Daily Pfennig : I.O.U.S.A

Feds Say NO To CIT...

Chuck Butler — Thu, 16 Jul 2009 14:40:18 GMT

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In This Issue..

* Currencies have strong day...
* What are the qualifications?
* JP Morgan posts 36% increase in earnings...
* RBA attempts to keep A$'s in check...

And Now... Today's Pfennig!

Feds Say NO To CIT...

Good day... And a Tub Thumpin' Thursday to you! The first day this week that I've gotten up and to work at my normal time. I hit the wall yesterday afternoon, went home, watched about 10 minutes of the Wizard of Oz (my all-time fave movie) with granddaughter Delaney Grace, and then went to sleep! Crazy, I know, but when you hit the wall, you hit the wall!

Yesterday was a strong day in the currencies. I wrote yesterday about how the euro was inching toward 1.41, but the level had been a tough row to hoe, with the euro giving back ground each time it went higher than 1.41... And... That was the case yesterday! The euro did trade higher than 1.41. It was 1.4120 when I left the office! But, as I turn on the screens this morning, the single unit has fallen below the 1.41 figure...

I think we'll probably see a day when the Risk Aversion campers come back out to play, given the news on CIT... The lender, CIT, was told that they would NOT receive any Federal assistance... (I guess they didn't have any ex-Goldman Sachs employees at CIT!) This news has pushed stock futures down this morning, and the "risk" of yet another bankruptcy that could shake the market is on the table. You know me... I would prefer that the Gov't was not involved in all this, so on one hand, I'm not sorry that CIT will not get assistance... On the other hand though, it really raises the question as to just what are the qualifications to receiving federal funds? Because Lehman Brothers, (Goldman's biggest competitor at the time) didn't qualify... But AIG did... Of course AIG owed Goldman a ton of money.. Maybe that's the qualification! Oh, I'm not going to get started on all this, I'm sure there are all kinds of stories going around for you all to read that would keep me out of the hot seat with the legal beagles!

So... If the Risk Aversion campers come back out to play today, that means we could see pressure on the currencies once again... Unless... Yes, unless we saw a break of the link with stocks and currencies... And then traders and investors would look at the fact that the "green shoots" are nothing but dandelions, and the U.S. fundamentals are rotten, which will cause more deficit spending, more dollar printing, more monetizing debt, and all the other things that should, fundamentally speaking, weigh heavily on the dollar!

All of the currencies, except yen, are off their highs of yesterday this morning. With Risk Aversion back on the table, Japanese yen is rallying again... This going back and forth from one day to the next is really beginning to give me rash! I'm tired of it! I'm also tired of writing about it!

OK, did you see the results of the FOMC's meeting minutes yesterday? In case you didn't, the minutes read like a book from the fiction section of the book store... The Fed revised up growth for the rest of this year and next year. Although the Fed raised their growth forecast... they raised the expected ranges for the unemployment rate through the forecast. So... What I took from the minutes is that the Fed doesn't believe the unemployment problem will begin to seriously reverse itself until 2011...

So... I just don't know where the growth will come from... And yes, I'm very well aware of the fact that labor is a lagging factor of growth... But with 1 in 5 people unemployed, I don't see where the growth will come from... Do you?

Oh... And U.S. Foreclosure filings hit a record in the first half of 2009... More than 1.5 Million properties received a default or auction notice or were seized by banks in the first 6 months of this year... That's a 15% increase from 2008's first half... One in 84 U.S. Households received a filing... But the Fed see's growth? Maybe if this data was showing a bottom... But from what I see, it is much like house prices still searching for a bottom...

Speaking of the Fed.. I read this in the Wall Street Journal...

"More than 175 prominent economists are warning that "the independence of U.S. monetary policy is at risk" because of attacks on the Fed. They are urging Congress and the president to "avoid compromising [the U.S. central bank's] ability to manage monetary policy as it sees fit" and to refrain from politicizing its decisions on emergency loans to financial institutions.

The move to publicly defend the Fed's role reflects growing unease among academic economists, former Fed officials and some investors that the vehemence of the criticism from Congress of the Fed's handling of the financial crisis suggests a readiness in Congress to weaken the freedom the Fed has to move interest rates as it see fits."

Hmmm... I would like a list of those 175 prominent economists so I can give them a piece of my mind! While the Fed is "supposed" to be independent, its mere existence is questionable at best! Why not let the markets decide what interest rates should be? Again, though, I won't get into all this deeper, because, it would take over the entire letter for weeks! I just thought I would throw it out there and see what it hit...

Ok... Remember last week when I told you how June is normally a "good month" for the Budget Statement here in the U.S.? Well... For the first time since 1991, June was a deficit for the Budget! The Budget Deficit was $94.3 Billion in June! OUCH! Hey! Don't we normally see quarterly tax returns to keep the Budget Balance from turning to a deficit in June? Why yes, Chuck, we do... Or... DID! Not this year, folks... And probably not next year either! Tax receipts fell 17% (year on year) in June... And for all of you keeping score at home... For the year so far... Revenues are down 17.9%, and expenditures are up 20.5%... Not a good formula, eh?

Have you seen the results of the first set of earnings reports this week? Goldman and now JP Morgan reported some nice earnings... That's nice, eh? I say that with my own style of facetious tone!

I'll say this... You can scrap what I wrote about earlier that the Risk Aversion campers will come out to play today because of the CIT verdict... That's because JP Morgan just announced a 36% increase in 2nd QTR earnings! And you should have seen the currencies turn from red to green! The euro is back above 1.41... See how fickle these traders are? They can turn on you in a NY minute!

The JP Morgan earnings will have to hold fort on the markets forgetting about CIT, until more earnings announcements come out... So far, the "banks" have surprised me on their earnings...

I really do think that if we could put all this back and forth behind us the euro would move 3 to 4% higher, and then wait to see what happens then... But, that's a BIG IF...

Today, we'll see the Weekly Initial Jobless Claims, which really dropped last week... I had the thought when I saw the figure drop last week that maybe we've saturated the layoffs... In other words, maybe, Corporations are getting pretty close to not being able to cut any more jobs... It's a thought...

We'll also see the color of the TIC's data (Treasury International Capital) or... What used to be called the Net foreign Purchases report... The TIC's data will be May's print, and is expected to remain quite low, thus not covering the required amount of purchases to finance the Current Account Deficit... Which means, the financing gets shoved to next month... We keep shoving this all down the road... Just like everything else... We'll let someone else deal with it in the future... That's so sad! My friend, Bill Bonner, talks about this, in the award winning movie, I.O.U.S.A. Bonner recalls that Thomas Jefferson called it "immoral for one generation to load up the next generation with debt."

But, we go on about our lives each day, without worry about what we are doing to future generations... Again... I had better stop there before I go off on a tangent so long you could grow a beard while reading! HA!

I received an email yesterday responding to my discussing the increase in taxes on the wealthy... Just like I said in the Pfennig yesterday, where you stand on this all depends on what pain you'll receive... I did see that in most states, the taxes would go above 50% to pay for the health care...

And then there was this... I see where the Reserve Bank of Australia (RBA) sold A-dollars
(A$) in June... Hmmm... I said a few weeks ago that I didn't think the RBA was selling A$'s to keep a lid on the currency, but merely evening out the flows... But now, the June total was A$1.9 Billion of its own currency, sold...

I've now changed my mind on this... I believe the RBA is attempting to keep the A$ around 80-cents, given the global recession and everything else going on the financial markets, the RBA probably sees a real problem with a soaring A$ at this point. While I never like a Central Bank selling their own currency... I can't say that I blame the RBA here... They have one of the best stories going around regarding a currency, and if left untouched by the RBA, the currency could be soaring right now, which would in normal times be OK with the RBA, but in current times, is not OK with the RBA... So...

