Daily Pfennig : Interest Rates

Carry Trade reversals rally dollar / yen

Chuck Butler — Thu, 19 Nov 2009 15:13:25 GMT

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In This Issue..

* Carry trade reversal boosts the dollar/yen...
* STL Fed Head Bullard sends mixed signals...
* Audit of Fed in jeopardy...
* Kiwi and AUD fall...

And Now... Today's Pfennig!

Carry Trade reversals rally dollar / yen

Good day... And a Thunderin Thursday to you! Yes, the rain continues today, but I hear it is supposed to stop this afternoon. Fear of risk rained on the currency investors' parade as an equity market sell-off fueled a US dollar and Japanese yen rally. At times it looks as if we will break this pattern of markets up dollar down/ markets down dollar up, but it seems investors continue to return to the US$ and Japanese yen as soon as they become worried about equity market returns.

Many of the callers into the trade desk wonder how anyone would be buying the Japanese yen and US Dollar as 'safe haven' currencies. I think a lot of this buying of yen and dollars isn't necessarily due to investors believing they are safer in US$ and Japanese yen, but is a result of the reversal of carry trades. The dollar and yen are the two major funding currencies of the carry trade. Investors borrow yen and dollars and then invest the proceeds into higher yielding assets including equities. This is what is called the carry trade, and works best when an investor can use high leverage to increase the return. Since these trades are highly leveraged, they are closely monitored and reversed at the first sign of a possible fall in the value of the higher yielding assets. So while the popular press will talk about the 'perceived safety' of the yen and US$, I believe much of the dollar and yen buying is due instead to a reversal of the carry trade. Investors aren't buying these currencies because they think the Japanese and US economy are stronger and therefore safer than others, but are simply deleveraging to take risk off the table, and are buying yen and US$ in the course of this deleveraging.

So what caused investors to worry about their investments in the equity markets? Chuck sent me this note before heading out the door last night:

I saw currencies jump around again on Wednesday... But here's something that makes me scratch my bald head, and should make you wonder too... If you're confused with this, then don't feel alone... Fed Head Bullard was speaking yesterday and at one point he said... "FED MAY NOT START TO RAISE RATES UNTIL EARLY 2012" That really got the currencies going... But later in the same speech, he said, "MEMORY OF HOUSING BUBBLE MAY PUSH FED TO START RATE HIKES MORE QUICKLY THAN AFTER PAST RECESSIONS." WHAT? He said that the Fed may not start raising rates until 2012, but then says that the Fed may push to start rate hikes more quickly than before? In my best Andy Rooney voice... Do you ever wonder, how these Fed Heads get in the door? Oh well... The second statement didn't change the currencies, but it did change stocks... And for one of the first times in some time... U.S. stocks sold off, and non-dollar currencies rallied.

As Chuck points out, the St. Louis Fed Head Bullard seemed to be speaking out of both sides of his mouth, but his second statement that the Fed may push to start rate hikes more quickly than before scared equity investors. He stated that in the debate to tighten policy, "the idea that you might be creating asset bubbles by keeping rates too low for too long will be an important argument." This is what scared the markets.

The economic data released yesterday certainly didn't help investors confidence in the global recovery as US housing starts unexpectedly dropped 11% in October compared to the month before. The pace of construction was the fewest since April's record low, and illustrates housings reliance on government support. Obama has extended both the first time homebuyer's tax credit and instituted a new (and I believe stupid) program to give existing homebuyers a tax credit to go out and buy a new one. These programs will probably give a bit of life support to the housing market in November, but many question just how long the government can continue them.

Another piece of data released showed the cost of living in the US rose more than forecast in October as the price of gas pushed CPI up .3% following a .2% rise in September. Today we will get the weekly jobs data along with the Leading Indicators for the month of October. Last month's leading indicators surprised the market with a 1% increase, but this month the expected rise is just .4%. This would be the seventh consecutive month of increased indicators begging the question: Just how LEADING are these indicators??? They have posted positive gains for seven months, but the economy sure doesn't feel like it is picking up steam. Housing and unemployment continue to be drags on the US economy and, according to Chairman Ben S. Bernanke, economic 'headwinds' will limit the recovery for an 'extended period'.

