not be able to control price increases without forcing their economy into an abrupt slowdown. But this latest inflation reading indicates the government has been able to cool the price increases without halting economic growth. Chinese officials have also been helped out by the continued problems in Europe and the US which have helped keep a lid on commodity prices.

These lower commodity prices have put pressure on the commodity currencies of Australia and New Zealand. The Aussie dollar continued its decline yesterday, and has fallen almost 3% vs the US$ during the first 9 days of November. China's demand for Australia's raw materials is likely to continue to fall in the near term which will continue to weigh on the value of the Aussie dollar.

But the declines in AUD and NZD will probably be limited by the higher returns these countries offer. Even after the recent rate decrease, both Australia and New Zealand continue to offer investors a nice yield advantage over the currencies of Europe and the US$. These rate differentials should put a 'floor' under these two currencies, and limit the damage to investors currency portfolios.

Then there was this...All of the bad news flowing out of Europe lately has helped divert our attention away from just how bad things continue to be right here in the US, but a story appearing on CNBC's website yesterday paints an ugly picture of the US housing market. The title says it all: "Half of US Mortgages are Effectively Underwater". Home prices continue to fall as a glut of bank-owned homes and lack of job growth continue to hold down the US housing market. The story states that 28.6 percent of the mortgages on single family homes are currently underwater. That equates to 14.6 million borrowers."

But the story points out that many other homeowners have so little equity built up in their home that they don't have the financial ability to move (no money for a down payment or moving expenses). Adding these homeowners into the calculation brings the total households 'effectively' underwater to over 50%. Not good news for anyone hoping a housing turn-around will help pull the US economy out of our current funk."

Thanks Chris for the fodder. So on that note, I'll go ahead and wrap this up for today.

Currencies today 11/9/11...American Style: A$ 1.0243, kiwi .7875, C$ .9810, euro 1.3659, sterling 1.5992, Swiss $1.1068,...European Style: rand 7.9671, krone 5.6844, SEK 6.6430, forint 226.87, zloty 3.2202, koruna 18.6105, RUB 30.4639, yen 77.68, sing 1.2837, HKD 7.7720, INR 50.1750, China 6.3405, pesos 13.5109, BRL 1.7492, dollar index 77.50, Oil $95.35, 10-year 1.98%, Silver $34.95, and Gold. $1,797.50

That's it for today...it was a last minute rush to put this together so I apologize if you receive this later than usual and if it doesn't flow very well. Thanks to Chris for sending me some insight and helping out with the finishing touches. Its going to be a short week since Veterans Day falls on Friday, so I guess this is actually our Thursday since the offices will be closed. Chuck should be back in the saddle tomorrow so until then...Have a Great Day.

Mike Meyer

Assistant Vice President

EverBank World Markets

1-800-926-4922

1-314-647-3837

A Look At The EFSF Pushes The Euro Higher!

Chuck Butler — Thu, 20 Oct 2011 16:08:00 GMT

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

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Start researching your opportunities. Go to: https://www.everbank.com/personal/currency-resources.aspx?referid=11808

EverBank is an Equal Housing Lender and Member FDIC.

......................................................

In This Issue.

* Currencies rally on EFSF news.

* Gold & Silver get sold.

* Brazil debases their currency again!

* $131 Billion in new debt issues.

And, Now, Today's Pfennig For Your Thoughts!

A Look At The EFSF Pushes The Euro Higher!

Good day. And a Tub Thumpin' Thursday to you! One down, three to go! One win in the World Series does not make a winner, but it gets you going in the right direction! Great game. great pitching, managerial strategy, good plays, and one timely hit! It was cold last night, and will be colder tonight. But the cold didn't keep the 47,000+ fans from having a good time!