Until the markets decide they want to push the envelope with the RBA on keeping the A$ around 80-cents... That's where it will remain... But... Should the markets decide to push the envelope and test the RBA's mettle, then 80-cents will be left in the rear view mirror... Unfortunately, and I've talked about this before, today's currency traders don't have the cajones to fight Central Banks any more...

Currencies today 7/16/09: A$ .8015, kiwi .6460, C$ .8940, euro 1.4115, sterling 1.6450, Swiss .9325, rand 8.10, krone 6.3675, SEK 7.7770, forint 193.50, zloty 3.0350, koruna 18.3420, yen 93.90, sing 1.4510, HKD 7.75, INR 48.70, China 6.8311, pesos 13.57, BRL 1.9330, dollar index 79.38, Oil $60.95, 10-year 3.59%, Silver $13.27, and Gold... $939.50

That's it for today... And for me, for 2 weeks! Yes, I'll be gone, first to Vancouver, and then when I return, I'll be heading down the road on vacation with my family. Before I got sick two years ago, the Butler family would pack up our camper and head to Southwest Missouri for a vacation. My kids love camping! So, it's a week of relaxation for me. No cell phones, no laptops, no communication, as we are very deep in the Ozark Mountains! This will be the first time since I got sick two years ago, that we'll attempt camping again... Chris will be kind enough to take the conn on the Pfennig for me. I will send updates from Vancouver, but not from vacation... Speaking of Vancouver, getting there, and getting out are awful things to have to go through, but while I'm in Vancouver, it's an awesome city! Ok... Back to getting this out on time! YAHOO! It's time to make this a Tub Thumpin' Thursday!

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

A Day Of Healing...

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

...But First, A Word From Our Sponsor...
Now in Print: What You Need to Know About America's Economic Crisis

Based on the eye-opening film, IOUSA is your guide to America's enormous economic crisis. You won't find a more concise and complete evaluation of the global financial situation anywhere else.

Get your copy today: http://www.amazon.com/dp/0470222778?tag=dailyreckonin-20&camp=14573&creative=327641&linkCode=as1&creativeASIN=0470222778&adid=03WYRVDX49DN6K6GRQ4G

In This Issue..

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

And Now... Today's Pfennig!

A Day Of Healing...

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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 Day After...

Chuck Butler — Wed, 05 Nov 2008 16:50:18 GMT

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In This Issue..

* I want change too!

* Euro leads a currency rally!

* Factory Orders plunge!

* Carry Trades back on the table!

And Now... Today's Pfennig!

The Day After...

Good day... And a Wonderful Wednesday to you! The day after... The day after all the election ads ended... What a beautiful day it is! Well, in January we'll have a new president, one that had a call to "change"... I sure hope we can change... The problem is what I want changed hasn't been on any candidate's agenda... That's because, as the Big Boss Frank Trotter so eloquently said the other day when I complained about the lack of talk on this subject, "They can't get elected if they talk about that"...

The "that" is simply the national debt, and how we'll deal with it as the baby boomers begin to draw on their entitlement programs... I think people now like to "live for today, and not worry about tomorrow" and that's a real shame. As I said a month or so ago... I'm going to have to sit down and write a letter to my sweetheart granddaughter, Delaney Grace, and apologize to her for leaving her generation with a debt load that requires a huge tax burden that her grand father didn't have, and a loss of freedoms, and life style, that her grand father had...

OK... Man that was a real somber way to get things rolling this morning, eh? Well, it's things that have to be said, even if the people running our country won't say them!

Alrighty then, let's get the beat going here, and start to rock and roll! The currencies really put on a display yesterday pounding out gains VS the dollar all day long. The euro actually traded up and through the 1.30 handle at one point in the day. But profit taking took hold later in the day, and carried over to the overnight markets of Asia and Europe. But still, as I turn on the screens this morning, the euro is managing to hang around 1.2875...

Euros weren't the only currency to see some lovin' yesterday, as the Aussie dollar (A$) added to its early morning gains after the rate cut by the Reserve Bank of Australia (RBA), and saw 70-cents at one point in the day! But as I said above, the profit taking set in as the day and night came, and it looked like the exit polls were pointing to an Obama win. These knuckleheads are thinking that an Obama win will speed an economic recovery... Ahhh grasshopper, if it were all so easy as changing the President!

U.S. stocks rallied all day, leading the "risk takers" back to the trading tables... That meant the yen and dollar were sold, and A$'s and kiwi were bought... That's the Carry Trade in a nutshell for you there folks. Yen traded above 100 for the first time in a couple of weeks, but has settled back below the figure in overnight trading, as the profit taking took hold.

Oil prices also surged yesterday by over $6, and Gold had a strong performance... But the commodities are going through the same thing the currencies are going through this morning... Profit taking...

Factory Orders for September printed yesterday and were weaker than expected. Posting a 2nd consecutive month of weakness, Factory Orders decreased by over $11 Billion, or 2.5%. Notice something here folks... Going back to yesterday's report on the ISM (manufacturing index) and now this Factory Orders, which is simply new orders for manufactured goods, and you have some real rot on manufacturing's vine... While there was rot before August, the real nasty stuff has been exposed since the end of July... And guess what else has gone on since the end of July? Come on, you don't have to be a Sherlock Holmes to figure this one out... It's the dollar rally! The dollar has rallied strongly since the end of July, and has pushed Manufacturing to the edge of the cliff... And from the looks of the ISM the other day, (recall it fell to 38.5 from 53) Manufacturing is teetering over the edge...

Some good news on the LIBOR borrowing rate... It narrowed 21 BPS overnight... It's still out of whack with what the markets believe it should be, but this is a good sign. Let's hope it's not a false dawn. If we can get borrowing costs lowered, to stop the currency swaps going on, and to apply some W-4 to the locked credit markets, then maybe, just maybe, you never know, we could get back to fundamentals! And those fundamentals have not been good lately... Speaking of fundamentals, there's none bigger than jobs...

Friday, is a Jobs Jamboree Friday, and right now, it doesn't look good for the U.S. employment picture as I think that it could show another loss of jobs and this time to the tune of at least 200K... We'll get a "sneak peek" at the report this morning, as the ADP Employment Change for October will print... As I've explained before, this ADP report gives an indication of the direction of what the Jobs Jamboree will print... ADP is forecast to show -100K, which would not be a good sign for the Jobs Jamboree...

Some readers questioned my thought yesterday that deflation was winning the battle VS inflation, and one person even thought that my call was completely off base... I know it had been some time since I took those economics classes in college so I looked up deflation just so I get it exactly right... Webster's says that Deflation is a contraction in the volume of money and credit relative to available goods.

Hmmm... Maybe the jury's still completely out on this, but in my mind this is a deflationary period we're experiencing right now, but still feel that soaring inflation is on the other side of this record... Yes, the "B" side has inflation in store for us... But then, that's just my view from the cheap seats!

But! If I'm right, and Lord knows I can be just as wrong as the next guy writing a letter every day for 16 years at 5 in the morning, then the precious metals, like Gold, will be big winners... And non-dollar investors will also wear smiles like a Cheshire Cat! And this dollar rally will have been proven to be the fraud it is... A bear market rally... But... If I'm wrong... Well, I think I'll just retire and ride off into the sunset... OK, I can't do that, I have a 13-year old that still needs to go to college in 5 years! But If I'm wrong, then I'll take my lumps and admit it like a big boy...

Thought I would pass along some news from beleaguered Iceland... We were able to get our maturing CD's this week, traded at a much better level this week, and the news is full of hope that this will continue. I was told that there is a semblance of a spot market taking shape for maturing forwards. There's still no deliverability or forward markets, as the largest banks in Iceland are still trying to deal with being taken over by the Gov't. I know that there is a lot of confusion with the price that's being reported on the internet for Icelandic krona. But believe me now and hear me later, that is NOT THE MARKET PRICE FOR KRONA! And if you think it is, call up the provider of the price and tell them you want to sell them krona at that price! OK... I'm getting a little upset right now, so I'll stop there... Just wanted to give an update...

