Daily Pfennig : Henry Paulson

May Day empties the trade desks...

Chuck Butler — Fri, 01 May 2009 15:27:48 GMT

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In This Issue..

* May Day empties trade desks...
* Chrysler declares bankruptcy...
* SEC to investigate Paulson and Bernanke??
* China continues to grow...

And Now... Today's Pfennig!

May Day empties the trade desks...

Good day...and Happy May Day to everyone. Most associate May Day with the Soviet Union, where the communists turned it into a 'celebration of the worker'. But its origins are actually in central Europe where it developed from a combination of several pagan holidays celebrating the end of winter in the Northern Hemisphere. It never really took flight in the US, but is still a popular holiday in most other parts of the globe. With the way our government has been using tax payer funds to take over struggling companies, May Day could become a larger holiday here in the US also! Most of the trade desks throughout Europe are closed today, and many of the traders left early yesterday, so the currency and metals markets were pretty quiet.

The big news in the US yesterday was the announcement that Chrysler had filed for a 'precision' bankruptcy and would be shutting down all of its plants temporarily in order to reduce an inventory overhang. Unfortunately, I heard this morning that both Chrysler plants here in St. Louis would be closing for good, with Chrysler looking to sell them off to pay down debt. It is definitely a sad day for the thousand Chrysler workers here in St. Louis. I received a call from a reporter from Reuters shortly after the announcement, asking me how it was affecting the currency markets. In short, it had no impact whatsoever, as traders were already shutting down for the holiday, and the news has been pretty much baked into the market for some time.

The closing of the Chrysler plants will add to the already large number of unemployed workers here in the US. The weekly jobless data, released yesterday morning showed a slight improvement in weekly claims from an adjusted 645k to 631k. But the continuing claims just kept on growing with close to 6.3 million 'officially' out of work. Other numbers released yesterday included the Personal income and spending data which both dropped slightly more than economists' estimates. This was the first drop in purchases this year, and offsets the big jump in consumer confidence which we saw at the beginning of the week. Employment continues to be a drag on the US economy, and with yesterday's announcement by Chrysler, bad news just keeps rolling in for US workers.

The one positive out of yesterday's data is that the savings rate improved again and not stands at 4.2%. This number won't be welcomed by the administration, who would much rather see consumers borrow and spend to pull us out of recession; but I think the increasing savings figure is just what the US economy needs. While still a long way from the double digit savings rates in Asia, the 4.2% is a huge improvement from a year ago, when the US savings rates was zero. Again, an increase in the savings rate won't speed up the recovery (in fact it will probably slow it down a bit), but it is vital to the long term health of the US economy. Now if we could just get our government to start tightening their belts.

The Federal Reserve announced that it would be postponing the release of stress tests on the biggest US banks, originally scheduled for May 4th. I have been meaning to write about these stress tests the past few days, but have run out of room. With the holiday in Europe, today is a perfect day to dig into the subject.

There have several leaks of the results which apparently illustrate a shortfall of capital for both Bank of America and Citigroup. The Wall Street Journal ran an article on Tuesday which indicated BOA was looking at a shortfall in the billions of dollars. Now the results of these stress tests are being withheld from the public while executives at each of the banks debate the findings with examiners. The fear is that the stock prices will fall dramatically if the results are made public. But wait a second, aren't the US taxpayers major investors in all of these banks now? Don't you think we have a right to see the results before executives get a chance to 'dress them up'?

The additional capital will likely come in the form of converting preferred shares held by the US government into common shares. This will allow the administration to avoid going back to congress to ask for additional funding for these institutions. US taxpayers are in no mood to continue to throw money down the bottomless pits of these failed institutions, so the administration will look for ways to support them without having to go back to Congress for approval. This is just further proof of the cozy relationship between Wall Street and the Treasury department.

Chuck wrote about this cozy relationship last week when he pointed out the questionable tactics former Treasury Secretary Paulson used to force the Bank of America to merge with Merrill Lynch. The Securities and Exchange Commission Chairman Mary Schapiro called the decision by Paulson to exclude the SEC from the talks 'troubling'. According to then BOA Chairman Ken Lewis, the Treasury and Fed pressured him to complete the deal for Merrill, and to withhold details about surging losses from BOA stockholders. The SEC is now investigating whether those involved violated laws by not being truthful and transparent. Sure seems like a clear case of wrongdoing to me!! But does anyone really think the SEC will go after Paulson and Bernanke? Nope, they will claim that they kept everything hush hush for the benefit of the country, and the whole affair will likely be swept under the rug.

For his involvement in this sordid affair, Ken Lewis was ousted from his duties as chairman of BOA at the annual meeting on Wednesday. I guess he just didn't have enough friends on Wall Street! The Chairman of Citigroup, Bikram Pandit, sure did. He was compensated $38.2 million in 2008 according to a report from the AP. Unbelievable!

The Japanese yen continued to drop yesterday as investors moved back into higher yielding currencies. The Japanese jobless rate surged to a four year high in March, and consumer prices fell for the first time in 18 months indicating the Japanese economy is continuing to wallow in a state of stagflation. Japan's economy won't recover anytime soon, and when it does start growing, the recovery will likely be weak.

China, on the other hand, looks like it is headed for a much faster recovery. Manufacturing in China expanded for a second month as the government stimulus spending seems to have kicked in. Stronger Chinese demand is helping the exporting nations of Australia, Canada, and South Korea. Goldman Sachs now predicts China's economy will grow 8.3% in 2009, just above the government's target of 8%. It certainly looks like China will lead the world out of this recession, with internal demand in China taking the place of lost demand in the US and Europe. All data indicate China's economy will continue to recover, as the economy appears to have bottomed last last quarter with a 6.1% growth in GDP.

The Australian dollar gained again overnight, and headed for its ninth weekly gain vs. the US$ on the good news out of China. The New Zealand dollar also rose, reversing its recent losses after Central Bank Governor Bollard said he will keep rates low for an extended period. Both of these currencies are somewhat dependent on a recovery in the Chinese economy, and the increase in demand for commodities which will accompany it. These two currencies continue to be popular choices with our investors, as they combine a decent interest rate with the possibility of positive currency gains.

This morning we will get an indication of the state of US manufacturing, with the release of Factory orders for March and the ISM numbers for April along with April's vehicle sales numbers. I don't expect any of this data to surprise on the upside, and with trading desks lightly staffed, I wouldn't look for any major swings in the currency markets. Should be a pretty quiet Friday, so with that I will head into the currency wrap-up:

Currencies today 5/1/09: A$ .7318, kiwi .5717, C$ .8423, euro 1.3277, sterling 1.4895, Swiss .8791, rand 8.4208, krone 6.5399, SEK 8.0449, forint 216.83, zloty 3.3035, koruna 20.1634, yen 99.34, sing 1.4797, HKD 7.75, INR 50.09, China 6.8210, pesos 13.80, BRL 2.1904, dollar index 84.45, Oil $50.92, Silver $12.15, and Gold... $881.91

That's it for today... Looking forward to this weekend, as I am heading out to a friend's farm with my teenage son to see if we can get him his first turkey. Turkeys are a real challenge, as they have incredible eyesight and always seem to spot you before you see them. They say if a turkey could smell, you would never be able to get near them. Brendan is convinced this is the year he gets his first gobbler. It is supposed to rain most of the weekend, but the weather predictions haven't put a damper on my son's excitement. I just hope the turkeys show up! 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

Another HUGE Currency Rally!

Chuck Butler — Mon, 29 Dec 2008 23:43:17 GMT

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In This Issue..

* Gaza bombing has dollar on the run...
* More proof we're turning Japanese...
* Adding to the debt burden...
* What will deflation do for the dollar?

And Now... Today's Pfennig!

A HUGE Currency Rally!

Good day... And a Marvelous Monday to you! Well... It's been a long time, now I'm coming back home! Actually, I've been home all of my winter vacation, but I'm referring to the trading desk and EverBank's office. I had a vacation that had a split personality, as I was sick for the first part of it, then went to the eye doctor to get another shot / injection in my eye. So much for the first part! The second part went quite well, with lots of rest and time spent with family. Are there two better ways to spend your time? Not in my book!

So... The currencies had a split personality while I was gone too... At first, they rallied like there was no tomorrow, but then sold off, and then range traded. So, we'll finish the year on a down note for most of the currencies, but knowing all too well that the markets are beginning to realize that the debts the U.S. is chalking up are not going to go away, and in fact they're just going to get worse, and that spells bad times for the dollar... Eventually...

I did a lot of reading on my vacation, and the book I read the most was one by Christopher Wood, titled: The Bubble Economy... Now, on first take you would think that he was talking about the U.S.... But that would be wrong... This is an old book, and was written about Japan's economy in the 90's... I've spent a ton of time talking about the similarities between Japan then, and the U.S. now. And this book, just brings those thoughts even closer! For instance... In the book he quote the Levy Institute circa 1991... "monetary policy would not, on its own, be able to restart a depressed economy suffering from asset deflation and widespread financial crisis, for lower interest rates cannot motivate fixed investment when the market is glutted with existing assets worth much less than it costs to replace them."

Oh my! We're turning Japanese, I really think so!

So... Then this weekend, a Pfennig reader sent me a link to a story on Bloomberg regarding the Japanese... Here's a snippet... "Japan should write-off its holdings of Treasuries because the U.S. government will struggle to finance increasing debt levels needed to dig the economy out of recession, said Akio Mikuni, president of credit ratings agency Mikuni & Co.

The dollar may lose as much as 40 percent of its value to 50 yen or 60 yen from the current spot rate of 90.40 today in Tokyo unless Japan takes "drastic measures" to help bail out the U.S. economy, Mikuni said. Treasury yields, which are near record lows, may fall further without debt relief, making it difficult for the U.S. to borrow elsewhere, Mikuni said."

Well...the "rest of the story" can be read by clicking here: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aFgHlh.Dn4Lc

As I write, the euro is back on the attack VS the dollar, with it trading above 1.43 once again. There has been a 2 figure move up in the euro from just last night, as it appears that the markets are running from the dollar with the Israeli / Gaza thing going on. The Swiss franc is back above 95-cents, and so on... I also noticed, while on vacation, that the Aussie dollar bounced nicely off its 65-cent level. And Commodities staged a nice rally / comeback while I was gone. Gold is trading around $880 again...

When I left, I had told you about a Santa Rally for the euro, and it did just that, even with the profit taking after reaching 1.45, it's still much higher than it was when I said that we should look for a Santa Rally. I also was hinting that the Trading Theme that we've seen in place since July, was beginning to show chinks in the armor. Those chinks are becoming major exposed areas, as the markets are returning to focus on the fundamentals the hang over the U.S economy and dollar like the Sword of Damocles.

So... I see that the Fed has opened the door to grease the tracks to make GMAC a "bank-holding company" Why? Ahhh grasshopper... If GMAC is a bank holding company, they would be eligible for TARP funds, which would put them on the fast tracks to obtaining taxpayer bailout funding.

The thing I see happening now is that "everyone and their brother" is going to line up for taxpayer bailout funding... We've already set the stages for car loans, and student loans, and next we'll get real estate guys and who knows what else! Everyone is lining up at the Government bailout trough...

So, thanks guys... Thanks for running up the taxpayer costs... Thanks for making it possible that my grandchildren will be burdened with these unbelievable financing costs of all this debt we're building... Thanks... But no thanks!

It's all sort of like Humpty Dumpty isn't it? You know, all the king's men and all the king's horses couldn't put Humpty Dumpty back together again. All the Big Ben Bernankes and Henry Paulsons are trying to put the economy back together again, but it "ain't happenin"! Just shows to go you that they should have left it all alone... Let it fail... Then pick up the pieces and begin again... I've had a few people along the way that tell me that I don't offer solutions all I do is pick at the wounds... But they just don't read into what I'm typing each morning... I've said all along that we would end up in a debt ridden society if we didn't stop spending... So, there's one solution... STOP SPENDING! And then I warned that these bailouts that began last spring with the $150 Billion in checks to consumers, was going to put us on the road to turning Japanese, and we should have let things go their normal business course... There was another solution!

Now, that we're here in this quagmire of debt and there's more coming folks... I recall telling Chris while I was gone that there are rumors that the next bailout amount could reach $1 Trillion! But now that we're here, what's a poor boy to do? Well... For me, it's called savings... And when things look really bad, and prices have fallen to the core, then I'll put those savings to work, and if everyone does the same, the economy will grow once again, but from a lower base, which is a good thing. Of course, should everyone begin to spend their savings at once, this will bring about inflation that comes out our ears, but let's worry about that then, eh? Besides, like no one really thinks that with interest rates near zero, and all this money going into the system, that eventually we won't have an inflation problem do they?

OK... Now, that was a lot to get off my chest on my first day back, eh?

We didn't see any economic data on Friday after Christmas, so one would think that there's some catching up to do this week to end the year. But the data cupboard is empty today too! And it looks like those that are responsible for restocking the data cupboard, have taken this week off too... One piece of data we will get is the ISM (manufacturing) Index for this month... And remember when this index was hovering around the contraction/ expansion level of 50 and I kept saying that it was going to go below it and fall? Well, the index number in Nov. stood at 36.2, that's a long way from 50, eh? And the "experts" have forecast another fall to levels not seen since 1980! UGH! Now... Early last fall I fretted about the reversal in the weak dollar and its affect on manufacturing... Exports had just posted a strong performance in the 2nd QTR, boosting GDP, because the dollar was so darn weak! Well, I said then, that those wishing for a stronger dollar had better be careful for what they wish for...

So, with the trading desks still undermanned the volumes will be thin for the most part, unless... We see a ton of "book squaring" today, to settle before the end of the year... Either way, we need to be aware of the fact that thin volumes can cause wild swings in the currencies... Take last night's action for instance. When I went to bed the euro was trading 1.4130, and that looked pretty darn good to me... But when I turned on the screens, here in the office, this morning, what did my wondering eyes did appear, but the euro trading at 1.4350!

This rally means the euro is only down 2.5% from a year ago, which is far better than it was showing a month ago! And the best performer of 2008? Like you didn't know! It was Japanese yen, up 24.7% since last year! WOW! Of course there are some real "problem children" in the currency performance roster... Aussie, kiwi, pound sterling, loonies, and krone are all showing pitiful performances for 2008... But, if the recent price action is any indication of what could happen in 2009, if we return to the fundamentals, then these pitiful performances might get put in the rear view mirror...

