Daily Pfennig : Iceland

"The Cheater" Speaks...

Chuck Butler — Tue, 27 Jan 2009 14:50:17 GMT

In This Issue..

* Currencies rally...
* IFO unexpectedly rises...
* Norway looks good...
* Gold hits $900 again!

And Now... Today's Pfennig!

"The Cheater" Speaks...

Good day... And a Terrific Tuesday to you! We received the snow and ice they forecast, but the drive in to the office was no biggie, so the street crews did a fair job, I would say... We'll see when I head into the city for my radiation this morning...

Hey! What a day for the currencies yesterday! Geez Louise, it's seems like it's been a month of Sundays since I could say that! And there's been follow up overnight, although, I do believe I'm seeing some profit taking right now... I went to radiation yesterday with the euro trading around 1.2965... I came back 2 hours later, and it was 1.31! And it didn't stop there, trading up to 1.3175, but running into a wall of resistance there... But that was temporary, as the overnight market pushed the single unit higher to 1.3250... It did trade all the way up to 1.33 and change on news that the German Business Confidence, as measured by the think tank IFO, unexpectedly rose for the first time in 8 months. This improvement was a result of the European Central Bank (ECB) cutting interest rates...

Of course, you know me... And I always say that one swallow doesn't make a summer... And that can be used here, as this IFO report is just one sliver of hope for the German economy... There needs to be more, or this will report will be put in the rear view mirror soon. So, I'm not pinning my colors to the mast of a German economic recovery, just yet! But, the data did "goose" the euro higher, and for taking part in that, I give the IFO kudos!

The Big Winner of the day though, was pound sterling... In a case of an asset "falling too far, too fast"... The pound sterling has done a Super Ball Bounce from Friday's price, and has rebounded to 1.4190... Of course, that's a rally from Friday's figure of 1.3570... It certainly STILL shows the rot on the vine in the U.K. from last summer's 2.00 for pound sterling. I would be very careful here, as the U.K. is in the same boat, smaller in size, but the same boat as the U.S....

I had a great lunch yesterday with the Big Boss, Frank Trotter, and we were discussing what we would talk about next week at the Orlando Money Show. I told Frank that I really believe in the prospects of a nice big rally in Norwegian krone... Let me tell you why... First and foremost, it remains a Surplus country... A positive balance of payments... And that surplus has allowed Norway to weather the storm that's hit just about every other country in the world... See, why I believe the Surplus countries should always be considered when buying currencies? Anyway... The main reason it lost ground from last July's levels is the drop in Oil prices... They like the other types of Commodity driven currencies like Aussie, Canada, Brazil, New Zealand, South Africa, just got hammered due to the selling in Commodities... But... You know my outlook for the inflation in this country, and that will be driving Commodity prices higher by year-end... But the leader in the forefront of all this move will, in my opinion, be Oil prices... And IF Oil prices rebound like I suspect they will, that will be a very nice underpin for Norwegian krone...

And Gold traded above $900 yesterday... It has seen some profit taking overnight, and fallen back to $896... But, again, these are stair steps to higher levels for the shiny metal... But then that's just my opinion. You have to make your own investment decision...

OK, the data yesterday was not good, Yes, the Existing Home Sales moved higher, but only at the expense of a falling Home Price... The median home price was $175,400 in December, down 15.3% from $207,000 in December 2007, the National Association of Realtors said Monday. The median price in November this year was $180,300. Here's the real indication that this rise in sales wasn't at good levels... Of all sales in December, about 45% were distress sales at discounted prices. That's foreclosures and auctions on foreclosed homes folks... I don't think we want to get up on the fence and crow about this report...

And then, after all my harping about how the markets should pay closer attention to Leading Indicators data, the report for December showed an unexpected gain of .3%... Again, the one swallow doesn't make a summer, applies here too... I'm from Missouri, and I'll need to be shown more of this to believe it...

Today, we get the color of the S&P/CaseShiller Home Price Index, which will repeat what yesterday's Realtors report showed... Expect more rot on the vine here though, with home prices showing an -18% drop...

And we'll see Consumer Confidence, which I suspect will bump higher in December, although in reality I don't know why... But it most likely will, based on the stock market's head fake rally in December...

I see that "the cheater" a.k.a. Tim Geithner was confirmed as our U.S. Treasury Sec. I really didn't think I would ever have another punching bag Treasury Sec. like I had with King Henry Paulson, but, then along came "the cheater"... I have to tell you that this is scary stuff folks... In his confirmation he said, not once, but twice, that "President Obama, backed by the conclusions of a broad range of economists, believes that China is manipulating its currency. President Obama has pledged as President to use aggressively all the diplomatic avenues open to him to seek change in China's currency practices."

OK folks, this is where the problems begin... If in his confirmation, he's making statements like that, you can expect that Obama will push for legislature to put tariffs on Chinese goods... Protectionism... This is ALL GOING IN THE WRONG DIRECTION!!!!!!! And believe me now and hear me later... "the cheater" didn't just make up this response! This was given to him by Obama, and "the cheater" made certain that everyone hear him, by repeating the answer!

I've told you before, folks, that Protectionism is to a currency, like kryptonite is to Superman... So... Not only is the Gov't on the path to spending even more than the previous administration spent, they look as though they will go down this protectionism path... Add to that, the recession and zero interest rates, and you've got the ingredients for a huge swat at the dollar...

I read a report by Stephen Jen of Morgan Stanley, where he writes that he believes the euro will trade back to 1.20 in the coming months... Well, that may be, and would play well with my Obama bounce thing... But with this all happening so fast in the past couple of days, I might have to rethink that Obama bounce thing... We may get an Obama bounce, but it may be for the euro and other currencies!

Oh... And one more thing on China, before I go on... The IMF's Managing Director, Strauss-Kahn, was talking yesterday, and said, "I have said repeatedly that the renminbi is undervalued" He went on to add, "What we need is for the Chinese to change their policy and shift to more domestic-led growth than to focus on exports. Most Chinese officials are convinced that this is in their own interest."

So... The IMF believes the renminbi is undervalued, and that the Chinese should do something about it, and so does the Obama administration... And you say, "Trade wars"? I bet you can! And not a good time for them either! Not when the whole globe is suffering... Dolts, all of them, they can't see the Big Picture... Shame, Shame, Shame!

OK... I could really get going on all that... But... I'll shift gears and talk about the bailouts... Have you seen the Neil Young, you know THE Neil Young, video on YouTube? He's singing about the bailouts... Here are the lyrics...

There's a bailout coming but it's not for me
It's for all those creeps watching tickers on TV
There's a bailout coming but it's not for me
There's a bailout coming but it's not for you
It's for all those creeps hiding what they do
There's a bailout coming but it's not for you
Bailout coming but it's not for you

So... When guys like Neil Young know that these bailouts aren't working, and they aren't good... It should be very apparent to the likes of Pelosi, and Obama...

Oh... And Home Depot announced 7,000 layoffs yesterday, Sprint announced 8,000 layoffs, while Caterpillar announced 20,000...

I'll get to the Big Finish here in a minute... But first, and finally I wanted to talk briefly about New Zealand... The Reserve Bank of New Zealand (RBNZ) meets this week, and I truly expect them to continue their interest rate cutting. 325 BPS have already been cut from their once highest interest rate in the industrialized world... Finance Minister Bill English was speaking last night and said that the "economic outlook had deteriorated since the government's Dec forecasts, and that the economy now looked to be closer to the Treasury's "worst case scenario"." In that scenario, he suggested that recession would continue through to 2010, the current account deficit would balloon beyond 10% of GDP, and unemployment would rise sharply rising. These aren't "good times" for kiwis... So... Look for the weakness in the kiwi-dollar to remain in place here...

Currencies today 1/27/09: A$ .6625, kiwi .5280, C$ .8160, euro 1.3250, sterling 1.41, Swiss .8790, rand krone 6.7325, SEK 7.9660, forint 215.90, zloty 3.2950, koruna 21, yen 89, sing 1.4990, HKD 7.7690, INR 48.93, China 6.8615, pesos 14.05, BRL 2.3120, dollar index 84.36, Oil $46.27, Silver $12, and Gold... $897.40

That's it for today... Well... Only 6 more weeks until Pitcher and Catchers report for Spring Training... I think I can hold out! HA! The euro has just sold off while I was typing by 1/2 cent... The selling is fast and furious in the past 1/2 hour... My little buddy, Alex, wore his pajamas inside out last night, as a "rally" tool for a "snow day" today... It worked! He'll be sliding down the hills today... (lucky dog!) Well... It's like "old times" in the office this morning, as Suzy-Q, is here! Sue, used to be here in the early morning all the time, so this morning it was a special treat! Well... I guess I had better get going to radiation, as the roads aren't good, and it will take me a bit longer to get there! I hope your Tuesday is Terrific!

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

Misguided risk aversion...

Chuck Butler — Fri, 21 Nov 2008 16:31:01 GMT

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In This Issue..

* Bad data pushes investors into US treasuries...

* Barclay's says the euro will rally...

* SNB surprises with a rate cut...

* Iceland gets their bailout...

And Now... Today's Pfennig!

Misguided risk aversion...

Good day...The dollar rallied a bit yesterday on some very poor economic data which illustrated just how bad things are getting here in the US. As Chuck has repeatedly told everyone, in the current trade pattern the dollar rallies whenever we get negative data for the US economy. Investors get spooked by this negative data, and run scared into the 'safety' of US treasuries.

Ty sent me a quote from respected newsletter owner/author Bill Bonner yesterday: "Misguided risk aversion, anyone? A few months ago, investors stretched for yields. Now, it's safety they reach for...and grab U.S. Treasury debt with both hands. Investors now seem to have an unqualified trust in the full faith and credit of the world's largest debtor. Yields on 91-day T-bills have fallen to 0.11% - scarcely a tenth of one percent!"

And when you adjust these yields for US inflation, the real yields on US treasuries are negative (even the 10 yr treasury real yield is -.43%!!). These investors won't be parked in US Treasuries for long, but while fear continues to drive the markets, the US dollar will remain strong.

The data which sent shivers down investors spines yesterday was a one two punch of weekly jobless claims and leading indicators. The number of Americans filing for unemployment benefits approached a 26-year high of 542,000 last week. The Unemployment rate will likely increase another 100 bps by this time next year, and stay at these elevated levels for an extended period of time.

The second blow came shortly after the jobs data was released, as the index of leading US economic indicators fell in October for the third time in four months. The Conference Board's gauge dropped .8%, more than forecast, after rising .1% in September. This index points to the direction of the economy over the next three to six months. Consumers and companies are cutting back as job losses mount and housing and manufacturing sink deeper into a slump. These two pieces of data indicate just how quickly the US economy is falling into recession.

Investors fled stocks and moved back into dollars throughout the trading day yesterday, rallying the dollar index back to the highest level since April 2006. We moved above 88 on the dollar index a week ago, but it was unable to maintain the higher level.

The same thing occurred last night, as equity markets in Asia rebounded, bringing the dollar index back below the 88 handle. Apparently there was speculation that a sale of Citigroup Inc. will reduce risk in the financial system, slightly increasing the confidence of investors. This is how perverse these markets have become; the possible sale of one of the largest financial firms in the US actually rallies the markets.