Well... As I opined here, the euro got back on the rally tracks, and is back above the 1.29 handle... I guess the profit taking has ended for now, eh?

With the major news circling around the Presidential Election results there's not much left for those of us that are trying to deal with the Financial Crisis going on... So... With that void, for today at least, I'll head to the Big Finish!

Currencies today 11/5/08: A$ .6970, kiwi .6065, C$ .8675, euro 1.2955, sterling 1.5995, Swiss .8610, ISK (no quote), rand 9.5875, krone 6.6950, SEK 7.6825, forint 199, zloty 2.69, koruna 18.75, yen 99.10, baht 34.92, sing 1.4775, HKD 7.75, INR 47.44, China 6.8280, pesos 12.61, BRL 2.1120, dollar index 84.67, Oil $68.70, Silver $10.27, and Gold... $759.78

That's it for today... My friend, Addison Wiggin, sent me a note the other day, letting me know that the I.O.U.S.A. movie is going to be released in 35 new cities, and that soon a DVD will be available! I know I've banged on everyone regarding this movie and book, but it's truly a must see / read! Football is over for my little buddy, Alex. Now it's basketball time... I wonder if a coach tells him what a coach told me when I got to high school and went out for basketball... "you should stick to football"... (and I thought I was pretty darn good! HA!) Time to hit the send button... It's a great day, hope your Wednesday is Wonderful!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-984-0892

www.everbank.com

* Early withdrawal penalties apply. Fees may reduce earnings.

GDP Goes Negative...

Chuck Butler — Fri, 31 Oct 2008 14:53:04 GMT

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

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In This Issue..

* Currency rally fizzles out...

* Bank of Japan cuts rates...

* Tracking David Walker...

* A major shift change on spending...

And Now... Today's Pfennig!

GDP Goes Negative...

Good day... And a Happy Friday to one and all! A Happy Halloween Friday to boot! Boy, to be a kid again, and have what is forecast as a 70 degree day on a Friday for Halloween! We've been so busy at the Butler house that we didn't even decorate our front yard with Halloween stuff this year. UGH! But, that's OK, I guess, Alex is older now, and little Delaney Grace would probably freak out with the ghost that would fly across the front of our house, etc.

Well... The fog that was lifted from the markets came back with a vengeance yesterday, and once again it was the deep, dark, dangerous U.S. economy leading the charge. 3rd QTR GDP printed yesterday and even though it was forecast to be negative, when it actually printed negative, the trading theme returned. 3rd QTR GDP goes negative (and if you throw in inflation for good measure growth was REALLY negative!) and the dollar rallies... It's the trading theme of the decade! (Ok, I exaggerate a bit there, as it has only been in place for 3 months now!)

And get this... Recall how 2nd QTR GDP (+2.9%) was goosed by net exports (because the dollar was weak)? Well... Apparently the dollar was still considered "weak" during the 3rd QTR because net exports added 1.3% to GDP in the 3rd QTR! I can't imagine what the 4th QTR GDP number will look like, well, actually I can... And the big fat red figure doesn't look pretty! Anyway, what I was trying to get at before my fat fingers started typing something else, is that 4th QTR GDP isn't going to get any goose from exports, given the strength of the dollar these days!

So... As I left you yesterday, the euro had "gapped up" to 1.3145, and the stars were getting in alignment, the karma was flowing, and peasants were dancing in the streets, as the things seemed to be getting back, somewhat, to normal, and the fundamentals were back on the table. But, then the 3rd QTR GDP print brought the deep, dark, dangerous clouds/ fog back over the markets, and the trading theme kicked into place, with the dollar rallying and pushing the euro to 1.27! That's some strong volatility there folks... Something, as I said the other day, I've not witnessed before... Yes, there was volatility in currencies, but not like these wild swings we see on a daily basis now. The "trading crowd" have to be pulling their hair out, as I think about how they put on trades and then add "trailing stops" at a certain percentage away from the current market. With these wild swings, they have to be seeing their trades "stopped out" almost instantly!

I have nothing against the "trading crowd", it's just like stocks, commodities, etc. Me? I'm a diversification kind of guy... I don't have the stomach for "trading"... I would probably be taking as many losses as gains and it would be all fruitless anyway!

OK... The currencies, Chuck, focus... Concentrate... Ok, I'm back now. And one more point on the 3rd QTR GDP print... It appears as though the U.S. Consumer is in full retreat...

About a year ago, I gave a rousing speech in New Orleans (well I talked anyway!) and painted an ugly picture for the U.S. dollar with regards to borrowing needs to finance the debt going forward... Well, that was all playing out until the credit squeeze took control of the markets in July. But that doesn't mean the funding needs of the U.S. are going by the wayside... A reader sent me a note to look at a story he saw in regards to the debt and borrowing needs... Here's a snippet of the Bloomberg story...

"The U.S. government's borrowing needs will almost double to $2 trillion this fiscal year, prompting the Treasury to revive three-year notes and hold more frequent sales of 10- and 30-year debt, according to Goldman Sachs Group Inc."

Then, I read the Daily Reckoning (www.dailyreckoning.com) and saw where friend, Dan Denning had this to say... "The 30-year Treasury bond yield plunged 27 basis points last week to

4.062 percent. It reached 3.8676 percent on Oct. 24, the lowest since regular issuance of the security began in 1977.

This is the last big bubble. There's going to be a stiff penalty for staying in Treasuries as the supply increases (the three-year note is coming back, monthly auctions for ten-year notes will resume). Plus, you know, all that new stimulus. All that new borrowing. Yields will be going up for sure"

Hmmm... Debt... Treasury issuance... And we have only just begun... (no I'm not going to do the Carpenters here...) I'm talking about the problems of giving 70 million baby boomers what they will be looking for as they begin to retire. (the first baby boomer born began receiving Social Security this year!) You know who can give you all the facts you need about the amount of debt that will be added to the U.S.'s ledger as each year goes by and more baby boomers (like me) retire (not me yet!)? His name is David Walker... And he is the former U.S. Comptroller General, and if anyone should know, it's David Walker!

Well, David Walker is the star of the book and movie I.O.U.S.A. He, resigned from his job to take a position with the Peterson Group and spread the word about a coming crisis in the U.S. with regards to debt burden. (if he were to be able to tell the truth about it, he would probably say he left his job because no one would listen to him (recall the deficits don't matter crowd!), and he wanted to do something about the problem!) And David Walker is telling everyone that will listen that we (as a country) need to act now in an attempt to keep the U.S. from going bankrupt... There's a snippet of the I.O.U.S.A. book in Forbes this month that was carried by MSN Money... If you want to read the snippet click here... http://money.cnn.com/2008/10/28/magazines/fortune/babyboomcrisis_walker.fortune/index.htm

Or if you want to read the whole book I.O.U.S.A. click here... http://rcm.amazon.com/e/cm?t=dailyreckonin-20&o=1&p=8&l=as1&asins=0470222778&fc1=000000&IS2=1<1=_blank&m=amazon&lc1=0000FF&bc1=000000&bg1=FFFFFF&f=ifr

OK, anyway... What does this all have to do with currencies you're asking? Well, grasshopper... Sit, and listen... Not that this is the case right here and now, but every year we get closer and closer to having to pay interest on debt obligations out our ears! And there will come a time when we won't even be able collect enough taxes to pay off our obligations... So... You can be assured that 1. taxes are going to have to go higher and higher and higher... And 2. the Gov't will allow the dollar to weaken and weaken and weaken, so that they can pay back the interest and debt with CHEAPER DOLLARS!

But for now... The dollar is in a bear market rally, which gives a lot of people that missed one of my 150 talks the past 8 years and didn't know they could be diversifying out of the dollar as a hedge, a chance to get in at prices that aren't at all-time highs! Is this the bottom and the best prices they'll see? I don't know... My crystal ball is pretty hazy these days, but what I do know is these prices are bargain prices VS what was seen in June, just 4 months ago...