U.S. Treasury Sec. Henry Paulson is just about at the end of his "tour of duty", and you've got to think that he can't wait for the new administration to take over! I don't doubt for a minute that the new Treasury Sec. will pull back on the bailouts... But what I do question, with Paulson leaving, is what happens with China? Paulson didn't make the progress with China that he set out to make, but what he did do is keep the knuckleheads in D.C. from slapping trade tariffs on China... I have to wonder if that will be the direction of the new Secretary... If it is, then that won't be good for the dollar, as protectionism is never viewed as a positive for a currency. So, those questions and more are on the docket for 2009...

I received quite a few emails from readers while on vacation with a question about something that another newsletter writer wrote about the euro / dollar... The writer believed that deflation was going to be a big problem for the U.S. next year, and that would be a good thing for the dollar, thus pushing the euro to parity. Hmmm... Well, that may be true, for I don't know what's going to REALLY HAPPEN! But! I would just have to say that since we're mirroring Japan so much, let's go back and look at what deflation did for the yen in the late 90's when deflation was so prevalent... Oh, it doesn't look like deflation did yen any favors then... And I doubt it will do the dollar any favors this time around... So, there's my answer to that call by someone else... To me, though, this is all good, as it still means that there is a two-way trade, and that not everyone is on the same side of the ship!

So... Before I head to the Big Finish, let me re-cap today's action so far... The dollar has been hammered overnight on fears that the Israeli attacks on Hamas in the Gaza Strip will disrupt oil supplies to the U.S. This has driven the price of oil higher to $40.40, and has caused a traders to unload dollars... The data cupboard is empty today, and trading desks are undermanned, which could cause wild swings in the currencies this week.

Currencies today 12/29/08: A$ .6965, kiwi .5850, C$ .8210, euro 1.4355, sterling 1.4670, Swiss .9585, ISK 143.20, rand 9.55, krone 6.95, SEK 7.67, forint 186.10, zloty 2.9050, koruna 18.54, yen 90, baht 35, sing 1.4370, HKD 7.6710, INR 48.42, China 6.8525, pesos 13.46, BRL 2.3450, dollar index 79.70, Oil $40.40, Silver $11, and Gold $885.80

Oh, and thanks for all the kind words about our Christmas card / photo we sent out! Chris had a little error on his listing of the names on the photo... He said "right to left", but it really was left to right... Now, we've really got you confused, eh? HA!

That's it for today... Well, did you have a great Christmas / Holiday? I sure hope so! Do you have Big Plans for New Year's Eve? If you do, please be careful! I will get together with close friends for dinner, and return home! Thanks to Chris for another great job Pfilling in on the Pfennig! Chris sure had some very kind words about my beautiful bride last Friday. I thought he had ticked her off some way! HAHAHAHAHA! Wait till he sees my travel plans for March! I guess most people will be back today, except for Jen, who will be out this week. She needed it after me being gone two weeks! My beloved Missouri Tigers play in the Alamo Bowl tonight (a far cry from where they thought they might play this year!), against Northwestern. Should be a good game. Go Tigers! The bitter cold we had here has been replaced by normal temperatures, still chilly / cold, but not bitter cold like they were. So, that's all good... I guess it's not too early to talk about the Orlando Money Show, which will be Feb 4-7... I'll be there, God willing, along with others... I wonder where the currencies will be then? This is always the biggest show, best attended, and a welcome relief from the cold weather here in St. Louis! OK... That's all I've got for today... Let's make it a Marvelous Monday, eh?

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

Dollar bounces back up...

Chuck Butler — Fri, 19 Dec 2008 15:20:48 GMT

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In This Issue..

* Dollar bounces back up...

* Paulson heads back to congress...

* BOJ cuts rates to below the US...

* China to continue increasing the value of the Renminbi...

And Now... Today's Pfennig!

Dollar bounces back up...

Good day... The currencies took a breather overnight as the dollar bounced back up. When we left last night, the Euro was still holding above $1.42, but the single unit dropped 3 cents overnight and is now hovering around the $1.39 level. This move back down was to be expected, and serves as an excellent opportunity for investors who were afraid they had missed out on getting back into the currency market.

I have searched the news wires this morning and can't find any good reasons for the dollar's turn around other than it had simply gone too far too fast. Mike Meyer and I were talking about this yesterday morning, as we were looking at the trading screens in amazement. The dollar's move down over the past two weeks was even faster than the move up earlier this year. Chuck had warned readers all during the dollar rally that the strength was only temporary, but the reversal was just too quick. This move back up is healthy for the markets, and will allow investors another opportunity to move back in.

The US jobless numbers were better than expected as they dropped to 554k from an adjusted 575k last week. The continuing claims also fell to 4,384,000 out of work. Leading indicators fell .4% during November, and Octobers number was revised to -.9%. So while all of these numbers could be spun as positive (not quite as bad as the last ones), they still reflect an economy which is continuing to falter.

Treasury Secretary Paulson will probably be heading back to Congress to claim the second half of his $700 billion bank rescue plan. I think he is probably hoping Congress is in a giving mood with the upcoming holidays and will go ahead and let loose of the additional funds. But Paulson may have some trouble securing the additional funds as lawmakers have warned the Bush administration it must come up with a new effort to aid homeowners and get aid directly to their constituents.

Paulson is also probably worried that congress may pull back some of the promised funds and earmark them for the new administration's stimulus package. So now we have the present and future administrations fighting over who is going to get to spend the taxpayers money, with Paulson doing his best to get it all spent before heading off into the sunset. Chuck spent a tough day as the eye doctor yesterday, but still sent me the following note:

"As reported by the Wall Street Journal...

"Obama's economic team is crafting a stimulus package to send to Congress of $675 billion to $775 billion over two years, according to transition officials. The transition team has conveyed the figures to Capitol Hill, where the package is likely to grow as it works its way through the House and Senate. Obama aides hope to keep the package below the trillion-dollar mark, as they fear being accused of adding too much to the country's long-term budget deficit."

I laugh! As if! As if $775 Billion "won't add too much to the country's long-term budget deficit"! I give up... I really do... The Gov't thinks we are all BUFFOONS! They really do, folks... They are taking us as village idiots, thinking that if they keep it below $1 Trillion, we "won't notice"! "

Not to be outdone by the US, the Bank of Japan cut its benchmark interest rate to .01 from .3%. The move puts Japanese target rates back below the new target for US fed funds. The Japanese central bank also said it will continue using 'quantitative measures' to inject capital into the financial markets. The yen is unchanged on the day, but we saw a pretty large amount of selling by our investors yesterday.

The Chinese Renminbi headed for a second weekly gain as Chinese officials signaled they won't pursue a weaker currency to help exporters. Many thought the slow and steady appreciation of the Renminbi had come to an end as Chinese officials let the Renminbi move lower during the first part of this month. China's trade surplus which widened to a record $40.1 billion in November, continues to support a stronger Renminbi. Consumer prices in China rose just 2.4% in November from a year earlier, the smallest increase in almost two years. The easing of inflation pressures will allow China to lower interest rates to make sure growth stays above their 8% target. All indications support a further slow and steady appreciation of Renminbi.

Currencies today 12/19/08: A$ .6819, kiwi .5745, C$ .8155, euro 1.3982, sterling 1.5036, Swiss .9049, ISK 176.5, rand 9.7813, krone 7.0467, SEK 7.7980, forint 189.78, zloty 2.9152, koruna 18.8295, yen 89.24, baht 34.49, sing 1.466, HKD 7.75, INR 46.255, China 6.8457, pesos 13.17, BRL 2.3927, dollar index 80.869, Oil $34.39, Silver $10.67, and Gold... $835.34

That's it for today... I had good news from the hand doctor yesterday, as he feels the fingers are healing well. We had some crazy weather here, as the snow and ice were replaced by rain overnight with temperatures moving back above 50 degrees. The warm weather will be replaced pretty quickly, as temps are supposed to fall back to sub freezing today. Last weekend to finish Christmas shopping!! My wife and daughter are heading out to pick up her big present a little early, as they are going to pick up a cute little latese puppy this afternoon. Hope everyone has a wonderful weekend and a fantastic Friday!!!

Chris Gaffney, CFA

Vice President

EverBank World Markets

1-800-926-4922

1-314-647-3837

The NBER Finally Says So!

Chuck Butler — Tue, 02 Dec 2008 16:16:46 GMT

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In This Issue..

* RBA cuts 100 BPS...

* It IS a recession!

* Paulson to ruffle feathers?

* Yen to rally hard?

And Now... Today's Pfennig!

The NBER Finally Says So!

Good day... And a Terrific Tuesday to you! Quoting one of my all time fave Christmas songs, Baby, it's Cold Out There! Winter has arrived, and I had to drag out the big heavy winter coat this morning. So... The seasons pass us, which is a good thing, because without winter, we couldn't have spring, and spring training!

OK... Right out of the starters blocks this morning, the Reserve Bank of Australia (RBA) pulled the rug right out from under the "high yield status" of their economy, with another HUGE rate cut overnight... This time, the RBA cut 100 BPS, to an internal cash rate of 4.25%. This brings the total since September to 300 BPS! WOW! Talk about effectively unwinding seven years of tightening! The statement following the rate announcement leads me to believe that the RBA is probably finished cutting rates for now... It will be a wait-n-see what happens globally, before the RBA entertains any talk of further rate cuts... At least that's my opinion!

Had a long talk with the legal beagles yesterday... The just don't like what / how I say things. This all stems from complaints we've received that claim that, "I give investment advice". Of course when the currencies were going up, up, up and away, in my beautiful balloon, for 6 years, we didn't hear of any complaints or claims that I was "giving investment advice"... Any way... It is what it is... I call it "Market Commentary"... And everything I say is "Chuck's opinion" not that of EverBank's and the last time I looked... Opinion is: not to provide investment advice or to manage your money - THOSE ARE DECISIONS THAT YOU HAVE TO MAKE.

Well... Now that I've said all that... Guess what finally happened yesterday, that I've said was the case since January? Yes, the National Bureau of Economic Research (NBER) finally came clean and said that the U.S. has been in a recession since December, 2007. Here's where I could go totally sophomoric on you and say, "I told you so!" but I won't, no wait, I already did! But, that's not my intention. I only carry on about his because recently I've had a few people tell me that I have no foresight, and that I merely react to things... Hmmm... I said this was a recession 11 months ago, long before the un-dynamic duo of Paulson and Bernanke would admit it, and long before your friendly neighborhood economist would admit it, and way before the NBER, the official arbiters of this call, admitted it.

The currencies remained in a very tight range yesterday with a bias to buy dollars, with the Huge stock sell off... The stock jockeys didn't fall all over themselves on this news, and that surprised me... Here's why... You see, most times, in the past, by the time the NBER gets around to calling a recession, the recession is either over or about to be over. So, knowing this, I figured the stock jockeys would be falling all over themselves, calling out that the light at the end of the tunnel could be seen...

The problem with that mentality is that not all recession calls by the NBER have signaled the end of the recession. Take... The recession that started in July 1981, which was announced in January 1982, and that recession ended 10 months later in November 1982. That's the scenario I'm afraid that we are going to revisit this time. I've already said that I believe 4th QTR GDP will show a negative -5% figure, so that's right now, and there's no way, the economy rebounds from a negative -5% drop in a heartbeat... This is going to be a long, protracted recession, but then, the song remains the same here for me... I've said that for a long time now!

We heard from Federal Reserve Chairman Big Ben Bernanke yesterday... Big Ben said "further interest-rate cuts are "certainly feasible," but he warned there are limits to how much such action would revive an economy likely to stay weak well into next year."

Mr. Bernanke also said the "Fed's powers don't end with the federal funds rate, and its ability to inject liquidity into markets through its balance sheets "remains effective."

I guess, that was the wink and nod that interest rates are going lower, and that... The Fed is going to continue to take in toxic securities on their balance sheet...

OK... There's a story on the news wires this morning that according to the charts at the Bank of Tokyo, yen could push to 79.75 VS the dollar. WOW! I think these chartists should go back and check their angles again, because that's a phenomenal move in yen, and I can't believe the Bank of Japan (BOJ) wouldn't be in the markets intervening (selling yen) to keep that from happening... But for what its worth... There you go!

Today, we'll see U.S. Treasury Sec. Paulson speaking about the U.S. / China economic strategy... Hmmm... I wonder if old Hank, will ruffle a few Chinese feathers with his speech, or will he go quietly? I think that after yesterday's .75% drop in renminbi, followed by a "regular" .30% drop last night, which puts renminbi at a 5-month low, that Paulson will be in a feather ruffling mood, especially, given the thought that he only has about a month left on his Treasury Sec. watch...

Remember about a month ago, I told you all about the early part of this decade, when the global economies were all fighting with recessions, and that the currencies were getting rewarded whenever a Central Bank cut rates to promote growth? I said then, that we could very well relive that scenario, and each time the RBA gives us one of those "mega rate cuts" I notice the A$ rallies... I guess, after we get through the next two weeks of Central Bank rate cuts, we'll have a better idea if this is going to play out again, but for now, it sure is beginning to look like it will...

Looks like the airlines are "hurtin' for certain" as I saw two different ads in the weekend paper for $49 flights... Southwest and American Airlines were promoting those discount flights... Of course there were tons of "terms and conditions" but the key here is the offer of discount flights...

I see from the U.K. Telegraph that AIG is beginning to sell off assets in an attempt to pay back the $153 Billion "loan" the Gov't gave them. And I see where JP Morgan Chase is going to lay off 9,000 employees. And that there are rumors that Britain is entertaining thoughts about joining the euro again... They can forget about that! The people of Britain are NOT going to vote for that to happen... At least that's how I see it from the cheap seats.

And yesterday... The piece of data that "told me" we were in a recession, the ISM (manufacturing) Index printed... And the index number fell by a greater margin than the "experts" forecast, and brought it to the lowest level (36.2) since 1982! Again, folks, this is a very "telling" piece of data, and confirms my belief that we're in for a long, protracted recession, as this looks like the early 80's recession and not those willy nilly ones of the 90's and 2000's!

The only data we'll see today, is the vehicle sales, which is expected to fall again... I see where Ford is going to announce that they are going to change their focus to small, fuel efficient cars instead of Trucks and SUV's, hoping that will "win over" Congress to give them a loan... I also see where Ford is offering "employee prices" plus a rebate for a select group of their cars... (that "employee pricing" is a bunch of bunk if my opinion any way!)

So, there's a collection of some of the items that's will drag on the U.S. economy... And eventually the dollar, once we get past this credit crisis...