The European Union announced that is crafting a coordinated economic stimulus package to spur its 27 nation economy. European Commission President Jose Barroso told reporters in Brussels today that the commission will announce a fiscal stimulus plan next week. The plan will be based on member states taking measures suited to their own economic situation. I like the approach the EU is taking to the crisis, as they will design the stimulus to try and meet the differing needs by each country. According to the EC president, "Everyone is suffering from the crisis and everyone needs treatment, but not everyone needs the same pill."

According to Barclay's Capital, the euro will strengthen 16 percent against the dollar in the next 12 months as Chinese demand drives up prices for oil, reducing the US currencies attractiveness. Two-thirds of the euro's 22 percent slide since the July peak of $1.6038 can be accounted for by plunging oil prices, Barclays said. China is the second largest oil consumer after the US, and "Contrary to current received wisdom, oil prices are much more important for the euro-dollar cross than either the stock market or interest rate differential right now," wrote London-based David Woo, global head of currency strategy at Barclay's. Declining oil prices have helped the greenback by narrowing the US current account deficit, reducing the US's need for overseas funding, Woo said. He forecasts the euro will trade in a range around $1.24 in the next three months, but then rally to $1.45 over the next year as accelerating growth in China helps oil prices retrace their recent fall.

I agree with Barclay's analysis of global commodity prices. China and the rest of Asia will continue to be the world's growth engine, and demand for commodities will increase. The stimulus packages which are being pushed will put additional upward pressure on raw material prices. The commodity rally will not only help the Euro, but will help push up prices of the Norwegian krone, Australian dollar, and Brazilian real.

Switzerland's central bank surprised the market yesterday, dropping its benchmark interest rate by 100 basis points. The Swiss National Bank reduced its target for the three month Libor to 1 percent and promised a 'generous and flexible' supply of Swiss Francs. It's the third unscheduled move by the SNB since the beginning of October. I would expect the SNB to keep rates on hold at their meeting next month given the extent of yesterday's move. The Swiss Franc fell as the dollar strengthened yesterday, but rallied overnight and is now trading close to where it was prior to the SNB move.

In other interest rate news, the Bank of Japan kept its benchmark rate at .3 percent today and said it will consider pumping more money into the financial system to prop up an economy that fell into recession last quarter. Japanese banks are in a much better financial position that banks in the Eurozone or the US, and the Japanese consumers are flush with cash. Japan went through a long deflationary period, and consumers there are less leveraged than here in the US. The stronger position of Japanese banks, and the more solid consumer base will enable the Japanese economy to weather the global slowdown much better than most other economies. The yen will retain its attractiveness as the world faces a long, long recession.

Technical analysts predict the yen may rally to 92.50 in the short term, and could move above the 13 year high of 90.93 which it hit on October 24. According to the analysts, the so-called support level is near the bottom line of a trend channel that tracks the dollar's decline from a two week high of 100.55 yen on Nov. 4. The US currency is poised to extend a 3.5% loss this month as it failed to rise above the 20 day moving average and the down trend is still very clear.

The Australian dollar approached a five year low against the dollar in late US trading and the New Zealand dollar traded near a six year low as investors moved out of the carry trades after the negative US data yesterday. But the Australian dollar bounced back overnight as the Reserve Bank of Australia announced it had bought a record 3.15 billion Australian dollars in October. The RBA continued to purchase its own currency this morning, "providing liquidity as on previous occasions," said a spokesman for the Sydney-based central bank. The Australian dollar has posted a record monthly drop in October and the RBA has been purchasing the AUD$ in an attempt to slow the drop. Commodity prices continue to fall, dragging down the exchange rates of commodity exporting countries. Falling interest rates have also put pressure on the higher yielding currencies of NZD and AUD.

Iceland finally got the long promised bailout from the IMF and four Nordic countries yesterday. The IMF and four Nordic countries gave Iceland a $4.6 billion bailout. The Icelandic government will also borrow about $6.3 billion from the UK, Germany, and the Netherlands to cover foreign deposit guarantees at failed lenders. While the rescue was desperately needed, it will heap almost $11 billion of debt on the shoulders of the islands population of just 320,000. "This is an extraordinary scale of problem related to the size of the economy," IMF Mission Chief to Iceland Poul Tomsen told reporters. "Iceland is in an unprecedented situation." GDP in Iceland is predicted to shrink about 10 percent next year, the IMF says. The island had the fifth-highest per capita income in the world in 2007, but the collapse of their financial system has caused the Icelandic krona to lose two thirds of its value this year. The rescue may start to add some liquidity back into the banking system, but the massive amount of debt will likely keep the Icelandic economy from rebounding for a number of years.

Currencies today 11/21/08: A$ .6212, kiwi .5272, C$ .7817, euro 1.258, sterling 1.4982, Swiss .8194, ISK (No Quote), rand 10.46, krone 7.0831, SEK 7.2031, forint 211.78, zloty 3.046, koruna 20.405, yen 94.87, baht 35.22, sing 1.5304, HKD 7.7513, INR 50.02, China 6.8311, pesos 13.8031, BRL 2.457, dollar index 87.56, Oil $50.38, Silver $9.17, and Gold... $756.88

That's it for today... Big day here on the desk as we are all excited about our Christmas party tonight. Yes, it is a bit early for a Xmas party, but I'm not one to complain about free food and drinks!! And the party is being held at a bowling alley, which is right up our alley (pun intended) as we are a fairly competitive group. I actually took a bowling class in college, but I haven't bowled in a few years, so I hope I can recall some of what I learned back then. Hope everyone has a Fantastic Friday and a Wonderful Weekend!!

Chris Gaffney, CFA

Vice President

EverBank World Markets

1-800-926-4922

1-314-647-3837

SNB Cut Rates 100 BPS!

Chuck Butler — Thu, 20 Nov 2008 15:01:41 GMT

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In This Issue..

* Trading Theme returns...

* Automakers' bailout vote today...

* Not using all your arrows...

* Housing Starts go back to 1959!

And Now... Today's Pfennig!

SNB Cut Rates 100 BPS!

Good day... And a Tub Thumpin' Thursday to you! It's a short week for me, so this IS a Tub Thumpin' Thursday! I head to Florida tomorrow, and I'm ready! After last week, and the cold that's set in here, I'm ready! Too bad I'll be working about 1/2 the time! But, I'm not complainin'!

OK... Whew! What an awful day yesterday for the currencies... In the morning, they ere in rally mode with the euro gaining ground to well within the 1.27 handle. But then the Trading Theme set in, and those gains were wiped out. The Trading Theme was set off by the awful Housing data, which reminded everyone of the deep, dark , dangerous days ahead... I bought some euros, and watched them rise, and went off to do something else... When I returned, they had fallen... UGH! The Japanese yen, however, rallied, as is the case with the Trading Theme... Risk trades get unwound, which benefits dollars, and yen. I've explained all this before, so I won't get into it again, but there's someone that has gone into the problems (credit markets and the Fed and Treasury's response to the crisis), and does a great job of telling it like it is... So, instead of hearing from me, ranting and cursing the "leaders" I'll let someone else explain it to you... This is a fellow named Ted Cook, that Ty Keough sent my way...

"One hardly knows where to begin. America has currently embraced the monetary policies of a banana republic. The Argentine and Zimbabwe models cannot be far behind. For years (35 to be exact) we have warned about the consequences of unbridled credit expansion. We argued that artificially low interest rates would lead to catastrophe. Now the first installment of this crisis has been visited upon us. Our policymakers have greeted this dilemma with even more ruinous money and credit policies that compound the problem. We've had the earthquake. The Tsunami is yet to come.

The monetary authorities in Washington, who are supposedly the brightest among us, have adopted a short-term strategy resplendent with economic error. As usual, the politicians are clueless. Somehow the idea has gained ground that recklessly expanding money and credit (inflating) will cure our economic ills without repercussions. Nothing could be further from the truth. This is currency debasement on a grand scale."

OK... Back to me... I see where Iceland is getting $2.1 Billion from the IMF, and $2.5 Billion from the Nordic Countries of Finland, Sweden, Norway, and Denmark to help resurrect the Icelandic economy. Seems like it's a case of too little too late to me, but maybe this can unlock the markets there a bit. For those of you keeping score at home, we received a price of 182.10 on our Icelandic currency this week. Now... I know there are people out there that don't believe that we receive a price like this when the Central Bank posts a daily figure of around 139... But let me tell you how this all works... I think the easiest way to explain this is to look at the Wall Street Journal, or most newspapers' business section, and you'll see the Fed Reserve rates for currencies that day. Since currencies only really trade at the level that's posted in the paper for a mili-second, it's merely used as a reference. It's not an indication where trades are being bought and sold.

Then there was the Housing data yesterday... October Housing Starts fell 4.5%, and Building Permits fell 12%! OUCH! That's just awful data! The Housing Starts fell to an annual rate of 791,000, which is the lowest since records began in 1959! That's 1959 folks! I hadn't even started kindergarten yet! We hadn't even launched Alan Shepard into space yet! Oh, the Soviets were way ahead of us at that time, only to be caught and passed later... But I digress, with this space exploration talk!

I don't mean to try to get everyone's attention away from the awful Housing data, like the media would do... I think of the cable news people doing this story, something like this: "Today, we saw the October Housing Starts fall 4.5%, and how about Paris Hilton breaking up with her boyfriend yesterday?"

OK, I'm back now, the research team over at JP Morgan sent out a note to clients yesterday, telling them that they believe the Fed will cut interest rates to zero by the next two meetings, Dec. 16, and Jan 28, and leave them there for the rest of 2009. Recall, that I wrote about how I believed the Fed was going to cut rates to zero about a month ago? I said then that the Fed is thinking that they can be "Saved by Zero"... Well... It's nice to see the BIG research teams jump on my bandwagon!

I guess, the Nestea Plunge in the Consumer Price Index (CPI) yesterday convinced them to make that call... October CPI took the biggest Plunge in 61 years by falling 1% in the month!

Falling asset prices... Falling inflation (so they say)... Falling Home prices... And Falling Job Creation... This is getting pretty ugly folks... And here's Jimmy Buffett (a reader reminded me of this!) I don't know ---- I don't know --- I don't know where I'm gonna go when the volcano blows. Mr. Utley! (you can hear those steel drums playing in your head now can't you?)

I ran some numbers last week for our monthly newsletter to clients, called the Review & Focus, (shameless plug) because I wanted to see if our age-old portfolio theory thought about how diversifying your investment portfolio reduces the overall risk of your portfolio, was holding true, given the currency sell of since July... Lo and Behold, it's tru, it's tru, I did see a putty tat! Yes, with the S&P 500 off more than 39% in the past year, a $100,000 investment in the S&P would not have done you very good... But by allocated 20% to Gold, and 20% to 3 currencies, euros, Swiss, and yen, and you can even substitute Aussie to prove the point even more... You are left with far more money in your portfolio, than if you did not diversify.

So... Yes, the currencies have fallen on difficult times since July, but they are still doing their work as a risk reducing machine for investment portfolios... Interesting... Those are the facts, Jack!

Today... The Data Cupboard will yield, the Weekly Initial Jobless Claims, which last week jumped above 500K... I would look for this to remain above 500K... And that my friends, is not a good thing. We'll also see the Philly Fed Index (manufacturing), and one of my fave data pieces, Leading Indicators... If everyone would have paid attention to the Leading Indicators in the last year, they were telling us that something was wrong... And I believe they'll still indicate something still is going wrong, as they are forecast to post a negative -.6% print for October...