Speaking of our esteemed fed head, Bernanke's clout among US lawmakers will be tested today as the House Financial Services committee will consider how much to expand audits of the US central bank today. Panel members will be voting on a Democratic proposal to retain a ban on audits of the Fed interest-rate decisions. This would be a big blow to Ron Paul and his bill to allow audits of the Fed. Unfortunately I believe the Democratic ban on audits will pass, and Ron Paul will have to figure another way to try and hold the Fed accountable.

The worst performing of the currencies vs. the US$ over the past 24 hours is the New Zealand dollar which fell by over 2%. The kiwi dropped as the nation's main opposition party said it will no longer accept the central bank's primary policy of targeting inflation. The head of the central bank's salary is actually tied to keeping inflation rates at an acceptable level. This is one of the main reasons interest rates in New Zealand have been among the highest of industrialized nations. But in the opinion of the nation's main opposition party, these high rates have been at the cost of slower growth and a weaker exports. In my opinion, having a central bank focus on keeping inflation within a targeted range is absolutely required; and tying the main policy makers income directly to this objective is smart.

The Australian dollar also dropped for a second day on interest rate speculation. As Chuck has written, the markets have expected the Reserve Bank to raise rates again at their December meeting, but minutes of their Nov. 3 meeting caused some concern that they will not raise rates again until 2010. The minutes, released yesterday, said the pace of interest rate increases is an 'open question' as policy makers balance the risk of inflation vs. an economy which could slow as government stimulus ends. But I am still firmly in Chuck's camp, and believe the RBA will raise rates in December, and the interest rate differentials will continue to rally the AUD$ vs. the US$.

Minutes of the Bank of England's November meeting were also released yesterday, and showed the policy makers were split on whether to extend the 'quantitative easing' program or possibly cutting rates further. The pound sterling lost ground against both the euro and US$ as investors worried about the lack of direction. The minutes show there are three different camps at the BOE, one which favors expanding the program of pumping money into the system with bond purchases, another which favored no change, and a third which wants to use another interest rate increase to stimulate the economy. The lack of a clear plan by the central bank policy makers strikes fear into investors who want to see more of an agreement on the direction of policy.

While we don't trade the Russian ruble, it is part of our BRIC MarketSafe CD (for which time is running out!). Chuck pointed out to me yesterday that the Russian ruble has been the best performing currency of the BRIC, which was surprising. A story overnight said that Russia's central bank will have to accept a stronger ruble next year as rising commodity prices move the currency higher. Strong commodity markets have pushed capital into the Russian markets, pushing the ruble higher. Policy makers had indicated they will try to cap the ruble's gains, but the IMF warned recently that these efforts to fight the rubles advance will prove 'unproductive' and that 'underlying factors' justify the ruble's strength. This is good news for holders of the BRIC MarketSafe. If you haven't purchased this latest MarketSafe CD, the cut-off is approaching - you only have until December 3 and then your opportunity is lost.

OK, to recap, the dollar rallied on carry trade reversals, the 'Audit the Fed' bill is in jeopardy, AUD$ and NZD$ fell, and the BOE is split on the future of monetary policy in England.

Currencies today 11/19/09: American style: A$ .9170, kiwi .7287, C$ .9414, euro 1.4851, sterling 1.6626, Swiss .9811, European style: rand 7.5605, krone 5.658, SEK 6.93, forint 180.17, zloty 2.789, koruna 17.2147, RUB 28.90, yen 88.86, sing 1.3904, HKD 7.75, INR 46.69, China 6.8284, pesos 13.07, BRL 1.7287, dollar index 75.54, Oil $78.77, 10-year 3.35%, Silver $18.20, and Gold... $1,134.55

That's it for today... Best of luck to Chuck this morning as he heads to the eye doctor again today. It is nice to see Kristin Kuchem back from two weeks of traveling. She said both of her presentations were well received, as investors were eager to get money diversified out of the US$! Looking forward to the Blues game this evening, as several of us from the desk are hoping to watch a win! Hope everyone has a great Thursday!!!