Speaking of having a good time. The euro has bounced higher this morning after the details of the Eurozone Financial Stability Fund (EFSF) were announced. It looks like there will be more than enough to go around to help Spain and Italy. And the audit of Greece regarding if they are implementing the austerity measures, is finished, and they EU commission has recommended the next tranche of bailout funds be made to Greece. So. the death watch of Greece, has to order out for more coffee and pastries, because they aren't defaulting this week. The problems aren't over for Greece though. There are more austerity measures that have to be approved by Parliament, and then implemented.

So. with the euro bouncing higher, most of the other currencies are bouncing higher too.

The Brazilian Central Bank (BCB) cut interest rates further yesterday by 50 basis points (1/2%) Their internal rate is now 11.5%, and again, the inflation rate in Brazil is very high, and well above the Central Bank ceiling target, so I just don't know what they are thinking here. I chastised the BCB and Brazilian Gov't back in August for cutting their interest rates then, and I've still got a bag of chastising to use on them for this rate cut!

But I think I'll wait for the last rate cut, which will probably come about a the end of November. So, go ahead and debase your currency, you dolts. and watch the investment flow reverse, right when you need foreign investment to aid your readiness of the World Cup and Olympics.

The one currency that isn't taking a liking to the announcement in the Eurozone this morning, is Gold. The shiny metal is down $15 to $1,625 this morning, with its trusty sidekick, Silver, also losing ground. I don't pretend to understand why Gold goes down when the dollar is getting sold. The only thing that makes sense is that outside forces are flipping those circuit breaker switches again.

The recent trading, save for a day here and there, has been for the overnight markets to push the dollar down, and the U.S. market push the dollar back up. And I think we'll see that again today. The EFSF details are nice and all that, but the real problem in the Eurozone isn't whether they have enough money to bail countries out. it's how to keep those countries from needing to be bailed out! And then reverse the deficit spending that has existed for some time.

The Chinese renminbi isn't joining in on the dollar selling this morning either. Hmmm. Ever since the U.S. Senate passed the protectionism bill last week, the renminbi has been soft. Those days of appreciation have gone away, like the warm days of summer. It's not like I didn't warn the U.S. Gov't that this could very well happen. along with China balking at a strong presence at the next U.S. debt auction. But that isn't stopping our illustrious leaders in Washington D.C. They know what's best. You all know that I say those last two things in jest, for they have messed up more than we'll ever even know about!

Speaking of debt auctions. and since the U.S. lives auction to auction. Today, the U.S. Treasury will auction $35 Billion of 2-year notes, $32 Billion of 3-year notes, $35 Billion of 5-year notes, and $29 Billion of 7-year notes. using my new math skills, that totals $131 Billion in new debt issues that will have to be absorbed by mainly foreigners. If not. then the Fed will have to print some dollars to buy up the issues, but first they go to the Primary dealers, and out the back door to the Fed.

My friend, John Mauldin, was talking in his letter last week about the velocity of money, or better yet, the lack of velocity of money. John said something that I've long said right here in the Pfennig. The Fed can print over $2 Trillion in new dollars through their Quantitative Easing programs, and still no velocity of money. Because Banks aren't putting the money into the economy, by making new loans. Well. can you blame them? I mean, they took the brunt of the blame for the housing meltdown, giving loans to people who had no ability to repay the loan. And now, with unemployment at 23%, and people who need loans unable to show that they can repay them, what's a bank to do? Ahhh, grasshopper. just what they are doing. holding it and earning interest.

Now. eventually banks will make loans again, it's how they make money, folks. But not until the economy and the jobs picture looks healthier.

Well.. yesterday, I told you about the Lions, Tigers, and Bears, oh my. well, they were all shot dead. Hmmm. I guess those things they show in the movies, tranquilizer guns don't work in real life, eh?

OK. back to the task at hand.

The Aussie dollar (A$) is a bit stronger this morning, but still a ways from the +$1.03 figure it held earlier this week, before the rug was pulled from under the rallying currencies. There was story that went across the screen this morning, that said, "The Bank of Russia to start buying Aussie dollar by End of 2011". This is the kind of thing that really helps a currency when a Central Bank is buying. and when they decide to sell it can be ugly. But, it looks like the Bank of Russia could be helping the A$'s value as we head into year-end.