The Data Cupboard will be emptied after today, with nothing to report tomorrow.

In the Eurozone... ECB member Nowotny made a clever comment that has helped the euro a bit this morning... Nowotny was talking about interest rates cuts and said, "it makes perfect sense not to use all your firepower at once." Like I always say about not using all the arrows in your quiver! Yes, this is what I was referring to yesterday when I was talking to a long time customer... I said that the ECB would be more pragmatic when it came to their rate cuts... Yes, they participated in the coordinated round of rate cuts, and they cut rates 50 BPS at the last meeting... But... I believe they will pause for the cause, and take a look at what their two previous rate cuts did to the economic landscape before going off and cutting rates like there's no tomorrow.

Speaking of rate cuts... The Swiss National Bank (SNB) decided to take the plunge this morning and take out their yield that's offered... The SNB cut rates 100 BPS! That's crazy man! Crazy!

Speaking of crazy... The automakers were on Capitol Hill yesterday pleading for some bailout money... I understand that the proceedings were a bit heated at times, as well they should be! I think there will be a vote today on whether the Big 3 get some additional bailout money... You might recall that they already received $25 Billion to put toward alternative fuel vehicles... Yeah, I bet it went there, right? Oh, that's right, I see a whole line of alternative fuel cars rolling off the lines right now! NOT! If I were in charge of the purse strings here, I don't think I would give them a dime, until they demonstrated that they will change...

And... Finally, before I head to the Big Finish... Did you happen to see or hear or read any of the conversation between Sen. Ron Paul, and Big Ben Bernanke? Oh, this is classic stuff! Here's a link to a site that has the video of the back and forth between these two... Simply classic! http://news.goldseek.com/RonPaul/1227028538.php

Currencies today 11/20/08: A$ .6305, kiwi .54, C$ .7955, euro 1.2545, sterling 1.4865, Swiss .8210, ISK 182.10, rand 10.5675, krone 7.0740, SEK 8.15, forint 215.15, zloty 3.0740, koruna 20.43, yen 95.70, baht 35.15, sing 1.5290, HKD 7.75, INR 50.15, China 6.8342, pesos 13.40, BRL 2.3890, dollar index 87.62, Oil $52.15, Silver $9.39, and Gold... $745.50

That's it for today... And that's it for me till next Tuesday. Chris will have the conn on the Pfennig till then. Hey! I paid (technically below $2) $2 for premium gas last night! WOW! It's a good thing the oil price plunged when it did, given the state of the economy right now, eh? Still no improvement in the eye... My little buddy, Alex, and I were on our own last night, so we opted to go out for dinner after his guitar lesson! Tomorrow night is the office holiday party... I don't know who set this date, but to me, it's like putting up your Christmas decorations and lights before Thanksgiving! Just a little early, eh? Oh well, I'm not complaining, just observing... I'll be gone for it anyway... OK, Mike's here, better hit the send button! I hope your Thursday is Tub Thumpin'!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837

Rescue plan not an instant fix...

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

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In This Issue..

* Rescue plan to take time...

* Pound sterling rallies (for now)...

* Brazil supports the real...

* Iceland cuts rates...

And Now... Today's Pfennig!

Rescue plan not an instant fix...

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

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

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

Chuck had this to say about yesterday's trading:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Chris Gaffney, CFA

Vice President

EverBank World Markets

1-800-926-4922

1-314-647-3837

Who Owes Who?

Chuck Butler — Fri, 10 Oct 2008 14:09:05 GMT

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In This Issue….

* Trading theme pushes yen higher...
* Settlement day for Lehman CDO's...
* Oil price fall hurts loonies...
* Gold climbs back above $900...

And Now... Today's Pfennig!

Who Owes Who?

Good day... And a Happy Friday to one and all! It certainly doesn't look as though it will be a Fantastico Friday in stocks, as yesterday was a bloodletting, and overnight the Japanese stock market sold off 11%, and Europe is down about 9% at this point. UGH! This is getting quite ugly...

But remember what I've been saying this week about the currency trading theme... When things look bleak, the dollar goes up... And when it looks as though all the stimulus might work, the dollar sells off... This has been quite evident in Japanese yen overnight, as stocks sold off 11%, the currency rallied to a 98 handle from 101 yesterday... And... Then in dollar trading, other than yen, the dollar is stronger this morning, pushing the euro back to the 1.35 handle. The high yielders, which enjoyed a day in the sun yesterday before U.S. stocks took a turn on the slippery slope, got whacked hard overnight! UGH!

When I told you the other day that this is darndest thing in the financial markets that I've ever seen, and that I had begun my career in the brokerage industry in 1973, I wasn't kidding... I was dead serious... And I started tracking currencies in 1985 when we began the WorldCurrency desk at the old Mark Twain Bank. The reason I take you on this journey back in time is to illustrate the fact that the Aussie and kiwi dollars have fallen so much this week, that you have to go back 25 years to find another week like this one for these two currencies. 25 years! 1/4 of a century! 1 score and 5 years! Simply unbelievable that strong countries like Australia and New Zealand, full of natural resources and located near China, would go through these daily beatings...

When I arrived this morning, the TV was on, and Bill O'Reilly was talking about that crazy Jim Cramer, and how he told everyone earlier this week to get out of stocks.... O'Reilly said something to the affect of: you shouldn't pay attention to Market Analysts' advice on TV... And then he said, "and those stupid newsletters"... I thought for a minute... And then said, "it's OK Chuck, he said "giving advice"... You don't give advice, just opinions!" Whew! I thought for a minute he was calling the Pfennig "stupid"!

OK, back to the task at hand... And that is reporting on this financial market meltdown... I don't mean to sound flippant there, this is serious stuff folks! Looks to me as though the Fed is going to have to round up the posse once again and get another coordinated rate cut, because the one they made earlier this week, hasn't produced the W-2 they need to unlock the seized up credit markets.

The Wall Street Journal reported that the U.S. Government is considering following the UK’s lead by guaranteeing billions in bank debt and temporarily insuring all US bank deposits. This did little to appease the markets. What is going to appease the markets? The Fed and Gov. has turned over a lot of rocks, but the credit markets are still locked / seized up...

There are rumors going around this morning that today will be the "settlement" of the Lehman Brothers default... And while normally this wouldn't cause problems, it has this time, because of those darn Credit Default Swaps (CDS)! Here's something to think about folks... a CDS allows the holder of some debt (e.g. a portfolio of subprime mortgages) to get insurance on the risk of default of that debt from a third party such as a bank, insurance company or other entity. In this case, buyers of Lehman Brothers bonds and other debt securities are looking for the payoff of credit default swaps they purchased.

In this case... Banks are hoarding cash in expectation of pay-outs on up to $400 Billion of defaulted credit derivatives linked to Lehman Brothers and other institutions, according to analysts and dealers. This is when, we'll find out "who owes who" and if they have the cash to pay their obligations should they fall into the category of a "who that owes who"!

The Fannie and Freddie settlement went off at 98-99 cents, thus not a "default" and didn't cause as much of a ripple in the markets as first feared... But this Lehman thing is a horse of the different color, folks... We'll have to see how the markets deal with this today... Could add more fuel to the trading theme of: if it's bad for the U.S. buy the dollar, and if things get better in the U.S., sell the dollar... Strange, I know, but I've seen this before back in the 90's...

Have you been tracking the fall in the price of Oil? This is just as amazing as the run-up in the Oil. Could we actually see the return of less than $3 gas? Now that would be amazing as far as I'm concerned. It has fallen almost $5 overnight! This has led to the sell off in Canadian dollars / loonies. The loonie has fallen to an 18-month low of 86-cents! UGH!

The fall in the price of Oil also is probably going to help the Trade Deficit, which prints this morning. The August Trade Deficit is expected to narrow from $62.2 Billion in July, to $59 Billion. This would be a huge indicator that not only 1. the price of oil has fallen dramatically, but 2. the U.S. consumer is finally spent! And that my friends is another nail in the coffin of a long painful recession...

Yesterday, I read this in the Wall Street Journal... "The U.S. economy has sunk into a recession and government action is critical to stem the damage, according to economists in the latest Wall Street Journal forecasting survey. On average, the 52 economists surveyed now expect gross domestic product to contract in the third and fourth quarters of this year, as well as the first quarter of 2009. If those predictions bear out, it would mark the first time U.S. GDP -- the total value of goods and services produced -- has contracted for three consecutive quarters in more than a half century."

I don't mean to say I told them so... But if those knuckleheads had listened for the past year, they would not be surprised now to say the U.S. is in a recession! It's been staring us in the face since January... But those that the U.S. consumer depend on to lead them told them there was no recession, and that everything was just peachy!

Gold is back above $900 again this morning... I find Gold's performance in the face of a falling Oil price and a stronger dollar to be very impressive indeed! But, in reality, I'm still scratching my head over why Gold isn't soaring, given the lack of supply of the physical metal... Someday, this will all be very clear to everyone what went on... But for now, we scratch our heads and wonder...

And in my, what now is required due to the severity of the situation, daily update of what's going on in Iceland... Yesterday, I was thinking about the white knight for Iceland, and I began to wonder where the heck the IMF is during all this? What are they doing? The should be there to iron out the problems and provide a streamlined clearing mechanism. But they are no where to be found! Well, the Netherlands has provided 20 Billion euros to Iceland financial institutions... That news came through last night. There still doesn't seem to be a "quote" available in krona, and that's very concerning to me. Maybe the Netherlands' 20 Billion euros will get the bank operations going again...

The U.K. is all mixed up in this Iceland mess, and has frozen Icelandic assets in the U.K. in hopes of getting some their U.K. depositors' funds out of Icelandic banks... This problem with Iceland has really caused some problems for pound sterling, as if pound sterling didn't already have enough problems of its own, now it has Iceland weighing on it too!

OK... Here I am again, getting close to going to the Big Finish, and I've been nothing but gloom and doom all morning, and that's not how I like to go into a Friday! So... Let's see... Oh! Japanese yen is trading with a 98 handle! This has been long overdue, and held back by the Carry Trades... But now the Carry Trade is dead (for yen), but who knows... Maybe if the U.S. Fed keeps cutting interest rates to deal with the recession, the dollar might end up taking the yen's place as the funding currency of the Carry Trade!

Currencies today 10/10/08: A$ .66, kiwi .5950, C$ .8635, euro 1.3555, sterling 1.6965, Swiss .8970, ISK (no quote), rand 9.3350, krone 6.2090, SEK 7.12, forint 195.50, zloty 2.6350, koruna 18.4910, yen 98.90, baht 34.40, sing 1.48, HKD 7.7580, INR 48.29, China 6.8359, pesos 13.60, BRL 2.2825, dollar index 81.65, Oil $81.50, Silver $11.75, and Gold... $916

That's it for today... Well... This is it for me for almost 2 weeks! I head out on the Currency Tour on Monday morning, and then finish up in Jacksonville a week later. I'm then staying in Jacksonville for a couple of days to meet with the "BIG GUYS" at EverBank. I haven't been to the headquarters since before I was sick in June 2007, so it's long overdue. Chris will have the conn on the Pfennig, right after he finishes the Chicago marathon this weekend! I head out to Columbia MO tomorrow, after my little buddy Alex plays football in the morning, to see my beloved Missouri Tigers play Oklahoma State... This will be a tough game for the Tigers... I'm worried... And... It's another night game so you can tune in and watch them play! That's all... I hope you have a Fantastico Friday, and a Wonderful Weekend, I'll talk to you in two weeks!