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

3rd QTR GDP To Lift Our Spirits?

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

..But First, A Word From Our Sponsor..
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* 4 BRIC currencies: Brazilian real, Russian ruble, Indian rupee, Chinese renminbi
* High upside potential
* No market risk to deposited principal
* Low $1,500 minimum deposit

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In This Issue..

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

And Now... Today's Pfennig!

3rd QTR GDP To Lift Our Spirits?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Central Banks Diversify Out Of The Dollar!

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

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In This Issue..

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

And Now... Today's Pfennig!

Central Banks Diversify Out Of The Dollar!

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

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

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

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

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

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

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

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

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

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

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

Now that's funny!

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

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

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

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

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

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

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

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

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

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

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

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

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

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

ECB & BOE leave rates unchanged...

Chuck Butler — Fri, 09 Oct 2009 14:41:40 GMT

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In This Issue..

* ECB & BOE leave rates unchanged...
* Trichet makes a mistake in judgment...
* Asian central banks defend the $..
* Gold pauses...

And Now... Today's Pfennig!

Good day...Had a horrible night here in St. Louis, as every one of our teams let victory slip away. As you all know, Chuck drove to Columbia to watch his MIZZOU Tigers take on one of their arch rivals in a rare Thursday night matchup. The game went well into the night, as it was delayed due to problems with the lights at the stadium, so Chuck probably didn't get home until early this morning. I'll have the con on the Pfennig today, but Chuck will be back in the saddle again on Monday.

As predicted, both European central banks kept interest rates unchanged. The European Central Bank and the Bank of England kept their benchmark interest rates at record lows in an effort to keep stimulating their economies. Trichet signaled that the ECB has no plans to raise rates in the near future, stating that the current level is 'appropriate' for the current economic environment. "The recovery is expected to be rather uneven," Trichet said. "It will be supported in the short term by temporary factors but will be hampered in the medium term by balance sheet issues at financial and non-financial institutions."

When asked about the recent fall of the US$, and the possibility of currency intervention, Trichet repeated the standard line saying "excess volatility and disorderly movements" hurt growth and policy makers "will continue to monitor the exchange markets closely and cooperate as appropriate". Trichet also stated that he trusts his US counter parts (big mistake!) that their statement on the strong-dollar policy. "When the Secretary of the Treasury and our friend Ben Bernanke say that a strong dollar is in the interests of the US economy and that they are pushing a strong dollar policy, this is a judgment that is obviously very important for us and the global economy." NOTE TO TRICHET: YOU CAN'T TRUST A CHEATER!!

The current administration may say they support a strong dollar, but their actions sure don't show it. Quantitative easing efforts have pumped a record amount of liquidity into the markets, and Washington has the printing presses working overtime. Unless we the laws of supply and demand have changed, all of these US$ which have been created will cause the value of these dollars to drop. We have seen a 15% drop in the value of the dollar index in the past 6 months. The current administration has no reason to support a strong dollar, and realize there is no way they are going to be able to protect the value of the dollar while pursuing their 'quantitative easing' policies. In order to protect the dollar, Geithner and Bernanke would need to shut off the printing presses, and actually put them in reverse, pulling liquidity out of the markets. There is absolutely no way this will occur anytime soon.

The Bank of England also left rates unchanged and announced they will continue to push money directly into the economy through purchases of government and corporate bonds. At least one of the policy makers in England seems to understand what is going on. Conservative leader David Cameron stated today that the policy will lead to inflation, signaling to his party's annual conference that it would stop the government's main economic stimulus program if it wins the next election. "Sometime soon that will have to stop because in the end printing money leads to inflation", Cameron said. But others remain trapped in their own twisted reality with former BOE officials calling Cameron's remarks 'dangerous'.