Next on the rate cut block is the Reserve Bank of New Zealand, (RBNZ) who meets tonight... I think the RBNZ will play a game of poker with the RBA, and say..."I'll see your 100 BPS, and raise you 50 BPS"... That's right, I think we'll see 150 BPS rate cut from the RBNZ... Like I've said a few times now, rates are going lower all over the world folks, we should all get ready for this!

I sure ruffled a few feathers yesterday when I printed a comment from someone else about the Energy Dept... Folks... The point was simply that we don't need the Gov't operating private businesses, like banking... That's all it was...

The Retail folks are "happy" with the sales figures from the first weekend of Christmas sales... But, "happy" isn't "giddy"... And that's going to be a problem for the retailers this Christmas... They'll see sales... But they won't be "giddy"... And wasn't that a shame in NY where a Wal-Mart worker lost his life in a store opening stampede? That's a shame, it really is... It's not like Wal-Mart was giving stuff away free! I'll stop there, the story is sad enough...

Time to head to the Big Finish...

Currencies today 12/2/08: A$ .6480, kiwi .5345, C$ .8040, euro 1.2670, sterling 1.4940, Swiss .8290, ISK 230, rand 10.38, krone 7.0875, SEK 8.3175, forint 206.35, zloty 3.0160, koruna 20.2860, yen 92.20, baht 35.50, sing 1.5285, HKD 7.75, INR 50.14, China 6.8875, pesos 13.55, BRL 2.30, dollar index 86.85, Oil $49.23 ( I paid $1.84 for premium gas this morning, YAHOO!), Silver $9.44, and Gold... $778

That's it for today... My little buddy, Alex, was writing a paper on the Revolutionary War last night, and we were talking about "taxation without representation", and thought for a moment before going to bed, that, I kind of feel like that's what we're receiving now, today! Today is my long time friend, Ed Bonawitz's, birthday! Happy Birthday Ed! Ed and I began working together at the old First National Bank of St. Louis in 1980... I don't think the Dead Sea was even sick yet, then! There's a HUGE black out here in the St. Louis area this morning... We have electricity here are work, otherwise I would have turned around and gone back home! But, there will be a few people here affected by it, and the kids in those blacked out areas are jumping for joy this morning, as schools are closed where there is no electricity. Not my kids... My two oldest, Dawn and Andrew are teachers in the school district that they attended as youngsters, and my little buddy, Alex, goes to the same school district... And it's not affected! I can hear Alex complaining now! Oh well... Time to go... Hope your Tuesday is Terrific!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837

King Henry Keeps His Cash!

Chuck Butler — Wed, 19 Nov 2008 15:24:56 GMT

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

Gold and silver prices are down.

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

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In This Issue..

* Paulson says no to automakers...

* Currencies trade in a tight range...

* Richard Russell on a Wednesday!

* TIC Flows improve...

And Now... Today's Pfennig!

King Henry Keeps His Cash!

Good day... And a Wonderful Wednesday to you! OK... Are you up on these "pirates" stories going on right now? That's pretty unbelievable, eh? And... We are all fans of "pirates" here on the Currency Trading Desk, but these guys now are giving "our pirates" a black eye!

The currencies range traded yesterday in a very tight range, as Treasury Sec. Paulson, didn't give in to the lawmakers and allocate $25 Billion of the TARP (Troubled Asset Relief Program) funds to automakers. King Henry said, "The rescue (read bailout!) package was not intended to be an economic stimulus or an economic recovery package. The $700 Billion TARP was designed to stabilize financial markets and the flow of credit, and it not a panacea for all our economic difficulties."

Well... For once, I'm not going to take King Henry to the woodshed... The lawmakers were banging on him and Fed Chairman Big Ben to dole out funds to anyone that was in dire straits... But they held their ground... And therefore did not cast any "unknown" shadows over the markets. But U.S. stocks didn't like it, and sold off after the testimony and questions on Capitol Hill.

The thing to think about with these automakers is the fact that they have become such HUGE finance companies, which is where, I believe I read, they "really make the money"... Shutting them down because they haven't run their businesses correctly over the years isn't the issue... It's what to do with those financing companies... I could be totally wrong here, off base and picked off by a wily veteran lefty, but it's the way I see it...

OK, well, for the currencies... Like I said above, they were stuck in the mud, in a tight range, with no where to go and no one to see. I was reading a note from well respected and famous analyst, Richard Russell yesterday... Let's listen in to see what Mr. Russell had to say...

"Please remember, all these billions of dollars that the government is throwing at entities - all this money represents additional DEBT.

How the US dollar will hold up against this building-tower of debt is the question.

Ultimately, the trillions of newly-created dollars could lead to hyper-inflation."

Yes... But the question that I keep getting asked, and I would ask of anyone that makes a statement like that is "when?" When do the markets wake up and smell the coffee? When do the markets realize that they're on the wrong side of the road? I keep saying that it will all happen when the credit markets get unlocked... But that certainly doesn't look like it's going to happen any time soon... I just getting frustrated by all this... The signs are there for dollar weakness... It's like they are glowing neon signs in bright colors, pointing to the dollar with exclamations like "should be weak"...

Remember when I used to write about how the debt level in New Zealand would come into focus once the hype over the high interest rates and Carry Trades were history? And for years people would write me and cuss at me about how they sold their kiwi because I said it would be in trouble when the interest rates and Carry Trades were history... But I held my ground, then... And I'll hold it now... In fact, I've got company... By good friends over at Casey Research, including the guy that inspired me to write more and more, David Galland, had this to say yesterday....

"The foreign debt of New Zealand, which includes private debt, is a serious problem for them and is why their currency has fallen from NZD 0.80 to NZD 0.60 to the USD>

What will happen when the world finally realizes that the U.S. government debt (that is not even accounting for private debt) is already in excess of $10 trillion and well on its way to exceed $12 trillion in 2009? This is at a time when our $13 trillion GDP is sure to contract by a couple trillion. I am afraid the U.S. chart next year will not be that different, which bodes well for gold as the only real substitute to the fiat currency that will be created to cover the deficits."

OK... Let's talk about what's going on in the markets right now... Not the future, which is unknown to all of us... We can only speculate about the future based on the data we have now, and the knowledge of history... What's going on, as Marvin Gaye used to sing, is simply that the sentiment in the markets right now is so terrible and fragile, which is keeping the risk takers on the sidelines and investments centered around risk aversion on the burners. Any time the risk takers go out on the limb, another deep, dark, dangerous piece of data prints, or our "leaders" (read Paulson and Bernanke) make some stupid comment, which leads to a dollar rally, and the risk takers get squeezed.

Speaking of deep, dark, dangerous data prints... How about the news that Citigroup is liquidating its CSO hedge fund after it lost 53% of its value last month? This news won't be looked at as anything but deep, dark and dangerous!

Speaking of data... Today, we'll see the stupid CPI (consumer inflation), some Housing data, and the last FOMC meeting minutes... I would think the Fed Heads wouldn't have any surprises in their minutes, like the Bank of England (BOE) did in theirs... The BOE's minutes showed that the 150 BPS rate cut that was delivered earlier this month (which also begs the question as to why the BOE can issue their minutes within two weeks, while it takes the Fed over a month?) Anyway, the BOE minutes showed the 150 BPS rate cut was unanimous... Plus... There were quite a few calls to go to 200 BPS! WOW!

So... Ok, the stupid CPI, I've beaten this horse to death (no animals were hurt!) here with why I feel that CPI is stupid... And when those that have payments tied to CPI see today's print they will fully agree with me. CPI is expected to have fallen .9% YOY... To 4%... Of course you and I, and those on the payments ties to CPI believe that inflation is really around 10% or more!

The Housing data today is the October Housing Starts, and Building Permits, of which both are expected to be weaker than September's data...

I met Dan Ferris a year or so ago... A quiet, soft spoken guy, that when you look at him you just know he's got a lot of brain matter... Real intelligent! I follow his writing from time to time, and Ty Keough sent me a note from Dan... This was in the Stansberry Research letter... "The money we use every day in the U.S. is debt. It is lent into existence. This record level of Treasury borrowing is the inflation engine itself, tank filled with gas, hood popped up, revving into the red zone right before your eyes."

OK... I just saw / read a story that came across the Bloomie, that Bank of America (BOA) and Barclays Capital, are calling for a Aussie dollar rally next year, as they believe Australia will skirt a recession, that Europe, Japan and the U.S. are mired in. They even called for a rise to 70-cents in the next 6 months. Hmmm... I guess they're of the opinion that the Carry Trade unwinding is coming to an end.

I, on the other hand, don't believe that the Carry Trade is anywhere near an end... So, do with this information in your individualistic manner!

The data yesterday, saw PPI fall -2.8% in October... Which was mainly made up by the fall in oil prices... The TIC Flows showed the improvement I said we would see in this data, as the October flows showed an positive balance of $66 Billion, VS the $21 Billion in Sept. This still does not cover what's needed to finance the Current Account Deficit, and Federal Direct Investment. And should have been expected to be so robust, given the flight to safe haven Treasuries...

Currencies today 11/19/08: A$ .6480, kiwi .5495, C$ .8115, euro 1.2650, sterling 1.5080, Swiss .83, ISK 182, rand 10.38, krone 7, SEK 8.02, forint 214.75, zloty 3.0425, koruna 20.3390, yen 96.80, baht 35, sing 1.5280, HKD 7.75, INR 49.99, China 6.83, pesos 13.19, BRL 2.3590, dollar index 86.98, Silver $9.45, and Gold... $738.30

That's it for today... Well... Anheuser Busch is no longer, as the InBev deal closed yesterday... I was so focused on getting the Pfennig out yesterday that I totally forgot to send some love and congratulations toward Albert Pujols, the National League MVP for 2008! Way to go Albert! And... Hey! This IS HUGE NEWS! The good folks at Agora sent me the news yesterday that the movie I.O.U.S.A. has made the cut from 94 Documentaries to the final 15 that will be voted on for an Oscar! WOW! And to think I was interviewed for that movie, but was left on the cutting room floor! Congratulations to my good friend Addison Wiggin, and the other folks at Agora that had the idea to put this together in the first place! No improvement in the eye yet, still some pain to deal with, but I have to believe it will get better! Thanks so much, once again, to all of you dear readers that sent along good wishes and prayers for me. I feel bad that I have to keep announcing this stuff, but it is what it is, and life goes on. God willing... OK... Time to go... I hope your Wednesday is Wonderful!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837

TARP Testimony Today...

Chuck Butler — Tue, 18 Nov 2008 16:03:29 GMT

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

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In This Issue..

* What will Paulson say?

* Dollar remains well bid...

* How long for Safe Haven buyers?

* G-20 Schmee 20!

And Now... Today's Pfennig!

TARP Testimony Today...

Good day... And a Terrific Tuesday to you! I've been away for a few days to deal with something, I want to thank Chris once again for taking the conn on the Pfennig since last Thursday. He'll get it again at the end of this week and the beginning of next week, as I hope to get to Marco Island for the Wealth Masters Conference.

Well... Nothing has changed since I left you last Wednesday. The awful economic data just keeps piling on, and the dollar gets bid up on safe haven purchases. We did see the Eurozone and Japan announce that they are in a recession... Chris was kind enough to leave me the following, so here's some more Chris....

"The dollar weakened slightly after the US Industrial production numbers showed a rebound in October. The 1.3% monthly gain sounds great, but it followed September's drop of 3.7% due to the Gulf Coast hurricanes. After adjusting for the effect of the hurricanes and a strike at Boeing, output dropped .7 percent during each of the past two months. The trend continues to be very weak, and the recession which currently grips the US is now expected to last through 2010.

The US was rescued from the last two recessions by US consumers, who continued to borrow and spend right through the previous slowdowns. But we can't count on consumers to pull us out of this one. Plummeting home values, dwindling incomes and the near disappearance of credit have proved a potent mixture for the US consumers. The number of personal bankruptcy filings jumped nearly 8 percent in October from September. Filings totaled 108,595, surpassing 100,000 for the first time since the bankruptcy laws were changed in 2005. The number of filings were up nearly 34 percent from October 2007, and are expected to total over 1.2 million for the year.

Not only are bankruptcy filings up, but most filers have much more credit card debt than in years past. A recent study found that the typical family who filed for bankruptcy in 2007 was carrying about 21 percent more in secured debt, and about 44 percent more in unsecured debts like credit cards than those that filed in 2001. Don't count on US consumers to rescue us this time, so who will? Pelosi and President elect Obama are already talking about increasing government spending to try and borrow and spend our way out, but any stimulus or massive government projects will only add to the overall debt and increase the deficits. We are already being crushed by our debt load, and increasing it won't be a long term positive for the US. The dollar continues to be propped up by safe haven purchases and the global deleveraging, but this dollar strength can't continue. Once we return to the underlying fundamentals, the dollar will fall."

OK... Thanks once again, Chris!

The BIG NEWS today should come in the form of a testimony by Treasury Sec. Paulson, regarding his TARP... This should be interesting folks... You see there is a whispering campaign to withdraw the "blank check" that lawmakers gave to Paulson and Fed Chairman, Big Ben Bernanke, and any attempt to not fully disclose the details of what has been given out to date, or... Any more changing of horses in the middle of the stream, could cause a ruckus. It could also cause the safe haven boys and girls to go "all in" on their safe haven purchases, because, it will be just like last week, when Paulson did change his course for the $700 Billion bailout money, and the blanket of "unknown" was cast upon the markets, and the risk takers ran for the hills.

In other words... The Trading Theme that is in place that rewards the dollar when things look darker in the U.S. will be working overtime, buying dollars...

For the sake of honesty... And not that I'm cheerleading the currencies (I get real tired of this... Recently I've had some readers turn on me and accuse me of "knowing nothing" and being nothing more than a "cheerleader") Come on! Can't you see the forest from the trees? This is simply telling it like it is... WE have a HUGE deficit problem, and unless you are willing to begin paying taxes that amount to about 75% of your income to pay the deficit down, then we need to get the dollar weaker now, for that's the only way we're going to be able to pay down the interest alone on these debt obligations is with a cheaper dollar! So, yes, I push for that dollar to get weaker now, so that the tax obligations of my kids and grand kids aren't oppressive!