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

A New Trading Theme...

Chuck Butler — Thu, 09 Oct 2008 14:27:17 GMT

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

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

Coming to a location near you:

. 10/13 - Chicago

. 10/14 - St. Louis

. 10/16 - Philadelphia

. 10/18 - Ft. Lauderdale

. 10/20 - Jacksonville

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

EverBank is a Member FDIC and Equal Housing Lender.

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

In This Issue..

* Coordinated rate cuts...

* Did the Fed reignite soaring inflation?

* More pain in Iceland...

* Revisiting the 90's in Japan...

And Now... Today's Pfennig!

A New Trading Theme...

Good day... And a Tub Thumpin' Thursday to you! Well... How about those wily veteran Central Bankers? They all got together and decided to cut rates... The Reserve Bank of Australia (RBA) went first with their 100 BPS cut, and opened the rate cut sea for the rest of the Central Banks around the world. The European Central Bank, The Riksbank (Sweden), Swiss National Bank, Bank of Canada, Bank of England, and the Bank of China all lined up at the rate cut table... The Bank of Japan, The Norges Bank (Norway), and Reserve Bank of New Zealand did not participate.

The Bank of Japan doesn't have any rate to cut, The Norges Bank will wait until their regularly scheduled meeting on 10/15, and the RBNZ believes that they have taken their toxic waste bond flu shot...

RBNZ Gov. Bollard said last night... "New Zealand banks have high-quality assets. Fortunately they do not have the poor quality assets that have proved so damaging overseas." Boy... Given what happened after the European Union's Finance Minister put his foot in his mouth, pointing a blaming finger at the U.S. and putting the EU's fortunes above the U.S. only to see the walls crumble down all around him, RBNZ Gov. Bollard, might want to talk low, talk slow, and don't talk much at all!

That's a famous John Wayne line... Just had to use that when I saw it on the Bloomie this morning!

So... The currency traders around the world, stopped when the rate announcements were made, to check the pulse of the markets... At first, we saw calm... But then, traders and investors began to say, "Uh-oh!, maybe things are worse than we imagined if Central Banks around the world are cutting rates"... So, getting back to the theme I talked about yesterday, where if it looks bad for the U.S., buy the dollar, and if it looks good, sell the dollar, we saw the currencies go back and forth... But overnight, calm seems to have settled in, and keeping with the "theme", that means a weaker dollar.

The stock markets of Asia and Europe have generally been stronger, which could lead to a tourniquet being applied to the U.S. stocks... And again... Keeping with the "theme" that would spell a further weakening of the dollar.

This isn't rocket science, it's just what I see happening in the currencies right now... It's like looking into the mirror, as everything is opposite, but that's what's happening right here, right now!

G-7 ministers meet this week, starting tomorrow, I believe... U.S. Treasury Sec. King Henry Paulson, held a press conference yesterday afternoon, and in my opinion, effectively kicked off the G-7 meeting. King Henry was particularly focusing on the coordinated policy moves... I would think we could expect more of this kind of Global policy maneuvers going forward.

I'll tell you this... It's my opinion that... The coordinated rate cuts didn't do what the Central Bankers had hoped it would do. And that is, unlock the seized up credit markets... But, you can't blame them, the Central Bankers are doing what every they have at their disposal to deal with this global mess.

Speaking of messes... It was reported this morning that Kaupthing Bank, the largest Bank in Iceland, has fallen, as control was seized by the Gov't. The currency CAN'T EVEN TRADE AT SPOT! That means immediate cash isn't available, folks! This is very serious stuff! Somebody expressed dissatisfaction with the price we received in the market the other day at 171... Yesterday, the last spot trades were done at 259! UGH! A foreign exchange dealer at Nordea in Copenhagen said, "Effectively the krona can't be traded at the moment because there are no banks to clear the trade."

Hopefully, that situation will be fixed quickly, and currency transactions can be cleared again, at least for spot... Oh... And that peg to the euro that the Gov. announced on Tuesday? It was dropped yesterday, because the peg to the euro at 131 could not be defended... Trades were going off at 340 krona per euro... It's a bad situation, hopefully, a white knight will step in to help here... Unfortunately, banks around the world (except the few mentioned above) have their own problems to deal with right now. Russia made a big loan the other day, and with Russia swimming in cash from oil, maybe they could be the white knight...

Aussie and New Zealand dollars saw some love last night for the first time in what seems to be a month of Sundays. I wouldn't put too much into a one night stand for these two... Yes, it's true that they have been beaten up too much and look oversold to me, but that doesn't mean the markets see it that way... We'll have to see if more than a one night stand is in the cards for these two.

One thing keeping a lid on any big time rally for these two, especially New Zealand, is the fact that Japanese appetite for anything offshore has gone away... Recall... That I told you several times over the years that the Japanese loved to sell their currency and buy kiwi (and Aussie), shoot Rudy, they would even issue Japanese bonds issued in kiwi!

With the Japanese appetite for anything offshore going away (for now at least) the financing of the U.S. Current Account Deficit comes back into the worry picture. Recall, that the Current Account Deficit needs about $2 Billion per day in foreign investments to keep it properly financed. And if the Japanese are slowing their offshore investments, that means the U.S. too, not just New Zealand and Australia!

Another country with a currency crisis going on is Mexico... For the last month, the currency has teetered, and yesterday it fell off the cliff, on rumors that Citibank and Chase were pulling up stakes in Mexico. There was nothing to confirm those rumors, but the damage had been done. The pesos slipped to a 14 handle... Recall that 2 months ago, it was all seashells and balloons for pesos as they almost moved to a multi-year high. But that's in the rear view mirror now... UGH!

The Mexican President, Calderon, has proposed a stimulus package worth 1% of GDP to help the economy... But the real problem here is that the cow has already left the barn... And that is the economy which showed signs of slowing, but got caught in the mud after all the hurricanes this year, need a rate cut... And how many times have I told you that Mexico needs high interest rates to attract foreign investment... Foreign investors use the high interest rates as sort of an insurance policy, risk policy, whatever, to pad their investments in case of problems that have existed in Mexico in the past. Well... When the economy slowed, and it looked like the Central Bank may need to cut rates, the investors began to leave. And then with the rumors yesterday, the you know what hit the fan in Mexico. At this point, it's nothing more than a currency problem... This is not Iceland! Oh, and the peso has "recovered" back to a 12 handle...

One country that I was surprised to see on the list of rate cutters yesterday was Canada... I've written about the surprising strength of the Canadian economy the past couple of months, and even yesterday they saw Housing Starts at a pace that was stronger than forecast... But the Bank of Canada (BOC) joined the rate cut party anyway... Why you go out and debase your currency just to keep your neighbor to the south happy is beyond me! The loonie has taken the rate cut hard... The currency slipped 2 cents yesterday, from 90-cents to 88-cents... (rounded) It was just a few weeks ago that the loonie was trending toward parity again...

OK, this morning, I turned on the screens and saw the euro trading 1.3750, and said, "OK... That's better"... But now, I look up, after all this furious typing, and see that the single unit has slipped back below 1.37, to 1.3675... I don't know why it has to play these games with me! Trust me, I don't need any more stress! But... It is what it is... There's nothing I can do about, so no reason to bang my head against the wall, and throw things... Well, maybe the throwing, it always makes me feel better! HA!

Well... Gold didn't gain yesterday for the first day in 4... Gold continues to outperform Oil though, and that in itself is a major victory for Gold! With the coordinated rate cuts yesterday, I thought to myself, Chuck, this is going to reignite the inflation story, and that should be good for Gold.

Oh, and one other thing, and this is BIG! Who was right and who was wrong on the Fed's next rate move? Chuck, or the big banks? I told you months and months ago that the Fed's next move would be down before moving rates up again... Now, I didn't foresee the coordinated rate cuts coming then, but I did see the Fed cutting rates to reignite the economy, that they kept saying was strong... And I kept saying they were wrong! Any way... Rate cuts should get inflation roaring again, and again... That should... Be... Good... For... Gold!

Yesterday afternoon I got a minute to read a newsletter that brought something back to my mind that I had talked about in July and early August, and that is the Huge Dollar Short Covering we saw in July while I was in Vancouver... At that time, it appeared very suspicious, and I said it was Gov't intervention... Well, it may have been some of that, but it now appears to be a widely known fact that the Gov't gave the "heads up" to several large banks, and allowed them to cover their dollar shorts and sell Gold... Hmmm... Don't you think it would have been nice for them to give all us investors the "heads up" too? This just ticks me off to no end folks... You can't believe how angry I get when I begin to think about this stuff!

Any way... Back at the ranch... Now their rate cuts will reignite inflation, and Gold should look to rebound, maybe back to previous highs? Who knows... But... The Gov.'s and Fed's moves in the end, will have caused a lot of pain, and achieved nothing but to keep the dollar from circling the bowl...

And in an attempt to bring this home with a happy story... The Japanese yen continues to bask in the "no carry trade" sun... We saw yen trade with a 98 handle yesterday... I hadn't seen that since around 1995 or so... I would have to go back and check, but in the mid 90's we saw yen trade to the mid 80's... And they were in such a mess economically... I've said it before many times, but this mess we're in here in the U.S. has very familiar ring tones to what happened in Japan in the 90's... And, come to think of it, had the same currency trading theme that I believe is going on in the dollar right now. The worse off Japan's economy got, the better the currency did... Just like the U.S. right here, right now! WOW!

Currencies today 10/9/08: A$ .7030, kiwi .6205, C$ .8895, euro 1.37, sterling 1.7330, Swiss .8850, ISK no quote, rand 9.0575, krone 6.1010, SEK 7.0475, forint 183.50, zloty 2.5130, koruna 2.5125, yen 100.70, baht 34.34, sing 1.4680, HKD 7.7650, INR 48, China 6.82, pesos 12.11, BRL 2.3325, dollar index 80.79, Oil $88.80, Silver $11.62, and Gold... $888 (this has just slipped here, as it was $912 as I was writing about Gold above)

That's it for today... The League Championship games for baseball begin tonight... You've just got to love those Tampa Bay Rays don't you? They had never won more than 70 games in a year prior to this year, and now they're in the American League Championship! I love underdog stories like that! Sort of like my beloved Cardinals in 2006! Man! That seems like so long ago now! The Dodgers are in the National League Championship, and every time I see or hear about the Dodgers, I think about Rick Monday, and how he made the greatest play ever in baseball... You should Google it if you don't know what I'm talking about... Forever ingrained in my mind, and brings chills to my spine every time I watch it... OK... Things haven't calmed down here on the trading desk, and I'm leaving for almost two weeks! I sure hope things do calm down while I'm gone... Until then, I going to try to have a Tub Thumpin' Thursday and hope you do too!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837

Retail Sales Disappoint...