The dollar moved up a bit vs. the Euro and Pound after the announcement, but fell again overnight. Overall, the greenback is up compared with yesterday morning, with the biggest moves coming against the New Zealand dollar and Japanese yen. Asian central banks intervened heavily in the currency markets on Thursday to help support the US$. With China keeping the renminbi stable vs. the US$, other asian currencies not pegged to the falling dollar have risen. Governments in Japan, Thailand, Hong Kong, and Singapore were big buyers of US$ yesterday and continued with their purchases overnight. Their efforts may work to slow the decent of the US$, but it won't change the direction. These central banks just don't have the financial power to change the inevitable fall of the US$.

Data released yesterday showed initial jobless claims in the US fell slightly to 521k and continuing claims also drifted lower. Both are still near historic levels, and don't support the claims that the US economy is pulling itself out of the recession/depression. In other news, chain store sales managed to eke out a small increase in September. While the news caused a rally on Wall Street, the YOY increase was mainly because the stores had absolutely abysmal sales one year ago. The largest industry group is cautioning against reading too much into the increase, and continue to predict a decline in sales for November and December.

In another report, the Commerce Department said wholesale inventories fell 1.3% in August, worse than the 1 percent drop economists had expected. This follows a 1.6% drop in July as business continue to reduce inventories.

Today we only have one piece of data, the Trade Balance, which is expected to show a deficit of $33 billion for August. This deficit comes in spite of a falling US$ which should eventually make our exports more competitive, and force a narrowing of this balance. The continued deficit forces the US to have to attract foreign capital as imports continue to outpace exports.

Canada got a good piece of news yesterday as Canadian employers added jobs for the second straight month in September. The unemployment rate fell to 8.4% as employment rose by 30,600. The report will increase pressure on the Bank of Canada to raise interest rates from record lows, and could lead to strength in the Canadian dollar. We have been supporters of commodity based currencies, and Canada certainly has an abundance of raw materials. Their proximity to the US has caused some concern, as the US is still their largest trading partner, but Canada has worked to strengthen ties to China and is now enjoying an increase in exports to Asia as the recovery takes hold in the Far East.

An associate from headquarters down in Jacksonville emailed me last night to ask my opinion on recent events in Latvia. Now I certainly try to stay informed on all of the countries around the globe, but had to be honest and tell him I haven't really ever looked at what is going on in Latvia. But after doing a bit of research, I realized what had sparked the question. Economic troubles in the Baltic state led to concern over the future health of Swedish banks. Plunging property values in Latvia have left borrowers 'upside down' on their mortgage loans mainly provided by Swedish banks. The Latvian government had announced a plan to protect homeowners from foreclosure, angering Sweden. But overnight, Latvia has announced it is pulling away from its earlier plan, and would come to an agreement with its international lenders. It looks as if the 'Latvian' crisis will be resolved, and Swedish banks will avoid possible losses which could have occurred. The Swedish Krona is unchanged on the month, and has increased over 12% in the past 3 months. With the Latvian crisis avoided, the SEK will likely resume its move higher vs. the US$.

After hitting an all time high yesterday, Gold slipped back slightly overnight. This was the first drop in the gold price this week, after the biggest weekly advance since April. We had expected a pause in the rapid ascent for gold, and a small move higher by the US$ pushed gold lower. Many traders are now calling for a near term correction in the price as investors take profits from the rapid move. According to an analyst at HSBC: "The likelihood that long-term dollar weakness will support gold does not obviate the fact that the near-relentless increase in bullion prices recently has raised the possibility that gold is due for a pullback," HSBC Securities analyst James Steel said in a report emailed today. "A dollar rally, even if only temporary, could provide a reason for gold longs to take profits."