OK, sorry but I had to get that off my chest... So, for the sake of honesty, let's hope Paulson comes to the lawmakers with a cup of honest, and let the chips fall where they will. Oh! And yesterday, the Wall Street Journal reported that Paulson is unlikely to launch new bailout (the used "rescue" but we all know what it is!) programs, saving his unused horde of cash to hand over to the new Treasury Sec. and say, "here you go, spend it wisely, but just between you and me, this isn't enough to help anything"

Judging from happened in the overnight stock markets, with the risk takers nowhere to be found, the consensus being the overnight markets don't believe Paulson will deliver the goods, and stocks sold off in Asia and early Europe... I suspect that the U.S. market will take a cue from those overnight markets as well, at least until Paulson talks... And the Dow only has 273.58 points to give before falling below 8,000... UGH!

All those "Safe Haven buyers" must really be "scaredy cats" because as I look at the bond screens, I see that you will get 13 basis points for a 3-month T-Bill, and 80 basis points for a 6-month T-Bill... By the time the broker takes his fee or commission you are left with nothing! So, that's the same as putting the money under your mattress or stuffing it in coffee cans and burying it in the back yard! And, if you want to talk long notes and bonds... Well, you'll have to go to the 30-year bond before you can get yield that comes near to covering the inflation rate! Uh-Oh! Negative real earnings for the "safe haven buyers"...

How long can that continue? How long... Can this be going on? How long... Can this be going on? How long are these guys and girls going to accept negative real earnings? That's the $64 question... But, I have to believe that once these "safe haven buyers" decide that they've had enough, the unwinding will go very quickly, and the whiplash we'll receive from watching yields turn around will hurt!

And, with the unwinding of the "safe haven buys" one would think that the dollar gets put on it ear once again... That is unless there's a new "hoola-hoop" for investors to move into... But since there's no "hoola-hoop" to speak of, and probably won't be, given the fact that the regulators will be scrutinizing "new instruments" to make sure they "don't get fooled again"...

Did you see the news yesterday that Citgroup plans to cut 50,000 jobs? That's just awful! And if true, will be the latest jolt to Wall Street! Chief Executive Vikram Pandit addressed employees in a town hall-style meeting Monday morning, giving them the bad news. These job cuts won't take place overnight... And that they plan to be finished with them by the 3rd QTR of 2009.

The data cupboard today will give us a look at the Producer Price Index (PPI) (wholesale inflation), which is expected to fall from previous printings, as Oil prices have fallen faster than anyone and I mean anyone could have imagined. We'll also see the TIC Flows (net security purchase by foreigners) for September... This data should see some improvement, but remain well below the figure needed to finance the current account deficit.

Yesterday, Capacity Utilization printed for October, and improved (on first glance, wait for the revision) on September's revised downward figure of 75.5%... Capacity Utilization has long been a fave piece of economic data of mine due to the fact that it is one of the very few / rare pieces of data that is forward looking. Capacity Utilization weakness was one of the factors I used in calling the recession in the U.S. back in January. Capacity Utilization and the ISM Index (manufacturing)...

So, how about that stirring communiqué' from the G-20 crowd! I was moved! The chills went down my spine, my eyes filled with tears of joy, it was something to behold! Oh? They didn't do all that? I must have been dreaming, eh?

What a joke! These leaders from around the world met and didn't come up with anything other than rhetorical direction only? Fire them all! Throw the bums out! This is ridiculous! It just shows me that they are probably more interested in pointing fingers than actually agreeing to work together to deal with this global problem.

So... Look for more of the Trading Theme today, folks. The deeper, darker, more dangerous clouds are moving back in over the U.S. economy.

Currencies today 11/18/08: A$ .6465, kiwi .55, C$ .8115, euro 1.2635, sterling 1.5040, Swiss .8345, ISK 182, rand 10.2850, krone 7.0180, SEK 8.0425, forint 214.40, zloty 3.0475, koruna 20.4280, yen 96.10, baht 35, sing 1.5270, HKD 7.75, INR 49.65, China 6.8280, pesos 13.22, BRL 2.3215, dollar index 87.07, Oil $54.80, Silver $9.35, and Gold... $736.75

That's it for today... This summer I began to have a vision problem in my left eye, but having been to the eye doctor and being told about floaters, I figured it would go away. And it did for about 3 weeks... But then came back, and this time was worse, the eye was cloudy. So I went to the eye doctor again, and this time was told I had a mass behind my eye that was causing the problem. Last Thursday, I spent the day at a Cancer Center dealing with this mass that is attached to the back of my left eye. The procedures involved a laser and a shot, which resulted in some massive pain... This is just a setback folks. The doctor believes my vision in that eye will be saved, and that's all I know for now... I had to live like a hermit for 5 days because of the dye they put in me, so here I am... Back in the saddle... I know that I'm in good hands...

My beloved Missouri Tigers got out of Dodge with a win on Saturday, as their recent trips to Ames, Iowa haven't been good, but they prevailed this time, and are Big 12 North Champions for the 2nd year in a row! They still have the border war with main rival, Kansas, in two weeks, which they need to take care of before playing in the Big 12 Championship Game. I took my family to the Big 12 Championship Game in San Antonio last year... This year the game is in Kansas City, I think I'll stay at home in the warmth of the house and watch it on TV! OK... Mike's here, so I must be running late... I hope Your Tuesday is Terrific!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837

Paulson throws the markets a curve...

Chuck Butler — Thu, 13 Nov 2008 15:45:59 GMT

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In This Issue..

* Paulson throws the markets a curve...

* Goldman says to buy the yen...

* RBA intervenes to protect the AUD$...

* China provides support to commodities...

And Now... Today's Pfennig!

Paulson throws the markets a curve...

Good day... Chuck is out today, so I get the opportunity to share some of my thoughts on the markets. As many of you know, I spent most of last week in Washington DC giving presentations at the Money Show. On the way to the hotel, the cab driver who had noticed my EverBank luggage tag asked if I was a banker. He said he had seen a lot of us lately. I guess I was one of the few bankers flying into Washington DC who wasn't heading over to the Treasury Dept. to get some of the cheap money they are passing out. I had a great trip to Washington and really enjoyed the opportunity to spread the word about EverBank and the protection that portfolio diversification provides.

I don't think Treasury Secretary Paulson is having as good a time as I did in the nation's capital. When he came down from NY a couple years ago to take over the Treasury, he was Wall Street's best paid CEO and looked to cap his career with a high-profile sojourn in public service. But his credibility has really taken a hit over the past year, and his update before congress yesterday didn't quite go as everyone expected. Chuck left me the following to share with readers this morning:

"Yesterday I told you that Treasury Sec. Paulson was going to give an update on the bailout package... And instead of an update, he threw the markets a great big 12-6 curveball! Treasury Sec. Paulson laid out his plans for the next stage of the financial market rescue package, announcing he has shelved a plan to buy troubled mortgage assets and is moving his attention to non-banks and consumer finance.

And... in a striking admission, Paulson said that buying mortgage assets "is not the most effective way" to use government funding. Geez Louise! I could have saved him, Congress, and the whole country a lot of time and stress on this if he would have just listened to me at the time! I said when it was first announced that the Gov't had no business buying up these troubled assets, and getting involved in what used to be known as "free markets"! He's changing horses in the middle of the stream! What gives? And... All this unknown stuff now, put the Trading Theme in overdrive, buying dollars in the deep, dark days of the U.S. economy!

There's a silver lining here folks... And I believe that Sec. Paulson is seeing the seized up credit markets unlock. This development might just be nascent, but he believes it's there. And when this problem with the credit markets eases, a return to the fundamentals could very well be in store. In fact, I would bet a dollar to a Krispy Kreme, those fundamentals are going to come home to roost once this credit market problem is in our rear view mirror.

Now, back to the bailout package... Now, the Treasury Sec. wants to put the government's money toward unlocking student loans, credit card receivables, and auto loans... Some are calling this move a U-Turn, but in essence it isn't... Before the Gov't was going to buy toxic bonds made up of residential home loans... Now, they will be buying bonds made up of consumer loans, which in my opinion may end up more toxic than the first choice, given the fact that we're in a recession and the recession will work out to be one that is protracted.

While these things "might" get the credit markets unlocked, they might miss the mark too, and until we get these credit markets unlocked, the markets focus will remain on the crisis and not return to focusing on the awful fundamentals in the U.S. economy. These awful fundamentals need to rise to the top again for risk takers to come back, and until the risk takers come back, currencies and commodities like euros and Gold, will continue to be put into a corner by the dollar.

We get a new Treasury Sec. in January when the new administration takes over... The new Treasury Sec. will have their hands full for sure!

On the side... OK.... Yesterday morning... I looked up to the TV and saw that knucklehead Jim Cramer on the Today Show... I swear.. He said this to Meredith... "I have been honest on this show, Meredith, and I "try" to be honest on my show"... He Tries to be honest? OMG!"

I agree with Chuck, whoever decides to take over as the new Treasury Secretary will certainly have their work cut out for them. I've heard they may bring back Volker to take over for Paulson. That would be an interesting choice, as he has 'been there, done that' crushing inflation during the 1980's. But his high interest rate policies which he pushed caused the US to dip into a deep recession, and he also played an important role in bringing the US off the gold standard back in the early 70's. Even if he doesn't take the Treasury position, Volcker is one of Obama's advisors, and will certainly have some influence on the new administration's monetary policies.

Paulson's curve ball put the markets in a sell mode, with investors moving back into the relative safety of US treasuries and money markets. The dollar strengthened after his bombshell, but started to fall again in Asian trading. The Japanese yen which has been one of the most volatile currencies, rose to a two week high against the euro after Paulson's curve caused cuts in purchases of higher-yielding assets. But the yen reversed some of yesterday's sharp gains overnight as currency traders worried about BOJ intervention. These concerns were heightened by comments from Japanese Finance Minister Nakagawa who warned that Japan would protect the yen against sharp volatility.

Despite the prospect of intervention, the yen remains a buy according to a report by Goldman Sachs group. Goldman believes the yen will strengthen 6 percent against the US dollar due to a continued unwinding of the carry trade. The dollar will weaken to 90 yen in three months, before gaining to 100 yen six months from now, Goldman said. "Deleveraging and funding constraints have likely created a new source of foreign-exchange demand and supply," the Goldman analyst wrote. "We expect deleveraging patterns to continue into year-end, driving the dollar and yen stronger and putting pressure on higher-yielding currencies." As readers know, Chuck has been talking about this carry trade reversal for some time, and we agree that this reversal will likely last through the end of the year and into the 1st or 2nd quarter of 2009. Look for further dollar strength during this time period, but watch out below once the dollar reverses course.

The reversal of the carry trades has led to a fall in the value of the Australian dollar, a move which accelerated yesterday. The currency drop became too much to bear for the Reserve Bank of Australia who intervened in the markets to protect the AUD$. An RBA spokesman confirmed the central bank bought its own currency, putting a floor under the currency after it dropped over 2 cents yesterday morning. This intervention is a good sign that the RBA is now concerned with the value of the Aussie dollar and won't let it slip too much further than the current levels. With the RBA's support, and the possibility of a bottoming of commodity prices, these could be excellent levels to buy into the Australian dollar.

The German economy, Europe's largest, contracted more than economists expected in the third quarter, pushing the nation into the worst recession in at least 12 years. German GDP dropped a seasonally adjusted .5% from the second quarter, when it fell .4%. The economy is officially in a recession, as it has now contracted over two consecutive quarters. Traders increased bets that the ECB will reduce interest rates. The euro had been sold off before the announcement, hitting a low of 1.2389 vs. the US$, but then rallied back above $1.25 in early US trading.

This week has been a pretty slow data week here in the US, but today we have two important releases. The US trade deficit probably narrowed in September as retreating oil prices reduced the value of imports. The sharp increase in the value of the US$ over the past 6 months has also helped reduce our trade deficits. But I don't think the commodity price slump will last, and also believe the US$ will turn back around sometime next year. So this narrowing of the trade deficit won't last. We will also get the weekly jobs report today, which will likely show another big bounce in first time filings for unemployment. The labor market in the US is bad and getting worse, and I would be surprised to see a number below 500k for the weekly initial jobless claims. This is one of the factors which caused the Treasury Secretary to reverse course on the bank bailout, as he now moves his focus to the growing consumer credit crisis.

We talked about China's big stimulus package earlier this week, and the impact it will have on China's US$ reserves. But the stimulus package will have another impact on the markets. Most of the $586 billion stimulus will be focused on infrastructure building projects. These projects will mean China will continue to import large amounts of copper, iron ore, cement, and other building materials. They will also continue to demand a greater supply of oil and feul. This new demand will help offset some of the drop in commodity demand from the slowing western economies. Commodity prices have fallen dramatically as traders priced in the global slowdown. But China's economy is still the fastest growing among the world's 20 largest, with a growth rate close to 8 percent, and this latest stimulus announcement should cause a bounce back in the prices of these commodities. The countries supplying China with raw materials should also benefit, including the currencies of Brazil, Australia, and Canada, all of which have been beaten down lately.

Finally, Chuck let me know some great news for our St. Louis readers: There's going to be a screening of Addison Wiggin's movie, I.O.U.S.A. here in town... The screening will be Nov. 18 at the Missouri History Museum, part of the Community Cinema Series, co-sponsored by KETC and the History Museum. "I.O.U.S.A." will be shown at 7, followed by a panel discussion.

Currencies today 11/13/08: A$ .6389, kiwi .5557, C$ .8113, euro 1.2535, sterling 1.4838, Swiss .8404, ISK (No Quote), rand 10.3166, krone 7.096, SEK 8.0703, forint 215.51, zloty 2.9765, koruna 20.095, yen 96.03, baht 34.99, sing 1.5119, HKD 7.7501, INR 49.2925, China 6.8298, pesos 12.97, BRL 2.305, dollar index 87.43, Oil $56.81, Silver $9.41, and Gold... $717.66

That's it for today... Got to go now so I can call into the quarterly EverBank officer's meeting. It really is great working for EverBank, we continue to do very well and maintain our health in a very difficult banking environment. We just announced record growth in deposits and earnings here at EverBank. It truly is a great day at EverBank!! Hope everyone has a Tub-thumpin Thursday!!

Chris Gaffney, CFA

Vice President

EverBank World Markets

1-800-926-4922

1-314-647-3837

The Junk Yard Dog Bites!

Chuck Butler — Wed, 12 Nov 2008 15:13:13 GMT

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In This Issue..

* The dollar rallies big time!

* A dollar conspiracy?

* Bailing out the automakers?

* Weathering the storm in N.Z.?

And Now... Today's Pfennig!