Chuck Butler — Tue, 13 May 2008 17:29:00 GMT

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

The currencies. The free expert insights. The latest global economic information—all in one place. And only in the new Foreign Currency Resource section on EverBank.com. Visit today for a detailed and timely look at over 20 major and emerging currencies. There's a page devoted to every currency we offer. And inside each page, read what Chuck Butler has to say about the currency. Everything you'll find, including Chuck's insights, is updated regularly so you can diversify with confidence.
Come see the products mentioned in "The Wall Street Journal" and "New York Times". Go to EverBank.com, click Research & Planning, then Foreign Currency Resources.

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

In This Issue....

* Euro rally ends quickly...
* Bernanke speaks...
* Fighting inflation...
* Problems in Iceland...

And Now... Today's Pfennig!

Retail Sales Disappoint...

Good day... And a Terrific Tuesday to you! Quite the uneventful flight to Las Vegas yesterday, which is good... As we were getting ready to land, the scary landing we had a couple of years ago, went through my head and shivers went down my spine... That was the flight that the wind blew sideways just as we were landing and the wing came within a few feet of touching ground... So... No worries with yesterday.. Good!

That was quite a rally in the currencies led by the euro yesterday, which was very nice given the news I had to bring to you yesterday. Unfortunately, the gains couldn't hold in the overnight markets, and the euro is back below 1.55 after spending much of the day well above that figure.

Front and Center this morning we've saw Retail Sales for April print at a negative .2%, which falls in line with the indication the Butler Household Index gave us... But let me tell you this now, so you can listen to me later... The media is going to tell you that if it wasn't for Auto Sales, Retail Sales would have been positive... So, just like everything else, if the sector doesn't make us feel good, we just remove it! There! Now doesn't that feel better?

Fed Chairman Big Ben Bernanke is speaking this morning (this is one good thing about writing while in the West!) and he was very cautious talking about the rebound in the securitization markets as "moribund", and the overall recovery process as incomplete.

I don't see the Fed lowering rates in June like I previously thought they would... I think they will sit back a couple of months and look at what they did with their previous 7 rate cuts... I fully expect them to come back later this year and cut rates again, because I just don't think we as a country have put the "risk events" in our rear view mirror.

To follow that up... Bank of America announced this morning that they had widened their forecast of home-equity loan losses beyond projections offered last month... Doesn't this spell "more consumers are falling behind on debts"?

As you all know, I have not been a fan of the Fed rate cuts... They have been inflationary and that just drives me crazy, and causes me to yell at the walls! The Fed has turned its back on inflation, in an effort to promote growth... Providing price stability should be their main concern... But NOOOOOOOOO!

Inflation pressures in Europe are being felt in the Eurozone, Sweden, Norway, U.K. and Denmark... Besides the U.K. these countries have Central Banks that ARE fighting inflation first... And providing price stability... This is one of the reasons I truly believe these to be currencies to look to... Strong inflation fighting Central Banks and a positive balance of payments... Great reasons to look at these currencies!

Another Central Bank that has done a good job of fighting inflation pressures is the Brazilian Central Bank. And with food prices rising like they are, you can bet Brazil is facing some strong inflation pressures! The Brazilian Central Bank raised rates two weeks ago, and I fully expect them to raise them again at their next meeting. This should be quite a feather in the cap of the Brazilian real...

The stupid Carry Trade was put back on the books again yesterday, as those fearing "risk" on Friday, put those fears aside, and pushed up stocks again... Japanese yen held ground but the move obviously stopped the rise in yen in its tracks.

The Aussie dollar was the beneficiary of this move from risk, as the high yielders were bought again... Aussie is now the poster child for this trade on the buy side, as investors are obviously steering clear of Iceland and South Africa... Instead purchasing Aussie and Brazil in their place.

I received an email the other day chastising me for not telling Iceland holders about the problems that have come into this market... I have to say that this hit me from left field... I have talked and talked about Iceland's problems, here and in the monthly newsletter for customers, Review & Focus. But... Just because I write about it, I can't make someone read it!

Speaking of Iceland... This market has turned so sour that it just doesn't make any sense to be there any longer... Please when your CD comes due, do not roll it, unless you are willing to take on all that risk, with no interest premium to help offset the risk! Interest rates that are payable to holders of the currency have gone negative! The dealers have their hands tied, as there is no liquidity in the currency...

I'm running a bit late this morning... So, I'll head to the Big Finish...

Currencies today 5/13/08: A$ .9390, kiwi .7655, C$.9950, euro 1.5455, sterling 1.9435, Swiss .95, ISK 79, rand 7.5850, krone 5.0720, SEK 6, forint 161.28, zloty 2.1875, koruna 16.13, yen 104.40, baht 32.38, sing 1.3720, HKD 7.7975, INR 42.20, China 6.9880, pesos 10.47, BRL 1.6620, dollar index 73.30, Oil $124.20, Silver $16.67, and Gold... $864.10

That's it for today... I know most of you are wondering why this is so late this morning, but remember, I'm two hours behind my normal time zone... It will be this way all week... I have a talk this morning and I haven't looked at it yet! YIKES! Talk about unprepared! But then, I do this all the time, that I could do it in my sleep! Those are some very sad pictures coming from China where the earthquake there has accounted for deaths of over 12,000... I got to meet some customers last night at dinner... Very nice people... Well... I hear my presentation calling me... I hope you have a Terrific Tuesday!

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

Big Al Is Upset!

Chuck Butler — Tue, 08 Apr 2008 14:42:00 GMT

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In This Issue....

* Currencies rally a bit overnight...
* U.K. data sends sterling lower...
* Pooled precious metals...
* Oil hits $109!

And Now... Today's Pfennig!

Big Al Is Upset!

Good day... And a Terrific Tuesday to you! Well... As a Missouri Tiger fan, it pains me to say Congratulations to the Kansas basketball team on their National Championship... I didn't see the game, as it came on too late for your Pfennig writer to enjoy... I see that it went into overtime, so it must have been a great game! I held Memphis... Oh well...

The currencies were boring yesterday, with little movement at all... I was swamped though... Normal Monday trading, an interview with Smart Money, and further discussions with the NY Times... But, if you were at home keeping score, you probably found that counting flowers on the wall, and playing solitude with a deck of 51 were probably more exciting than watching the currencies.

And... That's fine with me! We had just gotten too crazy with those records falling like the rain that kept coming down on us here in St. Louis. Overnight, though... We've seen the euro gain about 1/2-cent as the dollar's mini-rally continues to fade in the rear view mirror.

As I mentioned last week, the markets are all about the thought that the Fed has taken "risk" out of the equation with their bailout of Bear Stearns... I still believe that taking that path is going to get someone hurt... But for now, the euphoria in stocks has the risk takers going into these murky waters feet first, which means... Carry Trades live again... And that also means that the high yielders have gotten a reprieve...

Iceland and South Africa have really seen a dead-cat bounce (no animals were hurt!), and the crisis for Iceland has been pushed to the back of the room... Hmmmm... Does this mean these two are ready for a full circle rebound? I don't know... I'll check my crystal ball... But I don't have a crystal ball! But... I do have an opinion on this (you knew I would!) and of course to make the legal beagles happy, my opinion could be wrong!

Anyway... I don't think this is a new life for Iceland or South Africa... You can cover up those awful looking warts, but sooner or later they will be exposed... So... As I've said before... As your Iceland CD's come due, you should call the desk at 1-800-926-4922 and speak to someone about alternatives to Iceland... Let me also remind you that breaking CD's is a no-no... It's costly...

OK... The other high yielders that have a "life" other than high yield, Aussie and kiwi, have also seen their fortunes turn with "risk" being put back onto the table.

And... Pound sterling is not faring too well this morning... After reaching the "2" level again last week, sterling has steadily fallen... Remember what I always say about a star burning brightest right before it burns out.

U.K. house prices fell more than expected, and the markets woke up to the fact I told you about yesterday... The Bank of England (BOE) will most likely cut rates this week... And with the data continuing to print weak... We could see back-to-back rate cuts from the BOE... That won't help sterling any... Short term anyway...

I have two BIG things to talk about now... 1. Big Al Greenspan... 2. pooled precious metals accounts...

First, Big Al Greenspan... You won't believe this, or maybe you will, but nevertheless, Big Al Greenspan wants to "set the record straight"... This I've got to see, I said to myself... So... Here are some snippets... This man is 82... Why should this matter to him now? Anyway, here's Big Al...

"I do take it seriously if my peers think I have misstated the facts," he says. "But where's the evidence? Too many people make accusations by assertion. I think it's improper."

"I am reasonably certain that I am right here," Mr. Greenspan says. If proved wrong, he says, "I will change. I do not have a vested interest in holding wrong ideas."

Hmmm... I find it interesting that Big Al is getting testy about all the fingers being pointed at him for this mess... I believe I may have been one of the first to point a finger at him when the housing bubble was getting bigger and bigger, and no one would admit we had a bubble.

But just for the record... Here's the blame I believe he should bear... First, I believe the Fed was too lax during the Stock Market bubble... Raising Fed requirements on margin, in my opinion would have gone a long way toward slowing that bubble, and maybe preventing trillions of dollars in losses...

Second, I believe he fueled the housing bubble and then all the awful stuff that happened as a result of the housing bubble, by cutting rates too low back in 2001 and then keeping them too low for too long (through 2003)...

OK... I could spend a month of Sundays talking about Big Al and his faux pas after faux pas... But I won't... Instead, I'm going to talk about our pooled precious metals accounts...

This is important, so please take the time to read this carefully...

There has been a lot of stuff said on the internet lately about "pooled" precious metals accounts and that the holders of the accounts don't have the precious metals to back their holdings... This has caused quite a stir in the marketplace... We've had many a customer call and question us.... We've even had some clients pull their accounts...

So... Here's my take on all this...

First of all the person that started this rumor doesn't have his facts in order.

At EverBank, we hold our "pooled" accounts at the Perth Mint in Australia... I reviewed the legal stuff and here's what I found... The Perth Mint runs by a strict set of guidelines and policies: they do NOT sell metals short. They do NOT use derivatives. They do NOT lend clients' metals to other entities that may have short positions.

For every ounce of metal they sell to clients, they MUST purchase a corresponding ounce in the marketplace.

Hope that helps everyone understand the "pooled" accounts better...

So... Today, we'll see the color of the latest Fed meeting (FOMC) minutes... And pending Home Sales... It will be interesting to see if the Fed gives a "true" recognition of inflation pressures, or if they will give it the old college try of "we see growth and inflation risks to be balanced"...

Pending Home Sales are expected to fall 1%, continuing the downtrend in place since 2005...

The price of oil hit $109 this morning... So much for all those that were calling for a falling price of oil a month ago! Inflation is all around us, but yet... Our Central Bank does nothing... Absolutely nothing, say it again!

Currencies today 4/8/08: A$ .9270, kiwi .7945, C$ .9880, euro 1.5750, sterling 1.9680, Swiss .9895, ISK 72.75, rand 5.0650, SEK 5.9525, forint 161.45, zloty 2.20, koruna 15.90, yen 102.20, baht 31.70, sing 1.38, HKD 7.79, INR 40, China 7, pesos 10.55, BRL 1.7025, dollar index 72.04, Oil $109, Silver $17.98, and Gold... $919.93

That's it for today... I'm seeing some euro selling as I get ready to hit the send button... Probably the sterling weakness pulling the euro down right now... Chris Gaffney, Mr. Marathon, will have the conn on the Pfennig the remainder of the week, as I head to St. Pete tomorrow... I'll be back on Monday. I speak twice on in St. Pete, and I haven't even begun to work on my second presentation. UGH! Hey! I've still got today, right? HA! Oh well... Gotta get this train out of the station! I hope you have a Terrific Tuesday!