Currencies today 10/9/09: A$ .9074, kiwi .7405, C$ .9572, euro 1.4761, sterling 1.5987, Swiss .9720, rand 7.3611, krone 5.6326, SEK 6.9742, forint 183.26, zloty 2.8760, koruna 17.4924, RUB 29.599, yen 88.75, sing 1.3917, HKD 7.7502, INR 46.4575, China 6.8255, pesos 13.2393, BRL 1.7364, dollar index 76.06, Oil $71.38, 10-year 3.26%, Silver $17.635, and Gold... $1,049.60

That's it for today... Tough night for the St. Louis sports scene as the Cards, the Blues, and the Tigers all blew leads to end up losing. I attended the Blues home opener last night, but caught the awful 9th inning of the Cardinal's game between the first and second period. What a waste of another great start by our stud pitcher Wainwright! The Cards have backed themselves into a corner now, and will need to win the next three in a row. The Blues started off the game on top, but couldn't hold their one goal lead and fell to their first loss of the 2009-2010 season. And finally, Chuck braved the cold and rain to watch his beloved MIZZOU fall in the fourth quarter. It was raining the entire game, so I just hope Chuck doesn't come down with anything! Looks like we may finally get a bit of a break in the rain today, but the temperature sure has dropped; summer is just a memory now. Hope everyone has a Fantastic Friday and a wonderful weekend!! GO CARDS!!!!
Chris Gaffney, CFA
Vice President
EverBank World Markets
1-800-926-4922
1-314-647-3837

Gold Soars To An All-Time High!

Chuck Butler — Wed, 07 Oct 2009 14:46:17 GMT

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In This Issue..

* It was all about Gold yesterday!
* Commodity Currencies take the lead today...
* The story behind the euro's non-move...
* Budget data prints today...

And Now... Today's Pfennig!

Gold Soars To An All-Time High!

Good day... And a Wonderful Wednesday to you! What a day for Gold yesterday! WOW! In case you were trapped in a cave and didn't hear the news... Gold, which I said yesterday morning looked like it was going to take out its all-time high, did take out its all-time high, and not just take it out! Gold pushed past the all-time high of $1,033.90, and didn't stop until it was trading $1,047 and change! WOW! No check that... Double WOW!

The Reserve Bank of Australia's (RBA) rate hike the previous night, opened the door to this run by Gold, as the Gold Bugs all came out and bought the preferred investment to counter soaring inflation... You see, if the RBA is raising rates, when most every other Central Bank is stuck in the mud with near zero rates, the RBA must see something, eh?

Well, I don't know about what they see, but I would guess it's inflation coming around the bend... I hear that inflation coming, it's rollin' around the bend, and I ain't seen the sunshine since I don't know when... Now... The RBA did say that they realized that they had reacted quickly last fall cutting rates too quickly and too low, and this rate hike would begin to reverse those panic cuts... The RBA did not say that they see inflation... But riddle me this Batman... Why would the RBA not just wait and hike rates 50 BPS in a couple of months if all they were doing was reversing their panic cuts?

So... Yesterday, was all about Gold! And why not? Gold has a few things going for it right now... 1. dollar weakness 2. inflation fears 3. rising oil prices and probably the biggest thing would be the momentum buying that takes place when mom and pops all see on the evening news that Gold has reached an all-time high, and they go out the next day and buy... Shoot Rudy, we couldn't get these people to buy when Gold was clawing its way to $900, couldn't get them to even notice Gold when it was $950, but now that its at the all-time high...

Today... I think we'll see things settle down a bit on the Gold front. I don't mean to take the move in Silver lightly... Silver pushed way past $17 once again, following Gold higher... Instead of Gold today, I think it will be more about the dollar...

Yesterday, I told you about the story in the U.K. Independent regarding the alleged secret meetings of countries to remove the dollar as the clearing mechanism for buying Oil. I did mention that the Saudis had denied these meetings had taken place. Now... Here's the big deal behind any removal of the dollar as the clearing mechanism for Oil... It's the perception, folks... The "KING DOLLAR" would no longer be needed to buy Oil...