The Junk Yard Dog Bites!

Good day... And a Wonderful Wednesday to you! Well, the Junk Yard Dog got a hold of the euro yesterday, and even though the U.S. Banks, thus the majority of currency desks, were observing Veteran's Day, the move down in currencies VS the dollar, led by the euro, was drastic!

The Junk Yard Dog I'm talking about is Jean-Claude Juncker, chairman of the Euro group... I stopped the euro in its tracks from its nascent rise in the past month, by saying the "euro's recent rise was undesirable"... He also deep sixed the euro, and thus all the currencies save yen, by saying he "didn't see any reason there couldn't be more rate cuts by the ECB"... (the ECB is of course the European Central Bank) Well... These two comments tore through any gains the currencies had mounted VS the dollar in recent weeks, like a Junk Yard Dog tears though some raw meat! It was a knife to the euro's heart...

And so it was to be, a massive dollar rally, on Veteran's Day. And it didn't get any better in the overnight markets, as Japan, and then early European trading has taken the dollar even higher and the euro drops to the 1.25 handle... A handle it thought it had left in the rear view mirror back in October... Boy! If comments from a guy that's not even the President of a Central Bank in the Eurozone, can deep six the euro like that, you have to sit back and wonder what's going on... Was it simply a case of watching the euro rally in recent weeks, and even get within spittin' distance of 1.31 last week, and needed to stem the rise? Well, if that's the case, the plan worked! And like Col. John "Hannibal" Smith used to say... "I love it when a plan comes together!"

And it just so happens that Bank of England (BOE) head Gov. Mervyn King added to the currencies' worries by announcing that the BOE policy makers are "prepared to cut interest rates again to prevent a recession pushing inflation below its target." All this on a day when most U.S. currency desks were absent... Hmmm... Sure seems to me as though this was a "planned" jawbone intervention to support the dollar...

So... Like I said above, the currencies, save yen, got whacked yesterday... But not Japanese yen! When things get really dark in the U.S. and with all the investment choices except U.S. Treasuries getting sold, that's when the dollar and Japanese yen shine... Which to me is still a strange phenomenon, that the dollar can be strong VS almost every currency on the face of the earth, but losing ground to yen. You would think that the other currencies would get some love just based on the dollar / yen cross!

Recall, I've explained the currency pairs and crosses before, and how one major pair's (like dollar / yen) usually carries over to the other currencies... But since the dollar and yen were the two major currencies used to fund the Carry Trade, they are getting bought at the same time, causing all kinds of ripples in the currency karma...

Looks like the good folks over at Bank of America, have been reading their Pfennigs each and every day! I say that because, there is a report out this morning that Bank of America (BOA) issued a report that; "U.S. dollar gains are increasingly at risk toward year-end as declining credit market rates switch investors' focus to the slowing economy."

WOW! If that's not just rewording what I've been saying in the Pfennig almost daily for a couple of months now, then I'm a monkey's uncle! The go on to say that, "A weak economy and declining stock prices are not a solid foundation for any currency over time. Persistent strength in the dollar is more related to the unwinding of long positions in the euro and pound and not a sign of optimism about U.S. economic prospects."

It's nice to see someone other than me, keeping my eye on the ball here... OK, I know all too well that it's not just me, but it sounds good, eh?

Well.. There's another "bailout" plan, although the media now calls them "rescue plans", being talked about... This one is for the automakers... The Speaker of the House wants the bailout package NOW! Unfortunately, for her, and the automakers, it doesn't look like a bailout package will be passed with this "lame duck" Congress... The "new guys" don't come into office until January 6th. Maybe, just maybe, this thought that every freaking business that runs into trouble because they didn't run their business correctly, and therefore "deserves" a bailout from the Government, which will mean in the end, taxpayers, will go away... I doubt it... But there's always a chance, somebody, someone, somewhere, at sometime, comes up with a hoola-hoop, and we don't have to go down this bailout road any more!

Hey! What ever happened to U.S. Treasury Sec. Paulson's "bazooka" that he threatened to aim at the U.S. credit crisis back in July? A quick check of the financial scorecard since then, shows that stocks are circling the bowl, the Fed has had to step in to conduct commercial paper operations, U.S. Consumer Confidence is at 1982 low levels, and loans are still difficult to get on the books... I'd say his bazooka was much like the bubble gum I used to chew as a kid, with the Bazooka Joe comic inside the wrapper... Sweet and satisfying at first, but soon petered out and the taste was gone, soon to be disposed of properly!

Speaking of Treasury Sec. Paulson, or King Henry, as I so named him during his ascent to the top of decision making with regard to the financial crisis, will be speaking today! King Henry will be giving an update on the Bailout packages... Should be interesting...

Our friends down under in New Zealand think they are far removed from the financial mess going on in the U.S. and Europe... But then, the European thought they were far removed from it too before the walls began crumbling down on top of them with bad debt! But, in New Zealand's case, I think they are on top of it... Mainly because the strong Central Bank... The Reserve Bank of New Zealand, (RBNZ) is big on fiscal discipline, and stated in their quarterly Financial Stability Review, that... "we are far from seeing the final impact of the financial and economic disruption. However, Kiwi banks and the Australian parents of the majors, are well positioned to withstand the economic downturn."

It would a HUGE feather in the RBNZ's cap, and further the kiwi's cap should the financial meltdown pass them by without causing major problems... The Kiwis get a glimpse at the state of their economy tonight when Sept Retail sales are printed.

Well... The euro is creeping back up as I get ready to head to the Big Finish this morning...

You know... On Monday I talked about the Chinese announcement to provide $586 Billion worth of renminbi liquidity to their economy, and how that had gotten the currencies around the world excited... And yesterday I talked about how that excitement dissipated... But there's one more thing to discuss here... And that's the fact that if the Chinese are going to focusing on keeping their economy going and their billions of citizens happy, they won't be focusing on buying U.S. Treasuries... And the funding problem that still exists, even though its not the markets' focus right now, will get even trickier for the U.S. and the U.S. dollar...

And... One more thing before I head to the Big Finish... Oil has fallen below $60 for the first time since March 2007! WOW!

Currencies today 11/12/08: A$ .6610, kiwi .5755, C$ .8260, euro 1.2590, sterling 1.5285, Swiss .8450, ISK 182, rand 10.45, krone 6.9830, SEK 8.0150, forint 215.50, zloty 2.9920, koruna 20.21, yen 97.30, baht 34.98, sing 1.5050, HKD 7.75, INR 49.25, China 6.8298, pesos 13.06, BRL 2.2665, dollar index 86.93, Oil $58.40, Silver $9.70, and Gold... $732.42

That's it for today... Mervyn King also said... "we are living in unprecedented times" Oh, thanks! Like we didn't already know that! It was a great day yesterday for catching up on email, etc. I also got a huge chunk of our monthly newsletter to clients, The Review & Focus, finished too... Hey! Chris has the conn on the Pfennig tomorrow, I will not be in the office. Don't know what the baseball writers were smoking, but they named Tim Lintecum as the National League Cy Young winner... Ahem... Brandon Webb won 22 games last year, Ahem... My darling daughter Dawn, phoned last night to tell me that my precious granddaughter, Delaney Grace, heard the song "Amy" on the radio and began to dance around and jabbering like she was singing... Dawn knows that I used to play that song on my guitar and sing it when friends would make me... I told Dawn, that Delaney Grace has good taste in music, she's like Me! HA! OK, enough... I hope your Wednesday is Wonderful!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837

Rescue plan not an instant fix...

Chuck Butler — Wed, 15 Oct 2008 14:16:08 GMT

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In This Issue..

* Rescue plan to take time...

* Pound sterling rallies (for now)...

* Brazil supports the real...

* Iceland cuts rates...

And Now... Today's Pfennig!

Rescue plan not an instant fix...

Good day...Another roller coaster of a day, as the dollar continued to slide through lunch but then rallied back up in the afternoon. As I walked out the door last night, most of the major currencies were trading right about where they were when I turned the screens on. The dollar has started to fall again in overnight trading, so the up and down of the past few weeks looks to continue.

The news stories coming across the wires this morning seem to be as volatile as the currencies. I have now counted three different stories which state the markets are moving back into higher yielding currencies and riskier investments after the coordinated bank bailout plan which was announced yesterday. But several other stories are talking about how investors are moving out of the higher yielding assets because of concern that the bank rescue will take too much time to unfreeze global credit markets. I tend to agree with the latter of these.

While Paulson and Bernanke have shown a willingness to throw UNLIMITED US$ at the credit markets, they have very little leverage to make the banks start lending again. The equity stakes which the US taxpayers purchased in Citigroup, Morgan Stanley, and seven other big institutions come with no guarantee that the investments will spur lending. Nor do they give the government board seats or any other leverage to demand that the firms actually use the money to help the economy. The banks have accepted the money (they may be dumb but they aren't stupid) and look to be using it to help shore up their balance sheets. The bet Paulson is making is that by helping them get their balance sheets in order more quickly, the taxpayer investments will hasten the major banks return to a more normalized lending environment. And I agree that this will probably be the case, but this will not happen overnight, and the recession which the US slipped into several months ago will continue to deepen.

Chuck had this to say about yesterday's trading:

"Well... All the euphoria in the markets earlier this week is diminishing as the realization that all this work to unlock the credit markets does NOTHING to change the recession course of the economy. San Francisco Federal Reserve Bank President, Janet Yellen, did not help sentiment when she said that "the U.S. economy "appears to be in a recession" as a contraction of growth is likely in Q4 and that financial market turmoil is a "serious and direct threat to global well being."

This was a big theme in my talks not only yesterday here in St. Louis, but Monday in Chicago too... The trading theme that I've talked about dominating currencies... But when the credit markets get unlocked... We'll return to the underlying fundamentals and the recession that could last 4 quarters according to one of my fave economists, Nouriel Roubini, is one of those awful underlying fundamentals... Yes, the dollar has rallied at times during previous recessions... But, we never had all these other dark clouds hanging over us like we do this time... Debt coming our out ears, money supply like there's no tomorrow, ultra-low interest rates that are very likely to go even lower, and now our new "socialism" hard at work! There are more... But, my fat fingers get tired after a while! HA! OK... Off to Philly!"

ECB President Trichet suggested a return to the 'discipline' of Bretton Woods yesterday in a speech at the Economic Club of New York. "Perhaps what we need is to go back to the first Bretton Woods, to go back to discipline," Trichet said. "It's absolutely clear that financial markets need discipline: macroeconomic discipline, monetary discipline, market discipline." The data released yesterday here in the US illustrates the need for monetary discipline in our own government.

It is of no surprise that the US government posted a record budget deficit for 2008 as financial market strains slowed the economic growth and spending rose the most since 1990. The shortfall widened to $455 billion in the fiscal year ended Sept 30 compared with a $162 billion deficit a year earlier and the previous high of $413 billion in 2004. The gap was 3.2% of GDP, up from 1.2% last year. And with the bailout and 'rescue' plans which Bernanke and Paulson have recently concocted, the shortfall will likely quadruple to about $2 trillion in the coming year. Yes, we will likely have a budget deficit of nearly $2 trillion in fiscal 2009!!

With this kind of debt, there is just no way the dollar will hold on to its value. A reader sent me a very scary looking graph yesterday, and I would love to share it with you but I haven't figured out how to paste it in. It illustrated the money supply figures and how they have spiked here in the past few weeks. With the Treasury secretary and Fed Reserve chairman throwing an unlimited supply of dollars into the markets, the value of our US dollar will undoubtedly be debased.

Today we will get a peek at how the US economy is weathering this storm, as Retail sales and producer price data is released along with the empire manufacturing data and business inventories. Later this afternoon we will get a glimpse at the Fed's Beige Book which gives the regional Federal Reserve bank's take on the current situation. Sales at US retailers probably decreased in September as mounting job losses, plunging home prices, and the deepening credit crisis rattled consumers. Producer prices may be a small bright spot, as the drop in the price of oil helped bring down producer prices in September.

Britain's pound had its biggest two day gain in three years against the dollar as UK stocks advanced after the govt. bailed out three of the UK's major banks. The currency climbed to the highest level vs. the dollar in almost a week as the FTSE stock index rose 3% yesterday. The pound is seeing a bit of a bounce back, but their problems are very similar to what we have here in the US, and I would suggest taking advantage of any bounces to exit Pound Sterling positions. There will be more bad news to come in the UK.

The Japanese yen rose for the first time in five days vs. the dollar as investors recovered from their initial euphoria over the bank bailouts. The bailout announcement has provided a bit of stabilization to the markets, but now investors are again shifting their focus to fundamentals, which are not pointing to strong global growth. Carry trade investments, which were put on during the Euphoria are being taken back off again as investors realize the rescue plan will not be an immediate cure for the global economic downturn. The yen is also being underpinned by repatriation of funds by Japanese investors. Japanese households' appetite for risk was already diminishing before the turmoil last week materialized, and these investors continue to bring their money back home.

With the markets waking back up to the fact that there is still risk in these markets, the higher yielding currencies of South African rand and Mexican pesos sold off. The Australian dollar and New Zealand dollars also fell as stocks and commodity prices declined on global economic concerns. The retreat of the Aussie dollar, after yesterday's record gain, was somewhat expected. Gold, Australia's third-most valuable raw material export dropped for a fourth session along with other commodity prices. Prime minister Rudd continues to take an aggressive approach to addressing the credit crisis, stating Australia's financial system and economy remain 'strong'.

The Brazilian real bucked the trend of other high yielding currencies and rose slightly for a second day. Brazil's central bank announced it was selling dollars in the spot market yesterday in order to support the real. Later, the authority said it will sell up to $1 billion worth of US dollars at auction today. The real has risen nearly 8.5% vs. the US$ in the past few days, nearly erasing last weeks plunge.

Canada's currency weakened against the US$ as the price of crude oil fell. The Canadian dollar has declined 13 percent since July 11 when oil reached a record of $147.27 a barrel. Commodities make up about half of Canada's export revenue, and the US is Canada's largest trading partner. With the US obviously slipping deeper into recession, the Canadian dollar will find it tough to sustain any kind of rally. They have established close trading ties with Asia and China in particular, which will likely make up for some of the lost exports to the US. These trading ties and the abundance of commodities in Canada could help put a floor under the loonie.

I will close today's Pfennig with another update on the situation in Iceland. Iceland's central bank cut its benchmark interest rate by 3.5 percentage points following the collapse of the country's three largest banks. Policy makers agreed on the cut at an unscheduled meeting today following the collapse of three banks last week. The central bank abandoned its attempt to peg the currency to the euro last week, citing 'insufficient support' from the market. We will continue to keep investors updated as to the status of things in Iceland.