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

Signaling The All Clear Horn?

Chuck Butler — Thu, 03 Apr 2008 14:13:00 GMT

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In This Issue....

* Some explanation, please!
* Retail Sales drop in the Eurozone...
* Another Iceland note...
* Carry Trades live another day...

And Now... Today's Pfennig!

Signaling The All Clear Horn?

Good day... And a Tub Thumpin' Thursday to you! Well... You heard it! Big Ben says that everything is going to be all right! Man, do I feel better about that! Just when I was getting all nervous and out of whack because of the debt situation, the jobs situation, the war situation, the credit situation, the housing situation, and the awful state of financial institutions... Whew! Everybody back in the pool! Big Ben says the water is fine!

Whoa! (in my best John Wayne) Now, just wait a minute there partner... Haven't we heard these words of euphoria before from Big Ben? Hmmm... Seems to me that last July, he told us that the mortgage meltdown wouldn't filter out into the rest of the economy... And then he followed that gem up with the August all clear sign that the housing meltdown had bottomed... Now... He expects us to believe him that the economy will be strong again in the second half of this year?

Hmmmm... OK... Before I go on, I had better tell you what happened so you can catch up... I just realized I immediately went into level 4 on Big Ben...

OK, so, yesterday, Big Ben was talking to Congress about the economy... He admitted that the economy would contract (notice the mass media didn't pick up that ditty) He also said that the there are "downside risks"... But then he put lipstick on the pig by quickly switching to statements about how the economy would be strong in the second half of this year... Well... You know my old saying folks... You can dress up the pig... You can put lipstick on the pig... But in the end... You still have a PIG!

I want to know and I can't understand why the lawmakers don't ask him this stuff... But I want to know where this growth that he's spouting off about is going to come from? Or, how about this one, triple B... Why don't you SHARE with us what you feel the downsides risks are? Nah... You wouldn't want to do that, because it would expose the awful job you and your Fed Heads have done! I feel like Ricky Ricardo... Hey Lucy, you got some 'xplainin' to do!

I could go on... But I've had it with this guy! He has begun to give me the same kind of rashes Big Al Greenspan gave me!

So... The currencies gyrated all over the place yesterday... First rallying on the Triple B words of a contracting economy, but then seeing the dollar rally on the "recovery" words. At the end of the day, the euro was back to rally mode, moving close to the 1.57 handle once again. Then came a report on Reuters that the Eurozone was going to voice concern at the euro's gains at the next G-7... That sent the euro back down...

This morning... The euro saw further selling when Eurozone Retail Sales unexpectedly declined in February, thus signaling to the markets that the U.S. recession is spreading to Europe... That news was followed by a German bank announcing a $6.7 Billion write down... So... The euro has taken on some water from the weakening of the economy... But, Hey! We all knew the U.S. recession would spread to other parts of the world... What I kept thinking though was that it would not be as devastating to other parts of the world, especially the Eurozone, as it had in the past...

I know, I know, I dislike the saying, "but this time will be different"... That saying costs people trillions of dollars a few years ago... But my point here is that on of the reasons the Eurozone was created was to buffer the countries from suffering U.S. slowdowns... 80% of all Eurozone trade is among themselves... And lets face it, the exports of BMW's, Mercedes, and other high end cars shouldn't see that much of a shift... Rich people don't suffer recessions!

So... We have the euro trading in the mid 1.55 handle... IT'S NOT A TREND REVERSAL! I said this the other day, but it's worth repeating... We've seen these "flash in the pan" dollar rallies several times over the past 6 years of the weak dollar trend... Nothing, fundamentally, has changed... So, why would the dollar reverse the trend?

OK... Another note on Iceland this morning... Yesterday, there was an OP-ED in the Wall Street Journal titled: Iceland Isn't Melting... Here's a snippet...

"But fears of a meltdown in my sub arctic homeland are vastly overblown. True, the current account deficit was 16% of GDP last year, but that's an improvement from more than 25% in 2006. And while net private-sector debt is about 120% of GDP, there is virtually no public debt in Iceland. This is largely the result of unparalleled political stability and continuity."

That's all nice... But it was written by an insider... A board member of the Central Bank of Iceland... I detect a note of "homerism"... But... Soothing words nonetheless, eh?

George Soros, a guy that I personally wouldn't have over for dinner, called the current financial crisis: "the worst since the Great Depression"... He also noted that the "markets will fall more this year after a brief rebound."

Well... I may not like the guy, but I agree with him on the second statement... Seems the markets are getting all pumped up on the kool-aid Big Ben is serving up... But these are just words folks... We'll see who's right and who's wrong on this... His track record isn't so good!

The Carry Trade is back on the books after spending the month of March getting unwound... This is good news for Aussie, and kiwi... And should be good news for South Africa and Iceland... But, I think the "once bitten twice shy" campers have had enough of the volatility of these two currencies and are sticking to Aussie and kiwi... So... Aussie and kiwi rallied yesterday, bucking the sell off of euro, yen, francs, and sterling...

Remember what they taught you in 6th grade science... A star burns brightest right before it burns out... And I think this can be applied to the Carry Trade... But, we'll have to wait-n-see, eh?

One of my fave currencies... The Norwegian krone, has held strong during this euro weakness... And this morning, Norway reported that Retail Sales jumped 5.6% in February... Seems that the recent wage increases, the largest in 5 years, spurred consumer spending... Hmmmm...

That would work here too... EXCEPT! Wages haven't increased in the U.S. in so long, people have forgotten what that looks like! My friend, Bill Bonner, of the Daily Reckoning (www.dailyreckoning.com) had this to say about wages yesterday...

"The part of the economy in worst shape now is the consumer. He's the one whose salary has not gone up. He's the one whose house is being foreclosed. And he's the one who's got to buy gas and food."

Here's another note Bill made that I believe is important to note: "Again, we see the sad evolution of the U.S. of A. since the end of the '60s. Then, fewer than five million people received food stamps. Now, nearly six times that number are living on them...after, what was supposed to be the biggest boom the world has ever seen."

But not to worry, Bill... Big Ben, or triple B, and I like to call him, tells us that it will be alright on the night in the second half of this year... I sure hope he's right! That would certainly make things easier for me and my family!

Currencies today: A$ .9140, kiwi .7865, C$ .9870, euro 1.5550, sterling 1.9825, Swiss .9815, ISK 75.05, rand 7.7980, krone 5.1430, SEK 6, forint 165.40, zloty 2.2410, koruna 16.07, yen 102.70, baht 31.65, sing 1.3870, HKD 7.7910, INR 40, China 7.0175, pesos 10.58, BRL 1.7250, dollar index 72.67, Oil $103.70, Silver $17.16, and Gold... $894.60

That's it for today... I found out yesterday that I will be doing a joint presentation with my friend Addison Wiggin, at the Agora Vancouver Investment Conference in July... Addison, by the way, has done an update of his best seller, "Demise of the Dollar", and it should be available soon... I was honored to write the forward for the book! You'll need to check that out, when available! So... If you're interested in the Vancouver Investment Conference check it out here: http://www.isecureonline.com/Reports/400SCONF/E400J307/

Took my little buddy to get fitted for his football gear last night... I sure wish he would get a growth spurt, these other kids are really starting to get big! But he can hold his own... He has the bulldog approach like I did, when I played... So... The Cardinals score 8 runs the night after I freeze watching them scratch out 1 run! UGH! Oh well, at least we won a game! Time to hit the "send" button, as our accountant extraordinaire, Mary Owens just walked in the door... I must be running late! Hope your Thursday is Tub Thumpin'... I get knocked down, but I get up again...

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

This Is Not A Trend Reversal!

Chuck Butler — Tue, 01 Apr 2008 14:05:00 GMT

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In This Issue....

* German Retail Sales crumble...
* UBS takes a big loss!
* An Iceland note...
* RBA leaves rates unchanged...

And Now... Today's Pfennig!

This Is Not A Trend Reversal!

Good day... And a Terrific Tuesday to you! And also, welcome to April! We have a wonderful young lady in the office that is our IRA specialist, named April... I call her April Showers, she always giggles... It's her month!

You know the old saying about April showers bringing May flowers, and what do May flowers bring? Pilgrims! HA! Anyway... Happy April to everyone, hopefully the rain will stop here and the sun will come out, and we can get on with spring!

Opening Day was rained out in the 3rd inning with the home team Cardinals up 5-1... Those are 5 wasted runs, as they all get washed out and we have a "do over"...

Yesterday, I left you with the news that the euro had ventured above 1.58 again... By the time I got to work, (I arrived late because I had to deal with a sick car) the euro had risen to 1.5889... WOW! But, by the time I got through all the mail on my desk, the euro had given up that rally and profit taking began once again, driving the currency to 1.5815... And then even lower as the day went on...

Overnight, the euro lost even more ground and fell through the 1.57 handle.... German Retail Sales unexpectedly declined in February, and had the biggest drop in almost a year... Seems the 3.5% inflation I told you about yesterday is beginning to eat away at people's wallets... Retail Sales fell 1.6% in Feb from Jan, and really puts the heat on the ECB to cut interest rates...

There was some good news from Germany overnight, that was largely overlooked by the currency traders... German unemployment has reached its lowest level in 15.5 years! The March report showed hiring across many sectors... 1992 was the last time unemployment was less than 8%... Good show!

Remember... I told you time and again in the past that the euro would get dented when the ECB does finally cut rates, which I believe will come next month... I also said that it would be a short-term thing... Remember? It was when the euro was about 1.45, and I said it could go down to 1.40... Well... Now it has seen the light of 1.58, I certainly don't believe it will fall all the way to 1.40 any longer! So... The markets may be pricing in a rate cut before its time, which means they aren't going to wait for May... Which also means we could see the euro get dented ahead of the rate cut, which certainly looks like what's happening now. So... Look for further softness and use it as your opportunity to buy at cheaper levels!

This is a NOT a trend reversal people... We've seen this various times in the past with the euro... Sooner or later, love is gonna get ya, and then the euro will finally climb over 1.58 to on its way to higher ground... At least that's the way I see it from my cheap seats!

As I said yesterday, and I've been saying since last October... The HUGE capital flows that used to come into the U.S. are disappearing... And with the Current Account having problems with financing, the only give is in the dollar...

I've heard some economists saying that the Fed is going to step in and not tolerate further weakness in the dollar... Hmmmm.... I wonder where they get this information, don't you? Since when does the Fed get involved with the currency? That's the Treasury's domain... And as long as Treasury Sec. Paulson is beating on China to allow their currency to strengthen VS the dollar, why would he tell the Fed to intervene and support the dollar? Doesn't make sense to me!

I received some differing opinions from mine yesterday regarding the Fed Bailout of Bear Stearns... And that's OK! I don't expect people to agree with everything I say... I am just glad that when they don't agree, they explain themselves and not get nasty about it...