As far as the affect on the dollar, the actual physical removal wouldn't kill the dollar per se, as most of these Oil producing countries, now take their dollars they receive for Oil and trade them right away for something else... So the net affect now on the dollar is zilch... The dollar is bought, the dollar is sold... But, the perception folks... This is the Big Kahuna here... And, think back to all the discussions we had a couple of months ago regarding the calls to remove the dollar as the reserve currency of the world... Wouldn't removing it from Oil trades, be just another step in that direction?

OK... Well today, the Commodity Currencies are the ones front and center in the assault on the dollar... Aussie, kiwi, loonies, real, rand, and krone are all lighting up "green" on my currency screen, which means they are UP VS the dollar! Doesn't it make sense that these Commodity Currencies would be the currencies to push the dollar around the schoolyard, especially after the RBA Opened Pandora's Box of interest rate hikes? I think so... Because, as I said yesterday, I think we'll begin to see more countries / Central Banks come to the rate hike table... And they are all on this list of Commodity Currencies! Which again points toward "seeing inflation pressures" in the future...

The euro? Well, even the best fall down sometime, even the stars refuse to shine sometime, eh? The official "offset currency to the dollar" participated in the currency rally yesterday moving as high as 1.4765, but overnight, it has retreated to 1.4715... Yes, even the Big Dog, has to take a back seat to the Commodity Currencies right now... But... That doesn't mean the euro is shaky... That the euro is weakening... That the euro has lost its place as the Big Dog... Not one iota! It simply means that sometimes other currencies take a flyer VS the dollar, while the euro bides its time... Taking my time, choosing my lines...

And I would bet you a dollar to a Krispy Kreme that the European Central Bank (ECB) is champing at the bit to join the RBA in a rate hike cycle! The ECB is a stickler for inflation fighting, a "hawk" if you will, and if the RBA is feeling some inflation heat, the ECB is sweating under the collar for sure! But, the Eurozone is hanging on to its nascent recovery by the skin of its teeth right now, and would not be able to continue if rates were hiked right now... So, here's the deal... The ECB "wants to"... But can't hike rates right now... But you can bet your sweet bippie that the ECB will hike as soon as they see the light at the end of the recession tunnel! I mean, they resisted cutting rates to the bone didn't they? That alone should give you an inkling of what' on their minds!

I think at this point it is important to note that even with the currencies moving strongly VS the dollar since March, they are still roughly 10% below their high levels that they had reached before the financial meltdown in August of 2008... So, some people wonder if they "missed the boat" because of the strong moves since March... I think this proves that they could potentially see the currencies move back to their previous highs...

Ty Keough, pointed something out to me yesterday when I was talking about this to the desk... Ty said, that this move probably has been more genuine, in that prior to the financial meltdown there was all that liquidity, and money flying around pushing risk assets higher and higher... Well, there certainly isn't any liquidity flying around this time! So, the moves by the currencies have been actually stronger, and with a stronger base...

Today... We'll see the Monthly Budget Statement for September. I laugh at the name of the data, given this has been nothing but a Deficit for a month of Sundays now... So, why not just change it to the Monthly Budget Deficit? I mean it couldn't even post a surplus in April or June when normally tax receipts outweigh the deficit spending! I know, I know, you're squirming in your seat thinking that I'm going to go on a tirade about deficit spending once again, when you've heard it from me over and over and over again for years now... Well, I have a treat for you... I'm not going to go there today! I mean, it certainly isn't important to our leaders... So why should I continue to make a big deal out of it?

HA! Gotcha! You know me, I can't just leave the deficit spending, and national debt alone! I can't let the leaders of our country win! I'm going to fight them to the bitter end, and you should too! Come on! Follow me! We can win this battle, if we have enough people to fight it!

And then there was this... I'm seeing more signs that the break of currencies and stocks is happening... And what a welcome thing that would be! These two have different pricing mechanisms and a low correlation to each other, which leads to both being in an investment portfolio for diversification... But, as chronicled many times in the past, since March of this year, the two have moved together... But last week, we saw a sign that fundamentals might be coming back into play... And then overnight, in Asia, we saw Asian stocks move significantly higher, and the dollar remain at current levels, not getting sold, as in the past 6 months... Hmmm... Maybe, this is just another teaser... But, I have to think that a return to fundamentals is coming... And none too soon either! For you all know what I think of future stock returns!