Today, we'll see the color of the Sep Personal Income and Spending reports... I fully expect to see the tide change on these two... I expect to see Personal Spending go negative, thus showing that we didn't spend more than we made, which will be a major shift change in this trend... Don't look for any big gains in Personal Income either though...

We'll also see the Employment Cost Index, which used to be a closely watched piece of data, by the Fed... And finally the Chicago Purchasing Manager Index (manufacturing), which will probably be awful... So... Once again, the data doesn't help things any... The rot on the vine is quite evident...

But, then too is the rot on the vine over in Europe... A month ago, we were all led to believe that they were going to get to Ollie, Ollie, oxen free on the toxic waste bonds, only to have that blow up in their faces. And now the Emerging markets of Eastern Europe are dragging the European Union down... But they're still putting on a brave face at this point.

Speaking of the European Union... The European Central Bank (ECB) will meet next week, and I think we'll see them cut rates to keep in step with the Fed, but I think they will be kicking and screaming all the way to the rate cut table. The ECB has a mandate from the Maastricht Treaty that requires them to provide price stability... Now, that will be difficult to achieve when you are cutting rates and debasing the currency... But, it's the call to arms right now, with the U.S. Fed calling the shots on rate cuts.

Shoot Rudy, even the Bank of Japan (BOJ) cut rates last night... I had thought earlier in the week that the BOJ was just jawboning the yen weaker with that kind of talk... But, they were able to squeeze another drop of blood out of the turnip and cut rates 25 BPS... That erases the 25 BPS rate hike they made a year ago or so, and led everyone to believe they were breaking out of their decade of deflation...

The rate cut didn't hurt the yen, as much as the talk the other day, so for yen it was a case of sell the rumor buy the fact... I would think with all the dark clouds forming over the U.S. once again, the risk takers would be running for shelter once again, thus pushing yen stronger, but that remains to be seen as of right now...

Currencies today 10/31/08: A$ .6650, kiwi .5830, C$ .8180, euro 1.2760, sterling 1.6230, Swiss .87, ISK (still no quote), rand 10.0675, krone 6.6980, SEK 7.7850, forint 204.50, zloty 2.8380, koruna 18.91, yen 97.90, baht 35, sing 1.4835, HKD 7.7890, INR 49.45, China 6.8380, pesos 12.74, BRL 2.10, dollar index 85.54, Oil $63.85, Silver $9.45, and Gold... $727.30

That's it for today... Can't wait to see my darling granddaughter today dressed up in her bumble bee costume! And can't wait to see the kids in the neighborhood in their costumes tonight. And the terrible jokes they come up with... They're funny anyway! Late night last night as we had our Art Show here... A good time was had by all. I got to catch up with a lot of former Mark Twain Bank colleagues... I don't know how Frank Trotter does it, but he somehow keeps in touch with all those folks that are spread out all over town! My beloved Missouri Tigers travel to Texas again this week to play Baylor. It won't be easy, but I have full faith in these Tigers to win! Next Saturday, I travel to Columbia again, and hope this time will be different from my last trip there to see the Tigers play! And my little buddy Alex has his last football game of the year tomorrow. He does love to play football! That's it... I hope you have a Happy Halloween, and a Fantastico Friday!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837

Heading Towards Zero...

Chuck Butler — Thu, 30 Oct 2008 13:59:32 GMT

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In This Issue..

* Fed cuts rates 50 BPS!

* Currencies rally Big!

* 3rd QTR GDP to go negative?

* I.O.U.S.A.

And Now... Today's Pfennig!

Heading Towards Zero...

Good day... And a Tub Thumpin' Thursday to you! It certainly was a Tub Thumpin' Wednesday for the currencies, foreign stocks, commodities, and the Philadelphia Phillies! This by no means that the deep dense fog that has hung over the markets for 3 months has lifted for good... It did, however, lift for one day, and what a day it was!

Oh, and the Fed did indeedly do cut their Fed Funds rate to 1%, which works out great since Fed Funds had been trading at 1% anyway! I had a reported from Dow Jones call me a few minutes after the rate cut and ask me my opinion on what the dollar was doing, which at the time was rallying back a bit... I said it looked like a classic case of buy the rumor sell the fact, that enough speculators were pushing the dollar lower ahead of the rate cut in hopes that a larger cut would be made. That, however, was not the case, and the dollar rallied... But only for about 20 minutes, and then it took a rid on the slippery slope, with the euro pushing to the 1.29 handle as I left for the day.

I turned on the currency screens this morning, and what to my wondering eyes did appear, but the euro trading back above 1.30, I gave a cheer! Not that I have a dog in this race, I just like to see people make money... So, I immediately began to think, Now Chuck, is this for real? Or... Just a false dawn? Well... You know, the dollar really had gone too far, too fast this month and was due for a correction, and what better day to have a correction than a day when your currency was debased by 50 BPS! The dollar was going higher so fast it reminded me of a story I heard a very long time ago, and can't remember if my dad or mom told me, but it goes like this... Chuck, nothing grows to the moon, stars and sun, but sometimes it looks as though something might... But don't worry, it will come back to earth.

And so it was for the dollar this month... Of course this all could be wiped out by the fact that tomorrow is month-end, and we could see some adjustments being made in foreign stock funds... Let me explain... These foreign stock funds are off by quite a bit this month, and since they are foreign stock funds, they are denominated in foreign currencies... So, to adjust the amount of currency needed to fund the well, fund... These funds might have to sell currencies tomorrow. So, keep that in mind... But after yesterday's performance, who knows?

The other day, I mentioned how the Emerging Market Currencies had really taken the brunt of the dollar strength... But... I saw where there was an announcement overnight of IMF and Fed dollar swap lines for emerging markets. This is a bold and reassuring measure to address the liquidity problem for the Emerging Markets... I don't know if it will be enough, but for now it has brought some calm to these markets.

So... U.S. rates are at 1%... This is the level that former Fed Chairman, Big Al Greenspan, brought rates to in 2003 and left them there far too long, through 8 successive meetings before lifting rates in June of 2004. During that time, Gold rose 16%... The S&P 500 rallied too, and bond yields went up... But... We certainly do live in a different world than just 4 years ago, don't we? I just don't like interest rates this low, but a Fed has got to do what they've got to do. And I think the Fed Heads believe that they will be "Saved by Zero"... Maybe, someday, Saved by Zero... But I think they'll have another thing coming! You've got another thing coming!

The current Fed Chairman, Big Ben Bernanke, or triple B, issued a statement following the rate cut, that was quite somber... To me, he painted a very dark, depressing picture of the economy, and... I think he left the door wide open to further rate cuts, taking us on that path toward 0%... I doubt they'll actually ever get to 0%, but we could be getting within' spittin' distance of 0%...

I could go on and on regarding these low interest rates, but I don't feel like getting my blood pressure all boiling, and yelling at the walls! This is the first day in what seems to be a month of Sundays, that I can look at the currency screens and smile... So, I'm not going there, and you can't make me!

Don't know if you've noticed, but the Chinese renminbi has remained virtually unchanged this week... Yes, the peg was dropped in July of 2005, and it should move some each day, right? Well... When you realize that the reality of the situation is simply that China is a Communist Country, and can do what ever they well please with their currency! And it looks to me as though China has restored the peg... Maybe it's just a move to sit on the sidelines during these tumultuous times in the financial markets...

OK... I just saw the euro gap up from 1.3075 to 1.3135 in a heartbeat! It was crazy! Now this is going too fast! Why can't these currency traders make up their minds? OK, I'm not complaining, this time! But, really... On Monday of this week we were looking at some devastating currency levels, and by Thursday they have reversed about 6%!