I still hold onto an email from a guy a couple of years ago (2005) that called me a "know nothing clown" and that I had led him to lose thousands in sterling... I always said that I would ask him when sterling got to 2 and then 2.10 if he still felt the same way... But you know something? My mother taught me not to rub it in someone's face... And just because they insulted you... You don't have to stoop to their level... She was right...

OK... Enough of that!

The dollar rally yesterday didn't interfere with the strength in yen and francs... Both are HOT, HOT, HOT! OUCH! Better put some Aloe on that burn! However, with the euro sell off overnight, these two were dragged down by the Big Dog... Not much slippage though, and again, it certainly looks like a chance to buy at cheaper levels....

Now, onto the currencies that aren't performing well VS the dollar... South African rand, and Icelandic krona... Well... Long time readers know that I've always said that I wouldn't touch rand with "your" ten foot pole... And a lot of people chastised me for saying that, because rand had been able to post some very lofty gains VS the dollar in the past 6 years... But these are the volatile times I have always been leery of with rand... And it's ugly... In fact, it didn't just get hit with the ugly stick, it got hit with the whole forest!

Iceland has the same volatility problems as South Africa and now that the Carry Trade is truly unwinding, these two have warts showing up all over the place. I'm being serious here folks... Iceland has some major problems, one of which is how small the economy is, and how it can be overrun by speculators... But another problem is beginning to show up, and if it continues could be really tough times for the krona...

I'm talking about a financial crisis in the banking sector in Iceland... If it gets out of hand... We're talking whole forest ugly... So... Here's my thought of the day for you Iceland holders... The next time your CD comes due, get out! And go to something that makes more sense without the warts...

If you want to break your Icelandic CD, you will have to wait until we gather up enough breaks at the same maturity date as yours before the break can be executed... And remember, you lose your accrued interest... And it costs 1.5% in currency conversion costs...

I don't like having to talk about stuff like that... But it has to be done!

Now... Onto brighter moments in the lives of currencies!

Getting back to Japanese yen... Here's some proof in the pudding that the yen's strength is coming from Carry Trades being unwound... Japan's Tankan (economic pulse) report showed sentiment among large manufacturers declined, thus raising expectations that the Bank of Japan (BOJ) will cut rates this year...

At any other time, that news would have "rocked" the foundation of yen... But not now... Not with millions and millions of Carry Trades being unwound probably as I write!

I keep seeing stories about how Investor Risk Aversion is easing due to the Fed's bailout of Bear Stearns... Oh, so we're to believe that it's OK to get back into the water and take on risk, because the Fed bailed out Bear Stearns? HOGWASH! I say! Anyone that buys into this thought, will get their hands trapped in the cookie jar, when it all unravels... But don't let my opinion get in the way of a "feel good" story...

Another currency that I've been warning would get caught up in unwinding Carry Trades is the New Zealand dollar... I received a note from a reader that tells the story of a slowing down of the lumber business in New Zealand... Time to think again about the fact that New Zealand's Current Account Deficit is over 7% of GDP... Sure the high interest rates have helped the currency to hold the wolves at the door... But I have to wonder for just how long can that go on?

Geez Louise, I'm full of "good news" NOT! This morning, eh? Well... You can't report stuff on the sunny side of the street every day!

Oh... Another thing denting the euro and Swiss franc this morning was the news that the Union Bank of Switzerland (UBS) reported a 1st QTR loss of $12.6 Billion... UBS has announced that they will be seeking additional capital... That casts an ugly light on European bank finances. The mortgage related write-downs just keep adding up, folks, and now they are infecting European banks... UBS's loss was larger than expected, and that's what's got everyone in a tizzy this morning... I expect this to hurt the euro and franc in the short term... But not drag on, and on, and on...

We'll see the color of the latest U.S. ISM Index (manufacturing) this morning... I expect to see this come in well below the 50 line in the sand that marks whether we are seeing expansion or contraction in manufacturing... This index first when below 50 3 months ago, which is when I said the U.S. had already entered a recession...

The Reserve Bank of Australia (RBA) left rates unchanged last night, which is what I expected they would do... The RBA had lifted rates in each of the past three months, so it was time for them to sit back and see what the landscape looks like... The high interest rates in Australia should be a good foundation and underpin for the Aussie dollar going forward.

And finally, in Canada... January's GDP rose a robust .6%, thus erasing, for the most part, the -.7% drop in GDP that was posted in December. Manufacturing led the way with a very strong showing of 1.7% growth... This report to me, tells us that the Canadian economy was relatively flat for the last few months... That's much better than the deep six GDP report that printed last month! A flat economy isn't the thing that a strong currency is made of, but it's better than a sharp stick in the eye! OUCH! Maybe that was carrying things too far... But it's a fave saying of the Big Boss, and I thought he would get a kick out of seeing me use it! (OK... I'm not a brown nose, but... Why not try to make the Big Boss smile?)

Currencies today: A$ .91, kiwi .7820, C$ .9725, euro 1.5635, sterling 1.9820, Swiss .9930, ISK 77.75, krone 5.16, SEK 6, forint 165.40, zloty 2.2450, koruna 16.11, yen 100.25, baht 31.45, sing 1.38, HKD 7.79, INR 40.11, China 7.0110, pesos 10.63, BRL 1.7520, dollar index 72.30, Oil $101.04, Silver $16.68, and Gold... $894.35

That's it for today... I just love those Opening Day festivities at Busch Stadium... The Sea of Red, and all... Gives me chills every year! Today is our Tim Smith's birthday... He's an April Fool's baby! Tim was the Top mortgage producer at EverBank last year, and wanted to broaden his skill set... So, we offered a chance on the currency desk, and he's taken to it like a duck to water! The main road to the little river city where I live, was washed out by the recent flooding here... We've had so much rain the past few days that it looks like we'll see more flooding... UGH! Pretty soon the rain and cold weather is going to hurt the farmers attempting to plant their crops... Let's hope the sun comes out soon! So... Welcome to April, and I hope you have a terrific Tuesday!

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

Let's Pick Up From Where We Left Off...

Chuck Butler — Wed, 26 Mar 2008 14:32:00 GMT

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

In This Issue...

* Consumer confidence falls...
* Recession fears...
* Norwegian krone leads the way...
* Trichet speaks...

And Now... Today's Pfennig!

Let's pick up from where we left off yesterday...

Good day...and a happy Wednesday to you...If action is what you were looking for, then yesterday did not disappoint:

It all started with the Icelandic central bank unexpectedly raising rates at an emergency meeting that I briefly touched on yesterday. At that point, it seemed like the dollar's fate was pretty much sealed for the day as the currencies were already in a lather. When US consumer confidence took a nose dive, the warm and fuzzies that some had on the economy were put in the back of the closet.

Consumer Confidence fell considerable more than expected in March as the outlook for the economy dropped to the lowest level since Richard Nixon was president back in December 1973. The Conference Board's confidence index fell to a 5 year low of 64.5 from a revised 76.4 in February. A pull back in consumer spending is what many feel will result, especially with a deteriorating labor market and income growth barely keeping up with inflation.

The second part of the one-two combination, the results of the January S&P/Case Shiller home price index, kept the dollar on the canvas for a ten count. The report showed a record drop of 10.7%, after a 9% year on year decrease through December 2007 and has seen 13 consecutive months of decrease confirming the housing recession is deepening.

The US currency dropped the most since January 2006 against the euro yesterday after the confidence report raising concern that the Fed won't be able to shake a recession. More economists are now looking for a .50% rate cut to 1.75% at its next meeting on April 30. With that being said, there are some looking for the euro to rise up to 1.6250 over the next few weeks.

Aside from Iceland's rise of near 5%, most of the other major currencies posted at least 1% gains against the dollar. The Norwegian krone rose about 2% as they enjoy a 3% interest rate differential over the dollar and represents the third highest rate among the Group of Ten, trailing only Australia and New Zealand.

The Norwegian economy remains strong and is one of those positive balance of payment currencies with strong fundamentals that Chuck has been talking about for a couple of years now. Given that Norway's central bank has signaled it will continue to raise rates in an environment of global rate cuts, is another factor for its continued potential rise.

The Swiss franc erased its losses, gaining 1.5%, as a gauge of Swiss consumption rose to the highest level in eight months in February on increased hiring and wages. Domestic spending is set to become the main engine of Swiss growth this year as a slowing international economy erodes demand for exports, according to the KOF Institute. With private consumption estimated to outpace last year's figure, chances of a Swiss rate cut are falling.

Getting back to the euro, we saw German business confidence unexpectedly rise for a third month in March, suggesting Europe's largest economy is coping with near record oil prices, a surging euro, and the global credit squeeze. We also had Trichet talking about inflation this morning and remaining on the hawkish side. He said that inflation will stay significantly above the ECB's 2% target for most of this year and the euro's economic fundamentals are sound. With expectations of continued growth, investors are starting to reduce their bets of a rate cut in the near future and pushing the currency back into the 1.57 handle today.

Japan's export growth unexpectedly accelerated in February as demand from emerging markets helped automakers ride out the US slowdown. Exports, which contributed more than half of the economy's expansion last quarter, climbed 8.7% from a year earlier as a result of increased Chinese demand.

As mentioned before, February's durable goods figures are to be released this morning and are expected to show a gain from January's numbers. If these figures disappoint and new home sales come in lower than forecast, we could see another tough day for the dollar, especially with the euro and Swiss franc up nicely this morning along with gold just under $950, silver over $18, and oil rising higher.

Currencies today: A$ .9228, kiwi ..8090, C$ .9897, euro 1.5736, sterling 1.9970, Swiss 1.0027, ISK 76.36, rand 8.0608, krone 5.1257, SEK 5.9748, forint 163.39, zloty 2.2438, koruna 16.2850, yen 99.11, baht 31.40, sing 1.3787, HKD 7.7819, INR 40.1425, China 7.0290, pesos 10.7049, BRL 1.7345, dollar index 72.276, Oil $102.48, Silver $18.14, and Gold... $948.89

That's it for today......It's finally nice to see regular season baseball on SportCenter as the Red Sox and A's opened the season in Japan last night. Spring has officially started in my book. I'm running a bit late this morning, so I keep it short. Have a Wonderful Wednesday.

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

Dollar Reversal this Morning...

Chuck Butler — Tue, 25 Mar 2008 14:48:00 GMT

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In This Issue...

* Home sales surprise...
* Consumer confidence today...
* Carry trade again...
* Iceland hikes rates...

And Now... Today's Pfennig!

Dollar reversal this morning as the dollar index slides about .75% ...

Good day...and a happy Tuesday...Not much in the way of large moves yesterday as some markets were still on holiday, but that is certainly not the case today:

Sales of existing homes in February surprised most on the upside yesterday as the annual rate increased to 5.03 million, which is up from last month's figure by 2.9%. From what I could find, the general outlook is still to the downside so the markets didn't pay too much attention and are looking for sustained data before getting excited.

A further look into the numbers reveal that the median price of single family homes dropped 8.7% from a year earlier and represents the largest drop since the National Association of Realtors began keeping records in 1968. Home foreclosure filings shot up 60% and bank seizures doubled from a year ago as interest rates on ARMs rose and those in that position couldn't find buyers before the bank was knocking at the door.