OK... To recap... Gold hits an all-time high and continues to move higher! Did the RBA smell the smoke of inflation burning? The Commodity Currencies are the story today as they are the leaders of the pack VS the dollar. Perception is the key to the dollar being removed as the clearing mechanism for oil... And, the Budget Deficit prints today...

Currencies today 10/7/09: A$ .8910, kiwi .7345, C$ .9455, euro 1.47, sterling 1.59, Swiss .9705, rand 7.4690, krone 5.6840, SEK 7.01, forint 182.40, zloty 2.8625, koruna 17.47, RUB 29.77, yen 88.90, sing 1.40, HKD 7.75, INR 46.67, China 6.8265, pesos 13.51, BRL 1.7590, dollar index 76.38, Oil $71.15, 10-year 3.24%, Silver $17.39, and Gold... $1,042.28

That's all for today... Well... That was SOME GAME last night in the tie breaker between Detroit Tigers and Minnesota Twins, with the Twins finally winning in the 12th inning! A BIG night for my beloved Cardinals, as they begin their playoff series with the Los Angeles Dodgers... The BIG question is will the Cardinals hit? If they do, watch out, World Series here we come! I did an interview with a writer for Business Week yesterday, I wonder what actually gets printed... If anything! Well... I've got my "blue" shirt on today, so it must be video taking day! I think we're doing two today, so I've got that going for me! OK, time to hit "send"... I hope you have a Wonderful Wednesday!

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

RBA Raises Rates!

Chuck Butler — Tue, 06 Oct 2009 14:22:32 GMT

...But First, A Word From Our Sponsor...
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* 4 BRIC currencies: Brazilian real, Russian ruble, Indian rupee, Chinese renminbi
* High upside potential
* No market risk to deposited principal
* Low $1,500 minimum deposit

Don't miss this unique opportunity. Deadline to buy the BRIC MarketSafe CD is Oct. 13, 2009. Apply today or learn more at http://www.everbank.com/001CertificatesMSBRIC.aspx?referId=11808

In This Issue..

* Pandora's Box of rate hikes is opened!
* Is the dollar being removed from oil trades?
* Deficits do matter, eh?
* Gold heads toward its all-time high...

And Now... Today's Pfennig!

RBA Raises Rates!

Good day... And a Terrific Tuesday to you! A Tuesday morning that is seeing a HUGE currency rally VS the dollar on the news that the Reserve Bank of Australia (RBA) opted to go ahead and hike rates now, and not wait for November's meeting, as I had thought they would do! WOW!

The first hike... It has opened Pandora's Box of interest rate hikes around the world... For, if the RBA went this soon, then we can expect Norway's Norges Bank to push their rate hike earlier on the calendar, maybe even later this month! And they won't be the only ones! Look for New Zealand to hike rates this year, and who knows what other country (Brazil?) will follow after that... But I see them coming, and they're marching the death march of the dollar!

OK, that was a little dramatic, while I don't believe, although I have more doubts every day, that the dollar would collapse to nothing, I do believe it has a long way to go when it comes to weakening. How else will the U.S. pay pack their debts in the future? It sure won't be because of a cut in Gov't Spending! That is... Unless all this deficit spending can be reversed and Gov't is cut (in size) to resemble something from 50 years ago! But, that's like asking for the moon and sky, eh?

Let's get back to the Aussie rate hike, that's more exciting and upbeat than talking about what's going to be needed in the future here in the U.S! The statement that followed the RBA rate hike, was very upbeat... So... I totally expect another rate hike next month from the RBA!

OK... The dollar's weakness this morning isn't all due to the Aussie rate hike, and prospects for other rate hikes around the world... In 2001 I wrote a white paper called, "The Demise of the Dollar"... This was the thesis for all the things I talk about almost daily regarding the reasons the dollar would got into a secular bear market... And this was one year, let me repeat that, one year, BEFORE the dollar entered into a weak dollar trend in Feb of 2002!