And you know what all this dollar weakness and euphoria brings to the currency table don't you? Of course you do! Risk trades, Carry Trades, dollar and yen weakness, Aussie, Kiwi, and other higher yielders stronger... Yen is still below 100, so that's a good thing... And maybe, the Bank of Japan (BOJ) will lose the scent of currency intervention... Or, maybe they'll just stop talking about things that would weaken the yen... For now!

I've been around the currencies since 1985... Trading them since 1992... I've never seen the volatility that I see every day since July in the currencies... Crazy, I'm crazy for feeling so lonely... No wait! Ahhh... Patsy Cline, one of my all-time faves! And, on a sidebar here... What's the most played song ever in jukeboxes? Crazy...

OK... Don't know where I was going there, but quickly turned to trivia, UGH! Today, we'll see the color of the 1st estimate of 3rd QTR GDP... This ought to be interesting.... Remember in the 3rd QTR, the dollar was stronger, so imports won't be there to pump up GDP like they did in the 2nd QTR. Hans and Franz, pump you up! The experts believe that 3rd QTR GDP will be negative to the tune of -.5%... I'm going to go out on a limb and say it will be worse than that... But the fact that it's negative, really reinforces my claims that we're already in a recession.

We'll also see Personal Consumption for the 3rd QTR... This is a report that the Fed Heads usually pay close attention to. Personal Consumption is expected to have fallen -2.4% in the 3rd QTR... That's another rate cut arrow in the Fed Heads' quiver... Personal Consumption falling is akin to falling inflation, which you and I know is a bunch of bunk! But the Fed believes what it wants to believe...

And with it being a Tub Thumpin' Thursday, we'll see the Weekly Initial Jobless Claims like we do every Thursday. This report has showed that the Initial Jobless Claims will not slow down. The Weekly number remains around 475K, and the Continuing Claims number adds to the figure every week. This all will lead to unemployment rising to at least 7% in the near future...

Again... I received a letter yesterday from someone that ripped me for not providing solutions and always criticizing... Hmmmm... I said for years now... Reduce the debt, reduce the debt, reduce the dept... That's the Solution! I think everyone can think of one way the Gov't and Consumers could reduce their debt... And that's the Solution! I've beaten the proverbial dead horse with that statement... Reduce the debt! Geez Louise... Oh, and did I mention... Reduce the debt!

And with the smoothness of a Carlos Santana guitar solo... I slip right over to talk about my friends, Addison Wiggin, and Kate Incontrerra's book I.O.U.S.A. that accompanies the movie of the same name that was released last August. I read the book on all the flights during the currency tour, and even recited parts of it in my presentations. This is a must read for everyone, period. It makes no difference if you are rich, poor, middle class, in debt or not. It doesn't matter what you wear, just as long as you are there.... See how I slipped right over to I.O.U.S.A. from my tirade about Reduce the debt? I've learned something from writing a daily newsletter for 16 years!

And... You can get your copy of I.O.U.S.A. by clicking this link... http://rcm.amazon.com/e/cm?t=dailyreckonin-20&o=1&p=8&l=as1&asins=0470222778&fc1=000000&IS2=1&lt1=_blank&m=amazon&lc1=0000FF&bc1=000000&bg1=FFFFFF&f=ifr

Currencies today 10/30/08: A$ .6870, kiwi .5995, C$ .84, euro 1.3140, sterling 1.6575, Swiss .8855, ISK (still no quote), rand 9.91, krone 6.5770, SEK 7.5050, forint 194.70, zloty 2.7040, koruna 18.60, yen 98.70, baht 34.85, sing 1.4610, HKD 7.5110, INR 49.67, China 6.8410, pesos 12.81, BRL 2.1150, dollar index 83.64, Oil $68.25, Silver $10.06, and Gold... $770.15

That's it for today... Congrats to the Philadelphia Phillies on their World Series title... I told the people of Philadelphia (when I was there) that I had thought the Phillies were the best team in the National League all year... Got to have dinner with my little buddy, Alex last night, as we went out (my beautiful bride was gone)... Just the two buddies... I had a flashback to when he was 3, and would sit on my lap while I wrote the Pfennig, and would help me sometimes, which would look like this 0970987u038yr8hy32o.... He's 13 now, loves to work out, play his guitar, and sports... I don't know how it happened but that sounds exactly like me when I was 13! One difference though, I was bigger than he is... And... I had no qualms admitting I liked girls at 13... He hasn't felt comfortable with all of that yet! So, see, kids aren't always ahead of what their parents did! OK, I've rambled on here too much... Time to go and have a Tub Thumpin' Thursday, hope your is Tub Thumpin' too!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837

Credit Fears Ease...

Chuck Butler — Mon, 20 Oct 2008 14:16:46 GMT

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

A panel of currency experts is coming to St. Louis University.

Plan to attend the upcoming panel discussion "Dollar Prospects: Do Fundamentals Really Matter" on October 23 from 4:00 p.m. to 5:30 p.m. in St. Louis University's Busch Student Center.

The event is free, and is being sponsored by the Simon Center for Regional Economic Forecasting at St. Louis University. Presenters include our very own Chuck Butler and Frank Trotter and other professionals in the currency market.

EverBank is an Equal Housing Lender and member FDIC.

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

In This Issue..

* Credit fears ease...

* Chuck's thoughts from the road...

* India cuts rates...

* China growth slows, but is still 9%...

And Now... Today's Pfennig!

Credit fears ease...

Good day...And welcome to what should be another volatile week in the markets. Credit worries eased somewhat over the weekend, which helped push money back into the higher yielding currencies. Today Federal Reserve Chairman Ben Bernanke will head to Congress to share his view on the economy. Should make for a pretty interesting day of trading. Hope you are sitting down and holding on, it looks like we are going to take another lap on the currency roller coaster!

The yen fell over the weekend as investors began moving funds back into the higher yielding currencies of Brazil, Mexico, New Zealand and Australia. I won't go into the whole explanation of the carry trade again, but suffice it to say that these moves haven't proven to have much staying power. But I do like the news that the credit markets may be calming down a bit after the government moves to shore up the big international banks.

European Central Bank President Jean-Claude Trichet urged banks to start lending again after policy makers put them "on the path" to recovery. Trichet said in an interview yesterday that the banking system is "on the path to normalization" after governments pumped record amounts of cash into money markets. The three month Libor rate for dollars fell every day last week and this morning we saw another drop in the rate, an indication that the credit markets are continuing to thaw out. "We're facing a very important market correction which is lasting," Trichet said, hinting that the credit crisis may be coming to an end.

Today I expect the international markets to focus on Fed Chairman Bernanke's testimony to the House Budget Committee. While I don't expect Big Ben to come totally clean on the dire economic situation facing the US, I would expect him to warn Congress that a rebound in US growth won't happen right away and that losses on mortgage derivatives will continue to impact the credit markets. His pessimistic comments on the economy will likely move the dollar even lower vs. the major currencies as the focus moves back to the US where we are most certainly in a recession.

Chuck was busy this weekend on the road with FXU, but took some time to send me these thoughts to share with all of you:

"A Marvelous Monday to you!

I gave a speech on Saturday in Fort Lauderdale, and tried very hard to get people to listen carefully about what I was telling them. And what I was telling them was that the U.S. debt generation is out of control... Then I saw this info that a reader sent along, that played well with my speech from the pulpit...

"From September 30, 2007 to the end of this past fiscal year on September 30, 2008, total federal debt grew by $1.0 trillion, from 9,007,653,372,262.48 to $10,024,724,896,912.49, which is an 11.3% annual rate of growth. The federal debt as of October 16, 2008 is now $10,331,139,000,845.92. So in just 16 days since the end of the last fiscal year, the federal debt has grown by an astounding $331.1 billion, which is a 75.5% annual rate of growth. It has taken just 16 days to borrow one-third of what the government borrowed in all of last year."