The stupid U.S. CPI report printed yesterday, and showed that inflation according to the Gov't held steady at 3.9% year-on-year, and actually weakened in September from August by .1%... To all that, I say HOGWASH! A quick check over at Shadow Stats tells me that "real inflation" is 7%... And that's before the velocity of money is unleashed on the economy, whenever that might be!

Housing starts data for September also printed, and show a real nice increase. but once again, I wonder why. Home inventory is our big problem. we don't need more homes, we need people that can afford to buy the existing ones! Today, since it's a Tub Thumpin' Thursday, we'll see the Weekly Initial Jobless Claims.

In addition, we'll see Leading Indicators , the Philadelphia manufacturing index, and Existing Home Sales. So it will be busy over at the data cupboard this morning.

Then there was this. This makes my blood boil, and it should yours too, folks. from Bloomberg. "Federal Reserve Now Backstopping $75 Trillion of Bank of America's derivatives Trades" Bank of America shifted derivatives from its Merrill Investment banking unit to its depositary arm, which has access to the Fed discount window and is protected by the FDIC.

According to Bloomberg. "This means that the investment bank's European derivatives exposure is now backstopped by U.S. taxpayers. Bank of America didn't get regulatory approval to do this, they just did it at the request of frightened counterparties. Now the Fed and the FDIC are fighting as to whether this was sound. The Fed wants to "give relief" to the bank holding company, which is under heavy pressure.

This is a direct transfer of risk to the taxpayer done by the bank without approval by regulators and without public input. You will also read below that JP Morgan is apparently doing the same thing with $79 trillion of notional derivatives guaranteed by the FDIC and Federal Reserve."

Chuck again. So. remember when I told you that a large percentage of the Credit Default Swaps on Greece and other Eurozone peripheral countries where held by U.S. institutions? Well, folks. looks like that liability is now being switched to you and me. the taxpayers. Does that make you angry? Call your Senator or Representative, and send them so many emails that they have to address this!

To recap. The details of the EFSF were revealed this morning, and it looks like there's enough to go around to help Spain and Italy, which has boosted the euro this morning. of course if the euro is rallying so are most of the other currencies. Gold is not rallying, and is down almost $20 this morning. The Brazilian Central Bank cut rates again yesterday, and the Gov't is attempting to convince us that inflation actually fell in Sept from August by .1%!

Currencies today 10/20/11.. American Style: A$ $1.0265, kiwi .7975, C$ .9845, euro 1.38, sterling 1.5790, Swiss $1.1155, . European Style: rand 8.09, krone 5.5975, SEK 6.6050, forint 214.50, zloty 3.1590, koruna 18.0375, RUB 31.29, yen 76.80, sing 1.2670, HKD 7.78, INR 49.80, China 6.3830, pesos 13.42, BRL 1.7665, dollar index 76.92, Oil $86.50, 10-year 2.18%, Silver $30.73, and Gold. $1,620.40

That's it for today. Sure had fun on the way to the game and home with the family last night. In order for us to all go, I had to sit in a different area (thanks Sandra!). But my darling daughter, Dawn, mentioned that it was the first time just the 5 of us went somewhere together in many years. And she was right. it has been some time. Dawn has been married for 8 years now. WOW! I went home from my radiation treatment yesterday, and took a good nap, so I would be able to stay up for the entire game. Radiation is no picnic, and I'm sure there are quite a few dear readers that have had radiation, so I'm not telling them anything new. I don't wish it on anyone! But I carry on. it takes more than that to keep me down! And with that I'll get this out the door, while listening to Earth Wind & Fire's After the love is gone. I hope you all have a Tub Thumpin' Thursday!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837

Will The CFTC Have Teeth?