Currencies today 10/15/08: A$ .7023, kiwi .6235, C$ .8627, euro 1.3659, sterling 1.7544, Swiss .8815, ISK 260.0, rand 9.2343, krone 6.2831, SEK 7.1762, forint 192.22, zloty 2.5739, koruna 18.1005, yen 101.38, baht 34.13, sing 1.4688, HKD 7.7594, INR 48.47, China 6.8318, pesos 12.442, BRL 2.0963, dollar index 81.158, Oil $77.39, Silver $10.889, and Gold... $845.35

That's it for today...Another crazy day on the desk yesterday, with near record call volumes. Customers are both buying and selling currencies, I guess that is what makes markets! Chuck said his presentation went well here in St. Louis and he is on his way to Philly today. Should be another busy day today, so off to the phones! Hope everyone has a Wonderful Wednesday!!

Chris Gaffney, CFA

Vice President

EverBank World Markets

1-800-926-4922

1-314-647-3837

Govt to follow Buffet's lead...

Chuck Butler — Tue, 14 Oct 2008 14:41:05 GMT

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In This Issue..

* Govt to follow Buffet's lead...

* Aussie $ has biggest gain ever...

* Yen reverses on carry trades...

* China's currency reserves rise...

And Now... Today's Pfennig!

...

Good day...And what a day it was! As I stated in yesterday's Pfennig, Columbus day is just sort of a holiday for the markets. These 'semi-holidays' can create some volatile trading, as not all of the markets are open and many desks are short staffed. So with the Federal Reserve and the banking system closed, the equity markets had the largest one day gain in over seven decades. I guess the stock jockeys figured they weren't going to get any bad news out of the credit markets, which were closed, so no news is good news!! The rally was certainly welcomed, and hopefully some of the gains will stick today as we return to a normal trading environment.

And I guess some of the credit for the stock rally has to go to finance ministers around the globe who finally agreed on a plan which seems to be able to work. The leaders of a majority of the worlds largest economies borrowed a page from Warren Buffet's playbook and decided to invest directly into some of their largest financial institutions. The Bush administration announced it would invest $125 billion in nine of the biggest US banks. The US move came after France, Germany, Spain, the Netherlands, and Austria committed $1.8 trillion to guarantee interbank loans and take equity stakes in European banks.

The investment represents a new approach for US Treasury Secretary Henry Paulson, who first promoted a bailout targeted at buying up illiquid mortgage-related assets. The government will obtain its stakes by purchasing preferred shares with warrants similar to investments that Berkshire Hathaway Inc. made recently in Goldman Sachs and General Electric. The move could be just what was needed to 'unfreeze' the credit markets and restore some liquidity in the markets.

I really think the new president should do all he can to try and convince Warren Buffet to at least take an advisory position in the new administration. Now that we have followed his lead on the $125 billion we should see what he suggests for the rest of the $700 billion 'rescue' package. Just think, with his guidance maybe the US taxpayers can come out of this whole episode with a bit of a profit!

The move got the backing of former Federal Reserve Chairman Paul Volcker who said the inevitable recession in the US would be made 'more manageable' by the new government plans to invest directly into American banks. The bailout measures were 'distasteful' and 'not consistent with a capitalistic system,' Volcker said at a lecture in Singapore today. 'But however distasteful, they are necessary to restore stability to the financial system.' But Volcker also warned that the global financial system is in 'intensive care' and will remain there for a considerable time before things return to normal.

The largest mover in the currency markets yesterday was the Australian dollar which has surged up 12% vs. the US$ since late last week; the biggest two day gain since it began trading freely in 1983. The Australian dollar gained as investor's confidence was restored and stock markets rallied. Australian Prime minister Kevin Rudd announced a A$10.4 billion spending package aimed at bolstering Australia's economy, adding to his Oct. 12 pledge to shore up the nation's banks. These moves by the Prime Minister should provide some support under the Australian dollar which had been falling fast. But the Aussie dollar will likely still be subject to some volatile swings, as investors continue to buy the Aussie dollar on carry trade investments, which have proven to be very erratic.

With investors moving back into carry trades, and some confidence returning to the equity markets, the Japanese yen fell against the higher yeilders. The yen headed for a record decline vs. the Australian dollar, but fell less against the US$. Japan's currency has become an excellent gauge of risk appetite in the markets, and the currency has risen as investors exited highly leveraged 'carry trades' over the past few months. But risk appetite has returned as we have exited the 'panic mode' and investors have started to move money back into these leveraged trades.

The Bank of Japan said it will hold an unscheduled monetary policy meeting today to discuss ways to make it easier to add funds to money markets. The bank said yesterday it's considering offering an unlimited amount of dollars to financial institutions, following a move by European counterparts to provide lenders with as much of the currency as they want to reduce short-term borrowing costs.

This recent flood of US$ into the markets has seemed to stabilize them, but what will it do to inflation in the US? One of the first lessons in Economics is that increasing money supply causes an increase in inflation. The billions or trillions (I can't keep up with all of the 'rescue' packages they keep announcing) of US$ which have been placed into the markets will eventually create a big up tick in inflation. And the huge amount of dollars which are being printed and pumped into the credit system will undoubtedly lead to an erosion of the value of the dollar. Simple supply and demand tells you that if we continue to throw unlimited supplies of US$ into the market, the value of these dollars will decrease in value.

And who is holding most of these dollars? China! China's foreign-exchange reserves rose to a world record $1.906 trillion at the end of September. Currency holdings rose 32.9% from a year earlier, the People's Bank of China said on its website yesterday. These reserves have helped to strengthen China's finances as the credit crisis threatens to trigger a global economic slump. The world's fourth biggest economy can still expand 10 percent this year and 9 percent in 2009 according to the central bank. Close to $2 trillion in foreign reserves provides China with a strong foundation and more room to adjust policies to enable it to maintain relatively fast growth. The worlds economic engine will continue to purr despite the slowdown in the US and Europe. Internal demand among these fast growing Asian economies will take the place of some of the exports which will undoubtedly slow. I look for the Chinese currency to continue to be a rock solid performer, with no big movements either way.

Good news / bad news for the holders of Icelandic krona, as we were able to get a trade done yesterday selling the maturing proceeds of the Icelandic CDs. The bad news was that the ISK currency was sold at the rate of just over 260 krona per $. Hopefully the latest moves in the credit markets will start to calm things in Iceland. But for now we will do our best to sell the Icelandic krona as the CDs mature.

Again, it will be interesting to see what the markets have in store for us today. We don't have much in the way of data being released today (as if anyone is really looking at economic data lately anyway). Wednesday we will get the PPI numbers which are expected to show an up tick in inflation, along with the retail sales and empire manufacturing numbers, both of which will likely show a decline. Thursday will be a big data day, as we will see the CPI data for September along with the weekly jobs data, the TIC flows, Industrial production, and the Capacity Utilization numbers. We will end the week on Friday with the release of housing starts and building permits, both of which are expected to be down.

Hold on to your hats, this rollercoaster ride is over yet.

Currencies today 10/14/08: A$ .7223, kiwi .6332, C$ .8781, euro 1.3738, sterling 1.7593, Swiss .8861, ISK 260.0, rand 8.9732, krone 6.1409, SEK 7.0546, forint 182.72, zloty 2.5284, koruna 17.933, yen 102.68, baht 34.07, sing 1.46, HKD 7.7606, INR 48.07, China 6.8338, pesos 12.004, BRL 2.144, dollar index 80.929, Oil $84.55, Silver $10.875, and Gold... $842.94

That's it for today... What was supposed to be a bank holiday turned into a full day of work here on the trading desk, as we took the opportunity to try and catch up on work. Chuck returned to St. Louis last night as the FX University comes to our home town. Unfortunately none of us on the desk will be able to attend, as the phones are already starting to ring. Hope everyone has a Terrific Tuesday!!

Chris Gaffney, CFA

Vice President

EverBank World Markets

1-800-926-4922

1-314-647-3837

Iceland Melts Down...

Chuck Butler — Tue, 07 Oct 2008 14:20:17 GMT

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In This Issue..

* RBA cuts rates 100 BPS!

* Iceland to peg the krona...

* High Yielders get whacked!

* Gold rallies in the face of a strong dollar!

And Now... Today's Pfennig!

Iceland Melts Down...

Good day... And a Terrific Tuesday to you! Well... Folks... The wheels, what was left of them, are really coming off this economy. It's a sad sight to see, but it's happening nonetheless, and there's no bailout, stimulus check, mortgage bill, truck loads of money supply, or whatever, that's going to stop this recession bus.. Memo to Paulson and Bernanke... Don't throw yourself under this recession bus...

Well... The dollar continued to push the envelope against a handful of currencies yesterday. Up front and center, the high yielders got beaten about the head and shoulders by the dollar. Aussie, kiwi, real, rand, all took major hits from the dollar. It was one of the worst days I can remember seeing for these currencies. This huge sell off showed two things going against the high yielders... 1. Commodities (other than Gold) are getting whacked, and 2. The Carry Trade is Dead...

To add insult to injury, the Reserve Bank of Australia (RBA) surprised the markets with a shock 100 BPS rate cut last night. A short-lived rally in Aussie after the announcement leads me to believe that interest rate expectations are not driving currencies right now. Instead, we've got the same kind of strange thinking in the markets, much like in 2001 and 2002, where the markets rewarded currencies that had Central Banks that cut rates to promote growth... It was the first time I had seen currencies gain after being debased, but it was there right before my eyes, and now, this... It could be happening again...

Yesterday, Japanese yen actually traded for a good part of the day with a 100 handle! That was a 3.5% gain in one day VS the dollar! Talk about the Carry Trade being dead... WOW! I looked up from my attempt to work through trading yesterday and saw yen with a 100 handle, and shouted out... "Hey! Look here everyone, yen is 100, I told you all that yen would get to 100!" Then some smart alec yelled back... Yeah, you said that two years ago, now sit down and trade currencies! HAHAHAHAHA! Funny guys...

On the Very Serious side folks, is the news that we came across yesterday when attempting to deal in Icelandic krona... There was no forward market! Dealers would only quote spot transactions! The banking crisis had reached a point that basically shut the markets down. The currency dropped 33%!!!!! This was Serious Stuff folks, I was scrambling around trying to find a forward market so our CD's could roll to the next maturity... But there was none... Well, maybe one could be found if the buyer wanted to take HUGE LOSSES... One's that were 1000% away from the previous week's bad forward points.

Basically, what happened is that, as I reported yesterday morning, the Icelandic Central Bank was waiting to hear from the Nordic Central Banks regarding a bailout, when they had to take the second largest lender, Landesbanki, into receivership... This news spread quickly, and caused the currency to drop to depths not seen in recent years. Since then Iceland has announced that they had received a 4 Billion euro loan from Russia to provide the banking system help and liquidity.

Now... The Central Bank has announced plans to peg the Icelandic krona to the euro at a value of 131. So... Like I said above, there is no forward market, the Icelandic krona CD's that remain will have to be closed when they come due. And they can NOT be traded / broken ahead of maturity, as there is NO FORWARD MARKET. A sad ending to what was once an exciting currency to be in... But had faded badly since early this year when the banking crisis arrived on the Icelandic scene.

So... There are a lot of theories as to why the dollar continues to rally in the face of increasing debt burdens, job losses, factories nearly shutting down, etc. In the end it really is just a case of the U.S. and Europe being in a bind, and them coming back to dollars as a safe haven... There's the CDO's unwinding, there's the capital requirements on toxic waste bonds, there's a ton of things going for the dollar right now, and I won't deny it... Which is why I said yesterday, that I needed to go sit in a corner with my back to the room, for not seeing this ahead of time... I was so myopic about all the bad stuff causing problems for the dollar, and didn't see the bad stuff causing dollar strength... Just didn't make sense to me, the dollar looked like it didn't have a prayer...

OK the focus today, since the data cupboard is basically in need of a trip to the grocery store, will be on speeches... First, European Central Bank (ECB) President, Trichet, will speak at the World Policy Conference in France. That will be followed by Big Ben Bernanke talking at a Capitol Hill boondoggle. Fed Head, Stern, will speak in Chicago on Financial Shock, which should be quite current, eh? I think the thing to think about here is that Trichet, and the hawkish Fed Heads, including Big Ben, remember he said in June that he was an inflation fighter, are all going to have to back off their hawkish statements... This is not the time to be putting the fear of higher interest rates into the markets...

Things like the Wall Street Journal (WSJ) reporting yesterday that Bank of America announced a cut in their dividend by 50% and raise $10 billion through the sale of common stock. Tell me that fundamentally the U.S. economic position is teetering... So, will the dollar's run be short-lived? Well... As far back as July I was telling anyone that would listen to me that I thought the dollar strength would last through the elections and probably through year-end. So... That's my story and I'm sticking to it.

We will see the color of the Fed's FOMC meeting minutes from last month's meeting... One would think that it would be, if they were honest with themselves, a picture of an economy in shambles... Plus that was the time when all the you know what was hitting the fan with Fannie and Freddie, IndyMac Bank, AIG, and a host of other problems... Should be interesting reading... If it isn't, then they were hiding things...

OK... Let me go through this Gold and Silver stuff again... Some of you missed class the last time I talked about this, so here goes... The metals dealers don't have ANY supply of coins or bars, PERIOD! Metals dealers haven't received shipments in some time. The minters had stopped minting because of a backlog in orders. It really is a HUGE mess! And there's nothing we, the dealers, or minters can do about it.

Now... I know what you're saying... But Chuck, if there's a shortage, the price should be going through the roof for the metals... And to that I would say, you are correct sir! (and Ladies!) Can you say, hanky panky? There's hanky panky going on here folks...

BTW... Gold rallied yesterday... Oil was down... The dollar was up... And Gold rallied? That seems strange to even type much less say! But it's true , it's true, I did see a Gold rally! And... It's rallying again this morning, up $22 right now on the day!

So, the turmoil in the markets continues today... Stocks were off 800 points at one point in the day yesterday before rallying back to close down "only" -370 points... The DOW is now trading below the 10,000 level... YIKES! All I can say is that I'm glad I sold all of my stocks last October! I have no idea what moved me to do that, except that I saw this all coming, as I had chronicled in the Pfennig, and for once in my life I have someone who needs me, no wait, for once in my life I acted on my thoughts for the market!