So... The National Debt clock needs to be replaced, because it doesn't have enough digits to deal with $10 Trillion dollars of debt! So... I thought I would give you two thoughts that I read out loud to the audience in Fort Lauderdale. These come from the book, I.O.U.S.A. by my friends, Addison Wiggin and Kate Incontrerra. The first piece is from Ron Paul... The second from Warren Buffett regarding debt....

Ron Paul: "We can't afford to pay all these bills, and if we just pay for these bills by printing money, it will destroy the currency - and that will be a much, much more painful reaction than us just tightening our belts and living within our means."

Warren Buffett: "I do think that piling up more and more and more external debt and having the rest of the world own more and more of the United States may create real political instability down the line and increase the possibility that demagogues come along and do some very foolish things."

>>>> Now folks, you know me... I have always railed on the U.S. for building up these debts... Budget, National, etc. but after reading the book, and seeing the movie I.O.U.S.A. I have to tell you that what I've been fearful of was chickenfeed compared to the information the book and the movie have regarding debt! Put away the sharp objects folks... This stuff is scary... But Real!

So... We can go along now, and the repatriation and LIBOR currency swaps can build up the dollar... But, the way we're headed, we have no other choice as a country than to allow our currency to devalue so that these debts, and interest on these debts be paid in the future with cheaper dollars!

I just saw that South Korea announced a plan to put $100 Billion toward a guarantee to foreign currency debt and a $30 Billion injection (from FX reserves) (see how nice it is to have reserves?) to the banking sector.

This lit the light bulb over my head! Could this be the key that unlocks the intense demand for dollar funding, which has fueled the dollar rally? (recall, when I told you about this dollar funding on currency swaps because of the out of whack LIBOR?) Well, this is what I'm talking about here... Another good sign last week was the drop, albeit baby step drop, of LIBOR last week... If this can continue, and the banking sector no longer has to go the currency swap market for funding, we could see the dollar lose some of its steam..."

New Zealand officials are working on a plan to guarantee wholesale deposits at the nation's banks, according to Finance Minister Micheal Cullen. New Zealand last week guaranteed retail deposits to bolster confidence in their financial institutions. These moves by South Korea and NZD follow similar moves by countries across the globe. These guarantees look like they are working, as credit markets have eased a bit and money is moving back into the higher yielding currencies. As risk aversion eases, the currencies of NZD, AUD, BRL, and Mexico will likely benefit. All four of these currencies are up nearly 1% vs. the US$ as a result of these moves.

Producer prices in Australia rose in the third quarter twice as fast as economists expected, which may stoke speculation central bank Governor Glenn Stevens won't repeat this month's decision to cut benchmark interest rates. The producer price index advanced 2 percent after rising 1 percent in the second quarter, the Bureau of Statistics said in Sydney today. Traders are still betting on another interest rate cut at the next meeting on Nov. 4, but the size of the cut is now expected to be just 50 basis points compared to the last cut of 100 basis points. The prospects for further aggressive cuts by the central bank has been reduced by the jump in producer inflation. Hopefully the Aussie dollar will continue to climb back up, as we are seeing a lot of support around the .69 level. A further rally in Gold and other commodities would also help the Australian currency.

India's central bank unexpectedly lowered its key repurchase rate for the first time since 2004 in response to the global credit market turmoil. The Reserve Bank of India cut its overnight lending rate to 8 percent from 9 percent today. The move signals Governor Subbarao sees weaker growth a bigger threat than inflation in Asia's third largest economy. China's economic growth slumped to a five year low last quarter and growth in India has been declining also. The Indian rupee is Asia's third worst performing currency this year, and may fall to a record low of 50 per dollar by year end according to currency strategists at France's Credit Agricole. A research report predicted the currency, headed for its biggest annual loss in 17 years, is one of the most vulnerable in the region to the falling appetite for risky investments. The currency has continued to fall as investors have pulled out nearly two-thirds of the $17.4 billion they invested in Indian stocks last year.

As mentioned above, China's economy expanded at the slowest pace in five years as the financial crisis cut demand for exports. But before everyone gets too worried about the shutdown of the Chinese economy, gross domestic product rose 9 percent in the third quarter from a year earlier. Nine percent doesn't sound like too much of a slowdown to me! And China will continue to cut internal interest rates to keep growth near the current levels. Predictions of an even greater drop in Chinese growth has helped push commodity prices down. If China can continue to grow at near double digit rates, demand for iron ore, copper, and oil will remain strong. Currencies such as the Australian dollar, which depend on commodity exports, will rebound with a rebound in these commodity prices.

Currencies today 10/20/08: A$ .6935, kiwi .6129, C$ .8446, euro 1.3403, sterling 1.7390, Swiss .8781, ISK 260.0, rand 10.10, krone 6.5672, SEK 7.3810, forint 199.61, zloty 2.668, koruna 18.63, yen 101.75, baht 34.28, sing 1.4792, HKD 7.7563, INR 49.01, China 6.8299, pesos 12.8049, BRL 2.106, dollar index 82.52, Oil $73.81, Silver $9.763, and Gold... $798.32

That's it for today...What a gorgeous weekend here in St. Louis, perfect fall weather. The Mizzou Tigers barely showed up in Austin this weekend and now they will have to try and battle through the rest of the season hoping for a rematch with Texas at the Big 12 Championship. The Blues and Rams both had big wins this weekend in some pretty exciting games! Hope everyone has a great week and a Marvelous Monday!!

Chris Gaffney, CFA

Vice President

EverBank World Markets

1-800-926-4922

1-314-647-3837

Does The Bail Out Constitute A CDS Event?

Chuck Butler — Tue, 09 Sep 2008 14:05:37 GMT

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

Announcing the FX University Seminar Series. It could open your portfolio to new horizons.

Come learn from some of the world's authorities on foreign currency investing. The one-day seminar will take place in 8 cities across the nation this September and October.

What this seminar can mean for you: Get an expert's view on a vast range of currency opportunities - leave with tips, tactics and insights you need to diversify with confidence.

As a seminar sponsor and participant, we're pleased to offer you access to this exclusive event. For locations and dates, and to register, call 866.584.4096. Cost to register is only $99 for EverBank customers.

EverBank is a Member FDIC and Equal Housing Lender.

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

In This Issue..

* A potential CDS debacle...

* Currencies rally back...

* Brazilian real history...

* Saber rattling or geopolitical pressure?

And Now... Today's Pfennig!

Does The Bail Out Constitute A CDS Event?

Good day... And a Terrific Tuesday to you! Right out of the starters blocks this morning, I have to apologize for the tardiness of the Pfennig yesterday... We were experiencing some technical difficulties... In fact, if you sent me an email, I didn't get it yesterday! Things look better this morning, so, maybe we're back on track! I know it's no one's fault when this stuff happens, but it sure doesn't make me feel good about getting up at X:XX AM (I won't say because you will think I'm crazy!) to come in and write the Pfennig, only to see it not go out until late in the day!

Well... The stock market here in the U.S. sure liked the news about Fannie and Freddie! I guess, they, just like the dollar bulls, didn't get the memo that this will put billions of dollars of tax burden on taxpayers, and most likely is going to cause a major disruption in the Credit Default Swaps (CDS) that are on the books... Oh, well, we have to learn to deal with mental giants all our lives, this is just another case of that!

So, first, I'll get to the currencies, and then take you for a ride on the CDS liquidation wagon... It's not a pretty / scenic ride, but one that has to be taken!

OK... So, the Fannie and Freddie news caused dollar bulls to shake the euro to its foundation yesterday, with the single unit falling even further, and at one point looked as though it might fall below 1.40. The euro (and other currencies) selling came swift and harsh, right after the stock market opening bell. The good news though is that the euro has rebounded in the overnight markets of Asia and Europe to 1.4175...