Chuck Butler — Tue, 18 Oct 2011 16:09:00 GMT

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

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You'll discover:

-Individual research pages on all of the major currencies available at EverBank

-Currency insights from Chuck Butler, President of EverBank World Markets -Tools, charts and tables you can use to compare and evaluate different currencies

Start researching your opportunities. Go to: https://www.everbank.com/personal/currency-resources.aspx?referid=11808

EverBank is an Equal Housing Lender and Member FDIC.

......................................................

In This Issue.

* German Officials deep six currency rally.

* Moody's warns France.

* German Investor Confidence plunges.

* Bud Conrad for your enjoyment!

And, Now, Today's Pfennig For Your Thoughts!

Will The CFTC Have Teeth?

Good day. And a Tom Terrific Tuesday to you! I finally got to read about and see the whole game Sunday night. Now the World Series begins in St. Louis tomorrow night, and just in time for the World Series the beautiful warm weather we've been experiencing here, has changed to cold & wet. UGH! Sitting in cold & wet at a ballgame is about the same as sitting in a boat and attempting to fish when it's pouring rain. They are both things you love to do, but not when it's raining! Oh well. I'm not complaining, just saying.

And the markets are just saying that the currency rally late last week and Sunday night is over. I think the two comments I told you about yesterday from a German official and then from the German Finance Minister, about the prospects of a "solution for the Eurozone debt crisis" being put to bed by next Monday, have really scared the markets into believing they went too far last week and Sunday night.

They believe that they pushed the envelope too far on the currency rally. To prove that in numbers. The only major currencies in the black this morning are dollars and yen. No, not even the Chinese renminbi, which normally bucks the trend, is in the black this morning. I even thought, and said so in yesterday's Pfennig that I didn't believe the euro was on terra firma. and so it isn't.

On a sidebar. a couple of years ago, I actually had a reader that truly believed that whatever I said, caused the markets to move. In other words, he thought the Pfennig (and me of course) could move the markets. HAHAHAHAHAHAHAHA! Look, there are a good number of people that read the Pfennig each day, but nothing like the market letters that my friends, John Mauldin, and David Galland put out. And even with their subscription levels, I doubt they could move the markets with their suggestions. so. now we are all on the same page on this, right?

Well. Even Gold is getting sold alongside the euro this morning. The shiny metal is down $15 as I type my fat fingers away here. So, the risk takers have cowered once again to the risk aversion campers. And the flight to "safe haven" is back. The 10-year Treasury, which yesterday morning saw its yield rise to 2.28%, has rallied back to 2.12% yield, which means, investors are selling their risk assets again this morning, and once again filing back into line to buy Treasuries. Apparently, enough time has passed for them to have forgotten the pain! The pain of losses.

The stock jockeys weren't spared either. so it was a true risk reversal day. And has been carried over to today's European Session. So, if it's all tied to whether Eurozone leaders can put forth a plan to deal with the debt crisis by next Monday, we might as well, review where the Eurozone leaders stand this morning. And no, I don't mean like Hey there's a leader standing over in the corner! HA! I mean where they stand on the putting forth the plan by next Monday!

And here's where I can understand why the markets are reversing their trades made after the end of the G-20 meeting, where Eurozone leaders pledged that a plan would be presented by next Monday. It's the same-o, same-o, situation, it's the same-o ball and chain. National interests, political saber rattling, egos, are a few of the roadblocks preventing the Eurozone leaders from really sitting down and ironing this out. And then throw on top of that, the news that Moody's warned last night that France's AAA rating in under pressure.

The Canadian Finance Minister, Jim Flaherty, threw a dart at the Eurozone leaders, in a speech he made in Dublin yesterday. Let's listen to Mr. Flaherty. "Quite frankly, Europe's response over the past year has been disappointing." He then went on to say, "This is the world's most immediate and pressing problem, and is threatening to bring the world to the verge of another recession."

Of course, he's just like most people in power. he can sit there and throw darts, but not offer up any solution. He should try it, he might like it! Besides, he could use the practice, for when the same thing hits his closest neighbor to the south.