The euro seems to be in a mini-rally this morning, as I've seen it move higher throughout the time I've been here writing. There was profit taking in Japanese yen overnight, and the currency is trading back to 102, but 102 is still better than 110! I see where China's renminbi moved higher VS the dollar, the most it has in one day, in 7 months! Remember, China was on holiday all last week, and therefore left the renminbi unchanged on the week... But that was quickly changed in the first two trading days, and that has to be a good sign for all that talk about a China slowdown!

The Chinese government indicated that the move downward in the renminbi before the holiday was too much, and that they want a "stable currency" to stabilize their markets. Makes sense, eh?

Our little Christine told me last night when we were leaving that she had received a truck load of CD breaks for this morning. UGH! This is not the time to sell into this kind of a market folks... It's akin to catching a falling knife! But... It's obvious that they are in panic mode, which I don't blame them... I don't know their personal investment situations... According to FDIC, CD holders must have a "financial reason" and a "need for the funds" to break a CD... So, that's all I have to go on!

Currencies today 10/7/08: A$ .7160, kiwi .63, C$ .9070, euro 1.3585, sterling 1.7450, Swiss .8760, ISK (no quote), rand 8.8130, krone 6.1825, SEK 7.1250, forint 183.90, zloty 2.5350, koruna 18.07, yen 102.10, baht 34.52, sing 1.4640, HKD 7.7660, INR 47.95, China 6.8170, pesos 11.93, BRL 2.1790, dollar index 81.24, Oil $90.40, Silver $11.63, and Gold... $882.25

That's it for today... I made it through a whole Pfennig without talking about the Bailout Package! YAHOO! I arrived home late last night, but in time to see my darling little granddaughter, Delaney Grace, who is really a cutie! She dropped something and said UH-OH! Cracked me up! She sure loves her uncle Alex (my little buddy). She just lights up when he comes into the room. Hugs him, kisses him, hangs on his leg, it's so darn cute! Long time colleague, Jennifer, had her son, Drew, here for a few minutes yesterday, he's getting so big! OK, enough kid-talk! Go a chance to spend some time with the Big Boss, Frank Trotter, yesterday... That's a treat, as he is always gone or on busy with something... We'll both be in New Orleans this year for the New Orleans Investment Conference... It's only about a month away! You can look up the Conference by going to: http://www.neworleansconference.com/ AND! If you're interesting in signing up, please use this link to do so... http://www.jeffersoncompanies.com/affiliate/affiliate_process.php?icode=confreg&acode=EverBank

Time to go... Hope your Tuesday is Terrific!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837

King Henry Was Wrong Again!

Chuck Butler — Tue, 30 Sep 2008 15:43:25 GMT

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

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In This Issue..

* Bailout package is voted down!

* Biggest one day point drop for the DOW!

* Dollar rallies hard...

* Carry trades unwind... Again!

And Now... Today's Pfennig!

King Henry Was Wrong Again!

Good day... And a Terrific Tuesday to you! Well... Guess who was wrong AGAIN! That's right, King Henry Paulson, he of the U.S. Treasury Sec. throne... He told the world on Friday, that the bailout package was a "done deal"... And he told us again on Sunday that it was a "done deal"... The markets rejoiced, the stock jockeys danced in the streets, the karma flowed and all the stars were in alignment... And then... A (not so) funny thing happened on the way to the forum...

King Henry's men revolted, and the bailout package did NOT have the votes to pass it, and the "done deal" was "undone"! Once again this man has led investors down the wrong path. I've documented the wrong statements by this man in the past year, and still, investors hang on every word by King Henry... When will they ever learn? When, will, they, ev-er learn?

The Dow posted its biggest one point drop ever... 777 points... It wasn't the biggest percentage drop in one day ever, that belongs to the Crash of October 1987, but still, that was enormous! There needed to be a tourniquet to stop the bleeding, and not one was given to the stock market. The S&P 500 suffered too...

And... Was the bailout package the "only" reason stocks dropped like a rock? Difficult to say... But let me say this so you can hear me now and listen to me later... Even in the face of the other bailout plans (remember Bear Stearns, Fannie & Freddie, AIG, the mortgage bill?) stocks had a difficult time putting together a rally that would last a couple of days... There's an underlying problem here folks... And if you ask me, and I know you didn't, but you'll get my answer anyway! I think it's the recession we're in, but no one wants to admit it. We're so deep into a recession that the NBER doesn't know their way out, much less call it for what it is!

I had a reader chastising me because his currencies aren't going through the roof. Hmmmm... Let's look around the bar room, and take stock of what's going on here... Currencies are performing better than stocks... Bonds... Mutual funds... Housing... Commodities... I wonder where it would have been better to have money? I'm sure there's somewhere... But, for the most point, Currencies may be down... But they are outperforming most other investments!

OK... I had to get that off my chest! So... As I left you yesterday, the dollar was rallying... But that rally was stopped in its tracks early in the U.S. session, as it looked as though the votes would not count up in favor of a bailout package passing. The rally by the euro and other currencies was strong for about an hour, and then range trading set in. However, as I turn on the currency screens this morning, they are back to trading in yesterday's clothes, with the dollar swinging the hammer again.

Some of euro's problem in maintaining a well bid rally the last few days is the rot that's being found in European Banks. As I said yesterday, I thought the Fortis problem wasn't going to be a one and done, but I thought the rot on the vine wouldn't be as bad as in the U.S. Well, this morning there's another one Dexia...

The Big Boss, Frank Trotter, sent me a story he found that was quite interesting, as the German Finance Minister was interviewed regarding the financial meltdown... This was a great story, and I can't give you all of it, but, I've put in the highlights... Here we go!

SPIEGEL spoke with German Finance Minister Peer Steinbrück about the roots of the US credit disaster, whether Germany is in grave danger and what the future has in store for world banking.

Steinbrück: We are experiencing the most severe financial crisis in decades, although one should be careful about historic comparisons with 1929. One thing is clear: After this crisis, the world will no longer be the same. The financial architecture will change globally.

SPIEGEL: And is the United States completely to blame?

Steinbrück: The source and focus of the problems are clearly in the United States. There are many causes. After 9/11, a great deal of cheap money was tossed into the market. Apparently some of that money went to people with poor creditworthiness. This led to the growth of the real estate bubble. The banks embarked on a race over profit margins. Then speculation spun completely out of control.

SPIEGEL: The German government is unwilling to participate in America's $700 billion bailout package. Is this your final word?

Steinbrück: I see neither the need for nor the possibility of taking on the responsibility for American banks. Besides, our situation is more robust.

So... There you go... Some statements from the German Finance Minister, who did say at one point regarding the AIG bailout... "We were all staring into the abyss"...

Long time friend and colleague, Ed Bonawitz, sent this note to me yesterday... "Given today's events in Washington and on Wall St.; the winner of the presidential election will probably ask for a re-count!"

Yes, funny... But oh-so-true! The bailout package, if passed, was going to leave a lot of important decisions in the hands of the next president. I can't imagine why anyone would want that job!

Looks like the Senate will try to revive the bailout package, after watching the carnage in stocks yesterday...

The Japanese yen pushed the envelope VS the dollar yesterday while stocks were circling the bowl, yen was in favor... This is a classic example of risk trades, like the Carry Trade, getting unwound during times like this... And when Carry Trades get unwound, the Japanese yen rallies. I would think that we should expect more of this... But then, I've thought that for almost a year now... Last November, speaking at the New Orleans Investment Conference, I emphasized that I expected risk events to be in play in 2008, and that would unwind Carry Trades. This was repeated in February at the Orlando Money Show, and every speaking engagement since...

Yesterday... Personal Income and Spending data was a little skewed, but here it is anyway... Personal Income for August "jumped" .5%, gaining back some of July's -.6% loss... Personal Spending failed to rise, and July's number was revised down...

Personal Income is still volatile due to the stimulus checks, etc. but the spending figures are encouraging and disheartening at the same time... Encouraging because maybe, we, as Americans, have stopped spending what we don't have or shouldn't be buying... But disheartening, because consumer spending makes up a huge chunk of GDP... Without consumer spending, economic growth is left with Government spending... That's no way to grow an economy!

Today, we'll see the color of July's S&P CaseShiller Home Price Index, which is expected to continue its fall. The Chicago Purchasing Manager Index (Manufacturing) will show a weaker print... And Consumer Confidence for this month is expected to weaken... Shoot Rudy, this data should fall through the trap door of falsely supported data! We'll have to see if the markets pay attention to the data today... I kind of think they will continue to be focused on the bailout package.

Gold sure shot up yesterday, gaining $30 and going back over $900... But that was short-lived... The shiny metal has given back $15 in the London market this morning. Profit taking? I would certainly think that has something to do with it. I just keep coming back to the conversations I hear on the desk every day from our metals traders, Kristin and Jen... They can't find coins or bars in Gold or Silver anywhere! There's a shortage folks... And there's no price adjustment in Gold or Silver going on! This has the all the makings of the PPT keeping the prices low...

I know, I don't like thinking that this isn't a "free market" any more than the next guy... But that's exactly what's going on, eh? There's no such thing as a shortage, it's merely in need of a price adjustment... And if there's no price adjustment, then it's being held down artificially... But by who? There's only one choice... The Plunge Protection Team... PPT...

This is no solace to Gold & Silver holders... They want their holdings to rise in value in a free market environment! Our free market, as we know it, may be the thing going into the abyss in my opinion... Think about what's happened since March... And then tell me if you think this is a free market, or one that is controlled by the Gov't...

OK, I'll get down from my soapbox now... Just think a little about that today, OK? Wow! I can really get off on tangents, eh?

So... Wachovia actually went to the highest bidder, Citicorp... Yesterday morning, the Wall Street Journal was reporting that Wells Fargo was the "winner"... Well, that fell through, and Citicorp came riding in on the white horse. Citicorp bought Wachovia's banking operations... I wonder what happens to the old St. Louis Brokerage, A.G. Edwards, that was purchased by Wachovia last year? I know people that work at the brokerage, so this hits home a bit.

The dollar has gained another 1/2 cent VS the euro since I've been here this morning, so this is getting ugly... Something has to turn this around and get this ship headed in the right direction again!

And... Finally... Don't look for this to be reflected at your gas station any time soon... But the price of Oil has fallen below $100!

Currencies today 9/30/08: A$ .8065, kiwi .6760, C$ .9550, euro 1.4325, sterling 1.7990, Swiss .9080, ISK 102.20, rand 8.30, krone 5.80, SEK 6.8325, forint 169.60, zloty 2.3780, koruna 17.22, yen 104.90, baht 33.88, sing 1.4290, HKD 7.77, INR 45.97, China 6.8460, pesos 11, BRL 1.9630, dollar index 78.20, Oil $98.89, Silver $12.92, and Gold... $894

That's it for today... Fall weather is here! Well... Not cold weather, but cooler anyway. I'm not a fan of cold weather, and I know that cool weather leads to cold weather! UGH! Oh well, just enjoy the sunny days! I have a feeling that this winter is going to be doozy too! UGH! Maybe I can schedule time at the home office in Jacksonville! My little buddy, Alex, made the jazz ensemble (guitar) at his school. I'm impressed! Sometimes I think that guitar is attached to him, as he rarely puts it down at home. That's how I was at his age too, but I played outside on the porch, as we didn't run the one-room air conditioner very often! My older sister, Barb, told me the other day that she now reads the Pfennig! I always figured my siblings didn't have a clue as to what it was that I did, now the secret is out! Anyway... Time to go... Hope your Tuesday is Terrific!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837

Cash For Trash...

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

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

The FX University Seminar Series. Learn from foreign currency experts-then invest like one.

Coming to a location near you:

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. 10/16 - Philadelphia

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Don't miss this exclusive event-you owe it to your portfolio. Visit http://www.sovereignsociety.com/Portals/0/landing/pfennig.html to find out more and register.

EverBank is a Member FDIC and Equal Housing Lender.

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

In This Issue..

* Grave words about the economy...

* OPEC warns of a higher Oil prices...

* FDIC in need of $150 Billion?

* Citigroup calling for a higher euro...

And Now... Today's Pfennig!

Cash For Trash...

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837

Turning Japanese?

Chuck Butler — Wed, 24 Sep 2008 14:24:17 GMT

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

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In This Issue..

* Profit taking in the currencies...

* German Business Confidence falls...

* More talk of the bailout package...

* A strong statement on Aussie dollars...

And Now... Today's Pfennig!

Turning Japanese?

Good day... And a Wonderful Wednesday to you! Another crazy day not only in the markets but on our trading desk, where the phones continue to light up. There's a ton of volatility in the markets these days, as witnessed by the roller coaster ride stock jockeys take every day, the no direction is a good direction course of currencies, and the ups and downs of bailout plans. It's all a little too much for yours truly some days, but I carry on...

Take this morning... Please somebody take this morning! The euro was showing signs of wiping out yesterday's profit taking session early on, only to see its gains wiped out by a weaker than expected German Business Confidence report. Yes, German Business Confidence, as measured by the think tank, IFO, declined more than expected this month, to the lowest level in almost 3 years. I would say that with lower Oil prices, and weaker inflation, these German Business people's attitudes will be changing soon... The German economy, other than this report, is showing signs of strength, which is bang on what I've been trying to tell everyone that was throwing darts at the Eurozone economy... Remember 80% of trade in the Eurozone is among the Eurozone members...

So... Yesterday we saw some swings in the currencies as the "un-dynamic duo" of Paulson and Bernanke were on "the Hill" pleading with members of Congress to accept the bailout package they had presented... At one point in the proceedings, Big Ben Bernanke admitted that the U.S. taxpayer will get caught in the middle, or something like that... Let me tell you this, so listen to me now, and hear me later, the $700 Billion plan is not nearly enough to deal with this problem as a whole!

I was reading a letter that Mr. Martin Weiss was preparing to send to the members of Congress and in it he details why the $700 Billion plan falls way short. I can't go into it more than that, as Mr. Weiss' letter is a "paid subscription" letter, and if you want to read his wise words, you must pay for them. But I will say that Mr. Weiss really did a great job of presenting his points... Now, if only someone in Congress will read it and understand it enough to act!

You see, I'm banging on Paulson and Bernanke for adding taxpayer burden, and at the same time I'm banging on them because the package isn't large enough! Talk about a catch 22! I just cringe when I think about this not being large enough to deal with the problem... Because, once again, it reminds me of the goings on in Japan during the 1990's... One stimulus package followed by another, and then budget plans, and bailouts... It all led to one disastrous decade for the Japanese. This is all too eerily familiar to me... I could sing, well... I'm turning Japanese, yes, I'm turning Japanese, oh yes I think so...