There wasn't any data prints or news from overseas yesterday morning to warrant that selling, just plain and simple stock market euphoria, and foreigners wanting in on the "action"... When foreigners are buying U.S. stocks, they have to exchange their currency for the dollar...

But, as I said, the currencies have rallied back overnight, so, as long as yesterday's selling is water under the bridge, I'll be OK with that!

Let's get to this Credit Default Swaps stuff, because this is important stuff folks... There will be a meeting today to discuss how this is going to all fall out... But here's some perspective on the situation... First and foremost, there's a question as to whether the Gov't's conservatorship constitutes a "CDS event", which would force the settlement of the CDS contracts that are outstanding... Fannie and Freddie have roughly $1.5 Trillion in debt outstanding... But that's chickenfeed compared to the notional amounts of CDS contracts that could be multiples of that $1.5 Trillion!

If the Gov't's conservatorship does constitute a "CDS event" there won't be enough debt to settle the contracts, which will lead to a need for cash... And that could lead to major problems, with the least of them being the holders needing cash, might have to sell other assets to raise the cash needed...

I know this all is confusing, it took me a time or two before I fully understood these Credit Default Swaps... But in essence they are simply an insurance policy, as it can be used by a debt holder to hedge, or insure against a default under the debt instrument. This would be under the heading of "derivatives" that you've heard all about. When the "credit event" or "default" occurs, then these contracts get unwound, and Peter pays Paul, and Paul pays Robert, and so on... In other words... It could get very ugly out there! The Association that governs the Credit default swaps, ISDA, will meet today to discuss how this will all come down or fall out... So, more on this tomorrow...

I got a kick out of Bill Bonner's thoughts yesterday regarding the bail out... He called it "Hurricane Hank sweeps through the nation's capital" That's in reference to U.S. Treasury Sec. Hank Paulson, who is the "brains" behind this bail out... Bill's actual comment was: "Hurricane Hank swept through the nation's capital yesterday with gale-force regulatory winds and a tidal surge of federal cash, upending two of Washington's biggest enterprises and permanently changing the landscape of housing finance in America." (www.dailyreckoning.com)

OK, there's got to something else to talk about besides this bail out... And I've got just medicine!

Last night, I was doing a bit of reading while taking in the Monday Night Football game. (of course I can only stay up for the 1st half, and not even that most Mondays) I came across some research by HSBC on the Brazilian real that I think is important... And you know how I love to use a historical perspective to give direction on what's going to happen... Here you go...

"During the great Brazilian real (BRL) run of the last 5 years, the Brazilian currency has corrected and closed at least 10% from the highs a total of 4 times, 5 if you include the current sell off. ** Since crossing the -10% threshold ** it took BRL as little as 6 weeks to resume its rally and post a new 'highest close' and as long as 44 weeks... average time before posting a new high is 22 weeks. As far as magnitude is concerned, the 4 individual corrections in this study have seen BRL close as much as -15.5% from the all-time high, with an average sell-off of 13.4%. Last Thursday we closed beyond the 10% correction threshold in dollar / BRL. History suggests two things: For one, we'll be here a while.. and two, the greater part of the correction (in magnitude) is behind us."

Great stuff!

Aussie and Kiwi rallied throughout the night, which indicates to me that Carry Trades are getting put back on the books of investors. Japanese yen moved to a touch below 108 this morning, but could not move further, again, indicating to me that Carry Trades are in being put on the books. We'll see how these Carry Trades react when the Reserve Bank of New Zealand (RBNZ) meets this week and cuts rates 25 BPS as they are expected to do...

This (Carry trade junk) being put on in the face of a HUGE geopolitical news story this morning... Here's the skinny: Admiral Eduard Baltin, former commander of Russia's Black Sea fleet said yesterday that Russia was to conduct joint naval exercises with Venezuela in the Caribbean.

What? Just what is going on here? Is Russia really going to send one of its most powerful war ships as part of the exercise to take place in the Caribbean? YIKES! This would be the first such deployment so close to the U.S. since the end of the Cold War.

The admiral indicated that if the U.S. wants to interfere in the Black Sea, then Russia will play war games in the U.S.'s back yard.

OK... I don't like the sound of this folks... Even if it's just saber rattling, which it probably is, I don't like it! And the geopolitical risk should weigh heavily on things like the Carry Trade, and make currencies like the Swiss franc, more valuable... But, we'll have to wait-n-see, eh?

The data cupboard will yield July's Pending Home Sales data this morning. This probably won't be a market moving piece of data, but you never know these days...

I think that with all this saber rattling, and GSE bail out, and CDS problems, that Gold looks to be at a bargain basement price of $803... The Blue Light Special siren is going off, and the spotlights into the sky are sending a signal... But then that's just my opinion, I could be wrong... But I fell as though I'll be right as rain! But... Again! It's just my opinion! And with the dollar intervention and subsequent dollar admiration going on, my track record has been tarnished!

But then... In love and war all is fair, but the dollar's got cards it's not showing... But former Fed Chairman, Paul Volcker says that, "the U.S. financial system is broken."

Currencies today 9/9/08: A$ .8120, kiwi .6740, C$ .9420, euro 1.4170, sterling 1.7620, Swiss .8855, ISK 89.40, rand 7.88, krone 5.6550, SEK 6.6780, forint 169, zloty 2.4375, koruna 17.4650, yen 108, baht 34.54, sing 1.43, HKD 7.80, INR 44.80, China 6.8380, pesos 10.46, BRL 1.7360, dollar index 79.23, Oil $105.15, Silver $12.06, and Gold.... $800

That's it for today... Thanks to all who have been sending along good thoughts and wishes regarding my upcoming scans on Friday. A loooooonnnnnggggg day yesterday, and I was beat! But, ready to go this morning! As mentioned above, we couldn't receive email yesterday... We could send it out, but not receive it... Funny, how dependent we have become to email... Pretty amazing. I forgot to mention last week that my colleague and long time friend, Chris Gaffney had completed a triathlon and bettered his previous best time! Good Show! Hey! I almost forgot again! I've wanted to tell you all this for the last week, but kept forgetting... My friend, Addison Wiggin's movie I.O.U.S.A. is still in the theaters. You can find out if its playing near you by clicking this link and entering your zip code... http://www.fandango.com/i.o.u.s.a._113616/movieoverview

I think I saw that Google celebrated their 10th anniversary yesterday... WOW! In 10 short years they have conquered the world! Or so it seems, eh? Who hasn't said... "hey just Google it"? Happy anniversary Google... Hurricane Ike is headed toward the Gulf of Mexico... Again, let's hope it fizzles out before it hits land... I hope you have a Terrific Tuesday!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837

Fannie and Freddie Back In The News...

Chuck Butler — Thu, 21 Aug 2008 13:09:07 GMT

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

Announcing the FX University Seminar Series. It could open your portfolio to new horizons.

Come learn from some of the world's most trusted authorities on foreign currency investing. The one-day seminar will take place in 8 cities across the nation this September and October.

What this seminar can mean for you: Get an expert's view on a vast range of currency opportunities - leave with tips, tactics and insights you need to diversify with confidence.

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

In This Issue..

* Strange trading days...
* U.K. Retail Sales surprise....
* Norway's GDP prints strong!
* A CDO lesson...

And Now... Today's Pfennig!

Fannie and Freddie Back In The News...

Good day... And a Tub Thumpin' Thursday to you! Don't know why... I just felt like it should be a Tub Thumpin' Thursday! I hit the wall yesterday, as I went home, and fell asleep at 3 o'clock, and didn't wake up till night time! Watched a few innings of my beloved Cardinals, wanted desperately to stay up and watch the May-Walsh beach volleyball game, but went right back to bed! So... I should be rested, eh? One would think so, but with the treatments I take, they just simply wipe me out! But... Hey! I always said that sleep was the greatest thing... I just get to enjoy more of it, right?