Speaking of U.S. debt. Yesterday, I told you that, well, let's just repeat what was in the Pfennig yesterday. "The Federal Reserve said its holdings of U.S. Government debt on behalf of central bankers and institutional investors outside America has plunged $76.5 Billion in the last seven weeks, the most since 2007." And then I also told you that the U.S. closed the books on 2011 and the final tally was a $1.3 Trillion Deficit.

Ok. do you know Bud Conrad? I met Bud a few years ago in New Orleans. He's the economist for the Casey Research people. Doug Casey, David Galland, and more. Bud is usually very thorough with his research, so when I see something that he's written that ties into what I'm talking about, I pull it to give credence to what I'm saying!

And yesterday Bud was talking about the plunge in U.S. Government debt held for foreign Central Banks. "What could be the cause of all this? The Senate passed a controversial bill that threatens to punish China for "currency manipulation" which will bring mandatory tariffs. China's opposition to the Senate action could be the power behind the big shift in direction of these custody holdings. In an election year, government action against Chinese imports may be seen as supportive for US jobs, thus garnering votes. But unintended consequences of decreasing liquidity in the credit markets will put pressure on financial markets. The movement shown in these charts could be the result of China's reaction to some of those anticipated policies. We can't tell what country is doing the selling until two months have gone by and the TIC data are published. In some senses, it doesn't matter which country is behind the shift. If rates begin to rise rapidly, even in the face of continued Fed manipulation, it could call into question confidence in the Fed's ability to keep supporting the economy. The rate on the ten-year Treasuries jumped from 1.8% to 2.2% in the last week. Foreign selling of this magnitude is dangerous for the dollar, and it could be very bad for US interest rates."

Chuck again. Now. Bud doesn't say it here. But, to keep interest rates from soaring when foreign buying of U.S. debt wanes, the Fed is going to have to step in and buy what the foreigners don't. Can you say Quantitative Easing? I thought you could!

OK. yesterday I told you that I thought that the Chinese 3rd QTR GDP would come in greater than 9%, and it did. printing this morning at 9.1%... And guess what all the media is going gaga over? The fact that this is the slowest pace for China's economy since 2009. I say yeah, yeah, yeah, wooo! Look folks. I've said this for over two years, while everyone else was calling for a collapse of the Chinese economy. With all the things the Chinese Gov't did to slow down inflation, it was bound to slow down the economy. Moderation.

Well. all this crying by the media and markets that the sky is falling once again in China, has the Aussie dollar (A$) in a tizzy this morning. Yesterday the A$ traded past $1.03, and this morning, the A$ is around $1.0170! The Reserve Bank of Australia (RBA) printed their meeting notes last night. and really didn't say much, but did leave open the option to cut rates, "if needed" and they have "an improved inflation outlook." Hmmm. Well, a quick look at the Aussie econ calendar shows me that next Tuesday, Australia will print 3rd QTR CPI. which previously printed at 3.6%, and was much higher than the ceiling target that the RBA uses. in which case, if CPI prints anywhere near the previous 3.6%, I don't see how the RBA could justify a rate cut. So, maybe, by the middle of next week, we can finally put this rate cut talk to bed, which would be a relief for the A$...

China did print a very strong Industrial Production number showing an increase of 13.8% in September from a year earlier. So, there's still a strong economy going on in China. I just don't see the what the Chicken Littles are crying about this morning.

However, in Germany. Investor Confidence, as measured by the think tank ZEW, fell to the lowest level in almost 3 years this month. For those of you keeping score at home, the Confidence index number fell from 48.3 to 43.3. OUCH!

I'm watching the Bloomberg TV this morning, and Bart Chilton is talking about the CFTC meeting today, where the position limits will be voted on. He just said that, "we're dealing with historic changes in the markets". WOW! Is there really going to be historic changes made? Because if there are going to historic changes made, you might want to think about buying some Gold & Silver before the price goes up because the bullion banks can't hold such large short positions any longer. But then, if he's just lathering us all up. I mean you have to learn what your failures have taught you or you'll have to learn them all over again. Lessons learned are like bridges burned, you only need to cross them but once.