I can't believe that I'm the only person on earth, right now, that is seeing this unfold and relating it all to the Japanese mistakes they made in the 90's. My friends, Bill Bonner, and Addison Wiggin describe this in their book, Financial Reckoning Day, which was written in 2003... But they couldn't have foreseen the goings on in 2008 then, or could they?

The main story yesterday however, was the news after the market closed, of a $5 Billion investment into Goldman Sachs by the sage of Omaha's Berkshire Hathaway. Goldman also announced that they would raise another $2.5 Billion in a public common stock offering. Nothing like diluting the outstanding shares, eh? Oh, well... It's their company, I'm not in it, so why would I care?

And in other news... The Fed announced a $30 Billion swap line with Australia, Sweden, Norway, and Denmark... Remember this news... For it might come back to us sometime in the future. But for now, it was put in place to provide Central Banks of these countries, more cash to lend out. This might lead to increased Carry Trades in my mind... But, I'm sure that wasn't the Fed's intentions!

Big Ben Bernanke goes back to "the Hill" today to speak, and then later will join his "buddy" King Henry Paulson in an attempt to get the bailout package passed. Big Ben did tell Congress yesterday that the bailout plan needed to get passed quickly, as any delay could cause the U.S. economy to go into a recession. Ahem! Memo to the "un-dynamic duo"... We're already in a recession!

You know, the other thing about this plan that sticks in my mind, and nips at me like one of those little dogs nips at your ankles, is the fact that I can't believe someone doesn't stand up and say... "Why should we believe you now, when you've told us that: 1. that it was only a sub-prime thing. 2. that the mortgage meltdown wouldn't filter out into the rest of the economy, and 3. that the housing meltdown had bottomed in August of 2007!!!!!!!!!!

But then, I'm reminded that former Fed Chairman, Big Al Greenspan, had a horrible forecasting record at his firm before being named Fed Chairman, and that one senator actually called him out for this horrible track record, and guess what they did? They appointed him anyway! UGH! SERENITY NOW!

So... As I suspected, the dollar gets a little McLovin while King Henry Paulson and Big Ben talk about how everything will be right as rain once this bailout package is passed. You see, the markets like to think that "everything will be OK" and they can stick their heads back in the sand and go back to Happy Days again... So, any time Gov't officials talk about seashells and balloons for the economy, the dollar gets bought...

And trust me on this one... I truly hope that it can be the end-all for what ails the economy... Wouldn't it be nice, if we could wake up in the morning, when the day is new, no wait! Wouldn't it be nice, if we could all just get along? No wait, Wouldn't it be nice if this plan is the end-all for the economy?

But you know me... I just don't see how it can be, and in the end... The money supply grows... Inflation rises... Eventually interest rates rise to levels that hurt... Dollars get cheaper to pay back debt and interest on debt... And... Yours, and my purchasing power gets reduced over and over again...

Other Central Banks around the world have announced that they WILL NOT follow the Paulson-Bernanke model of creating the RTC-like institution to buy bad debt... Do they know something that our lawmakers should know before they make a decision? I think they do...

Someone asked me yesterday, why I said that he Canadian dollar / loonie, would most likely be capped around parity to the green/peachback. Well... That's not set in stone... I was simply going back to the last time the loonie hit parity, and watched the Gov't and Central Bank freak out! These two made sure that parity didn't last too long, by talking down the economy, reducing interest rates, etc.

But, these two institutions had better watch out, and economic growth is stronger in Canada, and then yesterday we saw Canada's latest inflation report tick higher... Canada's all-items inflation rate was 3.5% in August, in line with market forecasts and the highest since March 2003. The inflation rate edged up from 3.4% in July. Canada's headline inflation rate was above the 3% target in August for the third month running... Think maybe that the Bank of Canada is re-thinking their decision to cut rates in step with the U.S. Fed Reserve last year? Nah... They'll give you 10 reasons from Sunday why those rate cuts were needed... But, now I'm saying that there are a few reasons to raise them again!

You know... Since the middle of July, the Aussie dollar has been taken to the woodshed, and only in the past week has it recovered a bit, gaining back 6% of its move down from 98-cents to 78-cents. I was dragged through the coals by a few people that said I misled them into believing the A$ would reach parity... Well, it got to 98-cents! But... Now I read an article that says that Citigroup is advising their clients to buy Aussie dollars once again, and once again they believe it will reach parity to the dollar. "The Aussie stands out as the currency within the majors that potentially has the greatest benefit. We still believe we are likely to see the Aussie get to parity." said, Tom Fitzpatrick, at Citgroup Global Markets, Inc.

So... On that note... I'll head to the Big Finish!

Currencies today 9/24/08: A$ .8380, kiwi .6845, C$ .9655, euro 1.4665, sterling 1.8550, Swiss .9190, ISK 95.11, rand 8.1750, krone 5.6150, SEK 6.58, forint 164.20, zloty 2.2660, koruna 16.57, yen 106.10, baht 33.95, sing 1.4220, HKD 7.7610, INR 45.96, China 6.8230, pesos 10.73, BRL 1.8460, dollar index 76.78, Oil $109.15, Silver $13.30, and Gold... $888.19

That's it for today... I received two wonderful gifts yesterday... A Beautiful flowered plant and an incredible edible fruit basket in recognition of me becoming a "Cancer Survivor"... That was very nice of the senders to do that! The kids on the desk ate up that fruit like it was going out of style! I told an audience last week that I preferred to be called a "Cancer Beater" ... Like I said though, the cancer wolf is always at the door, so I had better be careful. And thank you all once again for all your notes, and especially those that send along tips that have helped them after beating cancer. Today, is the newest member of the St. Louis Soccer Hall of Fame (along with our Ty Keough), Don Ries' birthday! I missed the induction ceremony last Friday night for these two ambassadors of St. Louis Soccer, sounds like I missed a good time had by all! Time to go... Hope your Wednesday is Wonderful!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837

Some Healing...

Chuck Butler — Tue, 23 Sep 2008 14:30:28 GMT

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

The FX University Seminar Series. Learn from foreign currency experts-then invest like one.

Coming to a location near you:

. 10/13 - Chicago

. 10/14 - St. Louis

. 10/16 - Philadelphia

. 10/18 - Ft. Lauderdale

. 10/20 - Jacksonville

Don't miss this exclusive event-you owe it to your portfolio. Visit http://www.sovereignsociety.com/Portals/0/landing/pfennig.html to find out more and register.

EverBank is a Member FDIC and Equal Housing Lender.

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

In This Issue..

* largest one-day move up in the euro!

* largest one-day move up in Oil!

* Gold and Silver rebound!

* Renminbi finally moves!

And Now... Today's Pfennig!

Some Healing...

Good day... And a Terrific Tuesday to you! I heard from one of my two sisters that live in the Houston area yesterday. They rode out the Hurricane together, have some damage to her house, and is still without electricity. I can't imagine what that's all like. But they are both safe at that's what's important at this point.

Well... The euro had it's largest one-day move upward VS the dollar since its inception in 1999, yesterday... We've seen some profit taking in the overnight markets, but just for good measure... I think it appropriate to show that the euro reached 1.48 yesterday... That was a 3.5 euro move, and after falling to a low of 1.3869 on 9/12 (before bouncing big that day), the euro has now recovered about 7%... I would call that "some healing"...

I don't believe this will be all for the euro or the other currencies that followed the Big Dog euro off the porch to chase the dollar down the street yesterday. Our old Corp FX Trader, Ashish, sent me a note from Citi yesterday regarding the dollar's move, and they don't see the events of last week as anything "positive for the dollar"... These are things I've tried to tell everyone since they began last August, and I don't mean August 2008! I mean August 2007! But, I guess no one sits up to listen until the "Big Boys" with they million dollar research centers say it's so!

That's OK... At least someone is agreeing with me... There for awhile there didn't seem to be anyone that was going out on the limb with me regarding how weak the dollar should be. The folks at Citi also sent out a note to their customers regarding the move in the dollar index... The note involves understanding chart movements... But in the end, the researchers at Citi show that the dollar index move higher has reached what's called "an evening star pattern"... The conclusion is simply that the dollar index is poised to fall...

Another thing moving the euro a bit lower this morning, from yesterday's high, is the fact that stability has return, somewhat, to Oil... Yesterday, Oil shot up $24 at one point! The largest one day movement in Black Gold, Texas Tea! Oil futures has calmed down overnight.

The other asset that had a moon shot day was Gold... The shiny metal reached $900 and change in yesterday's trading, and sits just below that figure at $897 this morning.

So... We saw it all going on VS the dollar yesterday... Gold, Oil and the currencies... And rightly so, don't you think? I mean, if the Treasury and Fed are going to add "at least" $1 Trillion in new spending to the deficit side of the ledger, and flood the markets with more dollars, the dollar should be beaten about the head and shoulders!

Morgan Stanley's Stephen Jen doesn't believe this to be the case though, and said that once the "shock" from the bailout is over the dollar will rebound. So... There you have it... Two sides to every coin!

Yesterday, I talked about how Goldman and Morgan Stanley were now Bank Holding Companies... And last night on the drive home I was sitting in traffic, and my mind started thinking about these HUGE Bank Holding Companies probably going on a raid of regional banks to accumulate deposits. They had better be careful, as these regional banks (except EverBank of course) have a ton of toxic waste mortgage bonds on their books, and even if they sell them to King Henry's RTC like institution to take on this junk, they will have to sell them at HUGE LOSSES! And that won't make their balance sheets look very good!

Did you like that "King Henry"? Of course I'm talking about Henry Paulson, U.S. Treasury Sec. he has acted like a "king" here lately, so I thought I would bestow the title of King on him!

The Canadian dollar / loonie sure took the their kissin' cousin to the south to the woodshed yesterday... A couple of weeks ago I talked about how the loonie was remaining Steady Eddie around 94-cents... Well, yesterday the loonie jumped out of that comfort zone and up to the 96-cent handle, and doesn't look as though it will stop there. Of course with Oil and Gold doing the Super Ball Bounce higher, the loonie was bound to finally move out of the comfort zone. I still think that loonie will be capped around parity to the green/peachback, that is unless Oil and Gold take off from here.

The two-day sell off / Carry Trade return in Japanese yen ended yesterday. The yen shook off the previous two-days of selling and got right back to rallying VS the dollar, moving to the 105 handle. Risk is definitely back on the table folks... And that will help the yen any old day!

The Swiss franc saw a push higher on the back of the euro's wave, but also gained I would think due to some "safe haven" buying... Investors still believe that francs are backed by Gold, and therefore in times of geopolitical problems, and financial meltdowns, there is usually a rush to buy Swiss francs, as a "safe Haven" currency... My father always told me that "you are what you are perceived to be"... And so... If the franc is perceived as a "Safe Haven" currency, then so be it!

The Nordic currencies were really flying high yesterday, Norway, Sweden, Denmark were all going strong VS the dollar... Norway's krone has seen a backing off this morning though, as it is thought that the Central Bank (Norges Bank) will keep interest rates unchanged at their meeting tomorrow. That and the fact that Oil has backed off some, will cause the krone to fluctuate a bit. But, I'm still pinning my colors to the Norway, Sweden, Denmark masts...

And we finally saw some movement from the stagnate Chinese renminbi overnight. The renminbi had been like some stagnate pond water collecting mosquitoes in the past month... But the renminbi finally broke free of that stagnate pond water to post a nice gain VS the dollar overnight!

One currency that didn't participate in the rally VS the dollar yesterday, was the South African rand... First there was news that the President Mbeki has stepped down, and now the Finance Minister has left... This is nothing new to the politics of South Africa, and the rand is usually taken to the woodshed for the political goings on here...

The data cupboard is pretty bare today, with very little to look at today. There's the Richmond Fed Manufacturing Index (3rd tier data), the House Price Index for July, which should show more rot on the housing price vine, and the ABC Consumer Confidence report for this week... So, no real biggies here, which means the dollar will have to rely on the outcome of the bailout package...

We're still sitting around waiting for Congress to deal with King Henry's bailout package... I sure hope these dolts in Congress realize that this package is not enough, and broad enough to efficiently deal with this mess... And in the end, it will just be a colossal screw up of the financial system, that former Fed Chairman Paul Volcker says is "broken"...

The Wall Street Journal called yesterday to get my take on all these dollars to be printed and the affect on the dollar... Today, I'm going to talk to the MarketWatch people about all of this mess... Interesting Times, eh?

A trader friend of mine was telling me yesterday that the dollar movement was strictly long positions being put on in the currencies, and not all-out short positions in the dollar. (of course going long a currency VS the dollar means you're short the dollar, but what I'm talking about here is where a trader / investor just "shorts" the dollar) Once we see the all-out "shorts" being put on... Then we'll be back to the all-out negativity toward the dollar. And we all know what that looks like!

Currencies today 9/23/08: A$ .8425, kiwi .6890, C$ .9675, euro 1.4775, sterling 1.8585, Swiss .9275, ISK 94.45, rand 8.1780, krone 5.5550, SEK 6.50, forint 163.05, zloty 2.2440, koruna 16.35, yen 105.50, baht 33.75, sing 1.4110, HKD 7.7645, INR 45.80, China 6.8115, pesos 10.65, BRL 1.8025, dollar index 76.22, Oil $108.10, Silver $13.37, and Gold... $893.30

That's it for today... The end of the baseball regular season can't get here fast enough for my beloved Cardinals... They have faded quickly, just like last year... Just don't understand how a team can play at a high level for 5 months and then collapse... Oh well, wait till next year! And our Rams? Oh Geez Louise, good thing my beloved Missouri Tigers know how to play football! My Tigers will be on national TV Oct. 4th VS Nebraska on ESPN, so you can check them out too! It was good to get back in the saddle at the trading desk here yesterday. It was a crazy day on the phones. We were so backed up, I had to jump in and take some pressure off the kids on the phones! This financial system meltdown, has our phones lighting up like the Rockefeller Center Christmas Tree. So, if you call, please be patient. Of course, isn't that like everything in life... People tell you over and over again to protect your investments by diversifying into currencies and metals, and then when the you know what hits the fan, they panic and have to "get it done" now! OK... If that's your bag... No worries, we're here! And... We're hoping for a Terrific Tuesday and so should you!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837