OK... Another day of strange trading... As I signed off yesterday, the euro had given up it's previous day's gains, but found some terra firma at 1.47 and then rallied in the afternoon... If you guess right, as I have not done so this week, you can catch a great price to sell, and buy, all in the same day!

In the overnight markets of Asia and Europe, there has been some distinct movement in Japanese yen VS the high yielders... Of course yesterday, I wrote about how the high yielders were inching back because there was no risk aversion in the markets... But that's changing, and the thing pushing risk front and center once again is our old friends, Fannie and Freddie! Fannie and Freddie shares are down about 30% overnight, as it now appears that a nationalization bail out is the real McCoy. With risk back on the table, yen has rallied to the 108 handle! And... Aussie and kiwi, back off... Again!

The U.S. dollar should be trading lower on this latest Fannie and Freddie development. That's all that needs to be said regarding that... The dollar is overvalued right now given what's going on... JP Morgan issued a report signaling the euro to be oversold, and that the losses have been excessive, according to their charts...

In the U.K. Retail Sales printed stronger than expected by a wide margin, thus showing that there is still a pulse in the U.K. economy. July Retail Sales posted a .8% gain... But one has to think that this is a "one and done" for Retail Sales, given the June number was a negative 4.3%, and the forecast for the U.K. economy isn't bright... I'd say... If this quickie in Retail Sales bumps pound sterling then use the bump to your advantage...

Back to the U.S. credit market for a minute or two (depending on if you took Evelyn Woods' speed reading course! HA!). We have a great older gentleman that works with us from time to time, and offers his insights in the Review & Focus from time to time, Joe Losos. Whenever he is in the office, he'll bring us his Financial Times after he's read through it... Well, yesterday, I noticed a story in the Financial Times (thanks Joe!) that said the CDO (collateralized debt obligation) values are in a "free fall", and that defaults are increasing... Uh-Oh! Long ago, I explained these CDO's, but thought that we probably need to go over this in class again, since I think everyone will be hearing lot of this term going forward!

A CDO (collateralized debt obligation) is: An investment-grade security backed by a pool of bonds, loans and other assets. CDOs do not specialize in one type of debt but are often non-mortgage loans or bonds.
Similar in structure to a collateralized mortgage obligation (CMO) or collateralized bond obligation (CBO), CDOs are unique in that they represent different types of debt and credit risk. In the case of CDOs, these different types of debt are often referred to as 'tranches' or 'slices'. Each slice has a different maturity and risk associated with it. The higher the risk, the more the CDO pays.

There's our lesson for today class, please write at least 500 words on how the issuance of CDO's got completely out of control pre-August 2007, and turn it in tomorrow...

Yesterday, I told you about the OECD recommending rate hikes to Norway... Overnight, Norway printed a stronger than expected report on economic growth. Norway, which excludes oil production from their growth numbers, reported a very strong 1% gain in the 2nd QTR, thus adding pressure on the Norges Bank (Norway's Central Bank) to raise interest rates. The experts had forecast a gain of .6%... So, economic activity was much stronger than expected, and you've gotta love that! The krone has gained a bit on the news, but really needs the euro to get on the rally tracks before the krone and other currencies can take a strong run at the dollar.

There are geopolitical risks in oil producing countries increasing again... But this time, it's not the usual suspects in the Middle East... This time it's Russia. Seems relations are getting strained between the U.S. and Russia over the invasion by Russia into Georgia. That invasion closed some oil export routes... These tensions are pushing the price of oil higher again... Oil is trading this morning at $117.15, that's up quite a bit from yesterday's $114, and earlier this week's $112.87...

Oil's rebound has the Commodity Index (CRB) on the rise again... The CRB is trading this morning at 391.33, VS 382 last Friday. It will take more than Oil rebounding to get the Commodity Currencies back in favor though...

Gold put in another good performance gaining $12 overnight... So... Maybe, we can get Gold back on terra firma, which would be good for Aussie dollars.... Recall last week, I pointed out how Gold and Aussie dollars had been tied together... Well, if it was like that on the way down, it had better be like that on the way up!

The Brazilian real continues to be strong VS the dollar, and if this story that appeared on Reuters yesterday has anything to say about it, the real could be in for a strong run....

SAO PAULO, Aug 19 (Reuters) - Bradesco, Brazil's largest private-sector bank, said on Tuesday it signed an agreement with Mitsubishi UFJ Financial Group to sell funds that invest in Brazilian assets to Japanese retail investors.

OK... So maybe you're wondering... "Why does that story help the real?" Ahhh grasshopper, sit down, hear me now and listen to me later... Remember the strong runs of Aussie and kiwi that were fueled by Japanese investors looking for higher yields? Oh yes, these were huge! And this story indicates that Brazilian real could very well be the next destination for Japanese investors looking for higher yields! I would think this to be quite the blinking blue light special notification... But, then, that's just me, I could be wrong here, and this story might not mean dookie!

The data cupboard will yield three second tier reports today. First, will be the Weekly Initial Claims data, which has exploded above 400K, and remained there with little indication that it will go back down. Look for last week's jobless claims to have risen by 450K...

Then we'll see the current Philly Fed Index (manufacturing), which has been negative for some time now. The Philly Fed report will then be followed by one of my faves... Leading Indicators... I complain all the time about how the markets don't pay any attention to this data, and it's true, they just don't give it two looks! But I do! And Leading Indicators should continue to print negative.

And finally... The Chinese renminbi booked a second day of gains VS the dollar overnight after losing ground to the dollar for the past 4 weeks... This just means that the stars are getting back in alignment, and the karma is beginning to flow for the currencies again... Things just didn't look right with the renminbi losing ground to the dollar, day after day...

Oh wait! Someone asked me yesterday whey I don't talk about the Swiss franc on a regular basis... It's always the euro this, and euro that... Well... That's because the euro is the BIG DOG! But, with regard to the Swiss franc... Except in times of geopolitical tensions or major global risk events, the Swiss franc tends to follow the euro... Yes, it was held down by the Carry Trade, but in the grand scheme of things, the franc is a little dog to the euro's Big Dog...

Currencies today 8/21/08: A$ .8690, kiwi .7115, C$ .9475, euro 1.4780, sterling 1.8635, Swiss .9145, ISK 82.52, rand 7.7175, krone 5.3760, SEK 6.3460, forint 158.15, zloty 2.2415, koruna 16.46, yen 108.50, baht 33.95, sing 1.4125, HKD 7.8075, INR 43.51, China 6.8445, pesos 10.13, BRL 1.6180, dollar index 76.67, Silver $13.59, and Gold... $826.40

That's it for today... I go to the oncologist doctor today... Probably time to schedule a new scan, so we'll probably discuss that, and how much longer I'll be on these treatments! I'm talking to an editor from a publisher about a project that I hope will come together regarding the Pfennig... More later... Our legal person sent me a note yesterday and said she "needed" to come see me... UH-OH! What did I say now that was wrong, I thought? She assured me it was just "housekeeping items"... Let's hope so!

Today is the BIG PREMIERE of I.O.U.S.A! And since I've seen it already, I have first hand knowledge of how this documentary / movie should be seen by everyone that pays taxes. It doesn't matter what side of the political room you stand on. Democrat, Republican, Libertarian, Independent, or nothing, this needs to be seen! So, when thinking about how I would put a song around this, I was reminded of the old Neil Diamond song... Brother Love's Traveling Salvation Show... Because it goes like this:

"It's Love, Brother Love, say
Brother Love's Traveling Salvation Show
Pack up the babies and grab the old ladies
And ev'ryone goes, 'cause everyone knows
Brother Love's show...

That's right, pack up the babies, and grab the old ladies, cause everyone needs to go! Here's the link to the movie trailer one more time! http://www.agorafinancial.com/iousa/movietrailer.html

I hope your Thursday is Tub Thumpin'!

Chuck Butler
President
EverBank World Markets
1-800-926-4922
1-314-984-0892