Inventories may remain high with the continual increase of foreclosures and represents a problem for sellers looking to get top dollar. We currently have a 9.6 month inventory supply, which needs to be around 5 or 6 months to help stabilize the market, and gives builders less incentive to start new projects. I think Mickey Levy at Bank of America represents the general sentiment with the following statement "If you look at the outstanding inventory of homes and the negative psychology, I think housing activity and prices will fall further."

Now that we've seen a feeling that these results may be a one month spike, we'll see how the general public views the situation with the release of consumer confidence today. As Chuck has mentioned many times before, there really isn't that much to be confident about right now. One of the few things that I'm confident about at this point is spending more at the pump each time I fill my car with gas.

Speaking of confidence, the stock market ticked up yesterday to the highest levels this month as JP Morgan quadrupled its bid for Bear Stearns to about $10 a share. What happens when we see a rise in the stock market...we see a rise in the appetite for risk. I think you know where I'm going with this.

Yes, you guessed it...both the Japanese yen and Swiss franc sold off yesterday with each giving up about 1% from Friday. That's ok, it just gave some a cheaper price to buy and get in position for the next crisis that pops up. The carry trade was on yesterday.

All four of the Commodity Index CD currencies rose against the dollar yesterday, with kiwi at the top of the list followed by the Canadian dollar, the Australian dollar, and the South African rand primarily as a result of the carry trade. The loonie isn't necessarily a carry trade currency, but it appreciated a bit as last week's 3.3% drop encouraged some to get the feeling it was oversold.

As I turned on the screens this morning, I saw that just about every currency gained against the dollar overnight as concern of lower consumer confidence has spread among the markets. Here's an interest headline from the Bloomie: 'Dollar Falls as Stock Rally Boosts Higher Yielding Currencies'. It seems the scenario Chuck brought to our attention last week about the US dollar being sold as a result of the carry trade is starting to rise. The dollar fell against the euro as a rally in Asian stocks encouraged investors to buy higher yielding assets with loans in the US currency. It should be interesting to see how far this will go...we saw what happened to the yen and franc.

Another surprise this morning was Iceland's central bank unexpectedly raising its benchmark interest rate to 15% at an unscheduled meeting after a slump in the krona threatened to fuel inflation that is already running at more than twice the bank's target. The krona is up about 5% against the dollar as of this morning, just showing you how volatile this currency can really be, both on the positive as well as the negative.

With full trading desks after the two day holiday for some, volatility has certainly picked up as the trading volume gets back to a more normal pace. It looks like Friday and Monday were days to catch our breath before jumping back into the pool.

Currencies today: A$ ..9141, kiwi ..8039, C$ ..9839, euro 1.5580, sterling 1.9927, Swiss ..9890, ISK 75.02, rand 8.0375, krone 5.1920, SEK 6.0442, forint 164.45, zloty 2.2637, koruna 16.3310, yen 100.51, baht 31.57, sing 1.3822, HKD 7.7795, INR 40.1250, China 7.0444, pesos 10.6782, BRL 1.7446, dollar index 72.376, Oil $101.02, Silver $17.6350, and Gold... $932.91

That's it for today......just another crazy Monday on the desk yesterday. I want to thank those for the kind notes on giving you some news updates while Chuck is away, they are much appreciated. It's getting late this morning and I still have a ton to do before the phones are on. Enjoy the day and have a Terrific Tuesday.

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

A Dollar Rout...

Chuck Butler — Thu, 28 Feb 2008 16:41:00 GMT

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

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

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

In This Issue....

* Euro hits 1.51!
* Bernanke disses the economy...
* Greenspan disses the dollar...
* Charts say we're in recession...

And Now... Today's Pfennig!

A Dollar Rout...

Good day... And a Tremendous Thursday to you! No health talk today... Let's get to the major rout on the dollar that took place yesterday!

Where's the Plunge Protection Team? They were nowhere to be found on Wednesday as the dollar selling that started late in the day on Tuesday, got all wound up in the overnight markets, and then just let loose during the day, especially the early morning here in the U.S. The U.S. received more bad data... Some very disparaging words on the economy from Big Ben... And a shot across the bow from former Fed Chairman Big Al Greenspan... There was nowhere to hide for the dollar.

The Wall Street Journal Online called me, and wanted to know what was going on in the currencies... I told them that the markets were finally waking up to the fact that the Fed was going to cut rates to 2%, and that interest rate differentials are really taking the bull by the horns in the currencies... The high yielders have ruled the roost this week... It wasn't two hours later that my talk with the Wall Street Journal Online writer was on the net!

So... Here's the scene yesterday... The euro, when I left you, was 1.5045... And then more sour data hit... Durable Goods Orders fell 5.3% in January! Yes... January Durable Goods Orders came in weaker-than-expected falling 5.3% compared to expectations of a 4.0% decline. This report fanned the flames of recession...

Then New Home Sales in January printed a larger-than-expected 2.8% drop! Even falling prices aren't helping now... And the inventories of unsold homes continue to trend sharply higher... This report fanned the flames of what I've said for two months now, that the Fed would cut 50 BPS at their March meeting.

Then came Big Ben... This guy actually had the cajones to say that the "Fed would continue to cut rates in the face of rising inflation" GET OUT OF HERE! He really didn't say that, did he? OH YES HE DID! That's our Central Bank leader folks... Leading us down the road of destruction caused by soaring inflation! He went on to deliver Congress an economic forecast fraught with risk...

And finally, overnight on Tuesday came word that Big Al Greenspan had told the Gulf State Nations that they should abandon their dollar peg... Talk about a shot across the dollar's bow... A slap in the face! All those types of things rolled together... The former Fed Chairman who had his hands deep into this mess that started all this, is telling people to abandon the dollar!

Talk about things mounting up on the dollar! I actually felt sorry for it one point yesterday the selling was so strong, and by noon yesterday the euro was trading 1.5140! And all the currencies joined in... In the old days of football (when I played) this was called "piling on"...

OK, so let's stop for a minute and take a breath... I'm going to be the first one to tell you that this has gone too far, too fast! The euro spent less time in the 1.50 handle than it takes for you to read the book about "what a man knows about a woman"... So... If the markets stop, take a pulse, and go back to fill in the gaps, that certainly seems in order right now.

And that's exactly what the markets are doing this morning in Europe... The euro has backed off to just below 1.51, and there's talk that the move was "excessive" yesterday... I would go along with that!

Alright then, now doesn't that feel better? Take a breath, and read the pulse... And then get ready to deal with rising energy prices... Oil hit $102 yesterday before slipping back on profit taking... And now, even Natural Gas is hitting a topside now... Yesterday Natural Gas prices are poised to move higher after breaking through a multi-year congestive trading range... This is all technical stuff... But it makes sense to me because they go with the fundamentals!

Do you know what's happening on March 11th? No... It's not my birthday! That comes 11 days later when I'll be in Jupiter Florida! On March 11, the Bureau of Labor Statistics will come clean (yeah, right!) with an adjustment to their labor statistics... Ok, so all those months with the economy was slowing but the BLS kept adding fictitious jobs to the monthly payrolls, will all come crashing down around them on March 11... I suspect this adjustment to payrolls will be negative... And it will be LARGE! If it's not... Then I give up all hope and throw in the towel on the BLS, and I'll never talk about them again, because that dog ain't gonna hunt, folks!

OK... Enough of the "scary stories"... I saw last night that Singapore posted a big surge in inflation for January... Singapore inflation surged to 6.6% annualized, which obviously would be well above the "experts" forecast. The Monetary Authority of Singapore (MAS) hasn't commented yet, so the markets are trying to fill in the void, and speculate what MAS will do... Review & Focus readers might recall us writing about Singapore in a recent edition, and the fact that the MAS would allow a stronger Sing dollar to combat inflation... Well... I don't think they were of the thought that inflation would be 6.6%! So... MAS will have to raise interest rates, which will drive more investment into Singapore, and thus push the sing dollar higher... The combination of higher interest rates and a strong currency should help the MAS...

Someone sent me a note the other day, and was just a little upset with me that I hadn't talked about Iceland lately... Come on... I've said so much about Iceland that I feel like a broken record, I mean a scratched CD... But... Ask and you shall receive! The Icelandic kroner continues to be driven by the perception of "risk" in the markets... Last week, risk aversion was a BIG thing, and the kroner suffered, losing ground to the dollar in large chunks... This week, risk has been tossed aside, and the high yielders rule the roost again, which obviously includes Iceland...

I continue to tell customers that I talk to that as long as the Carry Trade exists... And high yielders rule the roost, Iceland looks good... But take those underpinnings away, and I don't think Iceland looks so good... However, the Carry Trade is like a cat with 9 lives... So... It all depends on your outlook for the Carry Trade and high yielders... If you think they are going to carry on for some time... Then no worries, eh?

The New Zealand dollar took a backseat to the movements to its kissin' cousin across the Tasman, Australia yesterday... Aussie dollars kicked some tail and took names later, while kiwi backed off... And rightly so, given the results of the most recent Business Confidence report, which painted a different picture for the New Zealand economy for 2008, than it did at the end of 2007... 44% of businesses expect business conditions to deteriorate in 2008... December's report had just 25% of businesses with that kind of pessimism.

The reason for their pessimism? The strong kiwi... And that report was put together before kiwi hit a 22 -year high this week! But kiwi is resilient... It normally takes shots like this, backs off, and then recovers stealth like, and before you know it the currency is hitting 22-year highs!

My friends at Critical Factors, sent me their latest chart on the Business Cycle for the U.S. and the chart shows we are well into a recession, with much further to go... So we have that to look forward to, eh? But then I've said that for sometime now... And one of the reasons I was able to say that before the pundits, media, or Gov't gets around to admitting we're in a recession is that I get to review charts like this on from Critical Factors...

So... Today we'll see the latest revision to 4th QTR GDP... It's still expected to stay below 1% growth... Quite anemic, eh? And we'll see Personal Consumption for the 4th QTR... I'm sure Personal Consumption remains in line, because its from the 4th QTR... I don't think it will be holding up so well come 1st QTR... But that's for much further down the road... I don't think any of this data today does much either way for the dollar...

OK... Time to head to the Big Finish! Big trading day on the desk... So, Jennifer and I need to get going and sharpen our pencils!

Currencies today: A$ .9425, kiwi .8140, C$ 1.0230, euro 1.5095, sterling 1.9810, Swiss .9415, ISK 65.25, rand 7.1125, krone 5.2120, SEK 6.2050, forint 171.80, zloty 2.3320, koruna 16.70, yen 106.40, baht 29.70, sing 1.3950, HKD 7.7850, INR 39.85, China 7.1125, (that was a huge move for renminbi overnight!) pesos 10.70, BRL 1.67, dollar index 74.26, Silver $19.18 and Gold... $956.69

That's it for today... Almost didn't answer the bell this morning... I just couldn't get myself to leave that warm bed! But here I am, as I let out a huge yawn! Next week at this time I'll be in Clearwater Florida for a company meeting, then I go directly to Colorado for another Company meeting... So I won't be around for over a week! But that's just the start of my travels for March... Chris will be busy filling in for me for sure! Then... We have the last week of March when both Chris and I will be enjoying spring break with our families... Haven't figured out what we're going to do about the Pfennig that week... I just know that I'm not taking my laptop to Jupiter with me! Could the Pfennig go on hiatus for a week? Hmmm... I don't think so... Oh well, we've got a month to figure it out! I hope you have a Tremendous Thursday!

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