And by that I mean that we've been told before that this all was going to change, and it wasn't. So, what's it going to be CFTC?

Then there was this. I know this might tick a few people off, and that's not my goal here, but you can't always make everyone happy! This is from the Wall Street Journal this morning. "State and federal officials are pushing a plan that could help some "underwater" borrowers get refinancing assistance in the latest government bid to break a legal impasse with big banks over alleged foreclosure abuses and ease problems in the housing market.

The proposal was raised in a meeting last week between government negotiators and giant lenders as part of an effort to settle allegations of questionable foreclosure practices. Discussions are still fluid and any final outcome is uncertain. Talks between government officials and the banks are expected to continue this week.

The proposal would be part of a settlement with major lenders. The plan under consideration would make refinancing available to some borrowers whose houses are worth less than their loans, so long as they are current on mortgage payments, according to people familiar with the matter. Such borrowers typically aren't able to refinance because they lack equity in their homes. The plan would apply only to mortgages owned by the banks. It isn't clear how many of those borrowers would qualify for help. Around 20% of all U.S. mortgages are owned by U.S.-chartered commercial banks; the majority are held by investors in mortgage-backed securities."

Chuck again. Hmmm. remember when you were in school, and you got caught chewing gum? The teacher would say, "Do you have enough to share with the rest of the class?" In other words, if it wasn't good for everyone, then no one or two or three could have the gum. I'm reminded of this here.

OK. Chuck, you got a little carried away there. maybe you should apologize to anyone that you offended. OK. I'm sorry. I didn't mean to offend anyone. Now, does the Gov't have enough gum to go around?

To recap. The words by German officials that doubted the ability of Eurozone leaders to put forth a real solution to the debt crisis by next Monday was taken to heart by the markets yesterday and last night, causing the risk takers to back off and allow the risk aversion crowd to take over the markets once again. Dollar and yen are the only currencies in the black this morning. The CFTC will vote on the changes to the positions limits today. I sure hope they have some teeth in that vote! And China's economy slowed in the 3rd QTR but remained above 9% growth. The Chicken Littles are out in force crying about the sky falling in China once again.

Currencies today 10/18/11. American Style: A$ $1.0155, kiwi .7890, C$ .9765, euro 1.3680, sterling 1.5735, Swiss $1.1090, . European Style: rand 8.0375, krone 5.4415, SEK 6.6950, forint 217.70, zloty 3.18, koruna 18.1310, RUB 31.25, yen 76.70, sing 1.2725, HKD 7.7780, INR 49.32, China 6.38, pesos 13.52, BRL 1.7720, dollar index 77.38, Oil $85.86, 10-year 2.12%, Silver $31.07, and Gold. $1,658.75

That's it for today. I just heard a great old song in the I-Pod, Blue Mist by Momma's Pride (they were a St. Louis band but hit it nationally in the 70's). That's got me going this morning! Well. the effects of the radiation on my jaw are really beginning to hit me, I'm a week & 1/2 into the 3 weeks of treatments. I won't go into all the side effects, just know that It's not fun. But I knew this was coming, the doctor told me so before we started, and he told me yesterday, that it was going to get worse! UGH! Oh well, in 8 more treatments I'll be finished! YAHOO. I knew I would be hit like this, and had to back out of my speaking engagement at the Chicago Money Show this week. But, taking my place is an even better choice for the attendees. The Big Boss Frank Trotter, will be there! Don't know about the Chicago Money Show? Just Google that, and get registered to go.. it's free! Go see Frank, and our new Wealth Management guys. and U.S. soccer legend, Ty Keough, will also be there! WOW! Sure wish I could go! And with that, let's get working on this Tom Terrific Tuesday, eh?

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837