The reason I bring this up here in 2009, is that there is an article in the U.K. Independent that's making the rounds, that's called... "The Demise of the dollar"! This report though is about secret meetings with the Gulf Arabs along with China, Russia, Japan and France, and they are planning to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.

Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars.

Uh-Oh... That's serious stuff folks... And that death march I talked about above? Well, if this story is true, that death march just became much louder!

Right now, however, the markets are not taking the story hook, line and sinker, just yet... Yes, the dollar has been sold, but not like you would think, if traders had taken the story to heart... I think some digestion time needs to be had first... I mean the currency traders had the first rate hike and then this story on their plates all at one meal... That's a lot to digest! And Besides.. The Saudi Bank Gov. is denying that any of these meetings took place... Of course to conspiracy buffs like me, that's akin to saying, "These meetings DID take place, and we're just covering up the evidence" HA!

Now... Some might be cursing these countries right now, for dealing this rumored blow to the dollar... But, it's not like the dollar didn't have it coming! The Deficit Spending... For instance, is one thing that people that "know better" realize that the U.S. will not be able to climb out from under the deficit rock... And those knuckleheads who said "Deficits don't matter"? Well... I've said this many times before, but I can't talk about the Deficits don't matter crowd without talking about how these people remind me of a guy... He's standing on top of the Empire State Building, and decides to jump off... As he passes the 56th floor, he says... "So far... So good!"

Well, unfortunately for our "Deficits don't matter" guy falling to the ground, the sidewalk is coming at him very quickly now...

And here's another thing that should just tick you off to no end, but you have to think that the people that have loaned us money, are wondering if they'll ever get paid back... What I'm talking about here is the story from yesterday, regarding the TARP funds... You might want to sit down for this one folks...

Neil Barofsky, the special inspector general for the Troubled Asset Relief Program (TARP), says that despite multiple statements on Oct. 14 of last year that these nine banks were healthy and only receiving government funds for the good of the country's economy, federal officials knew otherwise. He went on to say that "the Treasury Dept. and the Federal Reserve lied to the American public last fall when they said the first nine banks to receive government bailout funds were healthy."

That's right... They LIED TO US! Now, doesn't that just tick you off? It sure ticks me off!

So... You can see some of the reasons the countries mentioned above might be thinking about removing the dollar as the pricing mechanism when it comes to oil...

OK... We started up beat, then got brought down, let's get back to upbeat! Hey! How about Gold? When I turned on the screen this morning, Gold was $1,020! You would think that even if the U.K. Independent story is just a rumor, that Gold would gain on the rumors...

I read a story last night, while waiting for the so-called "Epic Battle" between the Vikings and Packers on Monday Night Football, that one analyst was of the belief that Gold was about to return to its link to the price of Oil... Hmmm... Well, I personally hope that's not the case, as I certainly don't want to see the price of Oil rise to the levels I think Gold is going to rise to!

Yesterday, I did a presentation on the DTI network... (I had given you all the link to it last week) My power point presentation didn't work, so I had to just "wing it" (yeah, like talking for 30 minutes on how we got here, what's going on, and why one needs the power of portfolio diversification was difficult for me! HA!) I think they want me to come back next week... DTI educates investors / traders/ and people that just want to know how the markets work, so it's all for a good cause, because... An educated investor, is a good investor!

OK... Let's see... OH! I wanted to talk about this yesterday and totally forgot, but it's not too late today to talk about it...

One thing that we'll begin to see this month is the earnings season...
You might recall that in previous quarter ends I thought that stocks would get taken to the woodshed, because of lousy earnings, only to be surprised at the earnings that were posted... But trying not to be the boy who cried wolf, I'll once again say that I just don't see the earnings to support stock prices. This time I think we'll see that the method used in previous quarters by Corporations to produce the earnings was cost cutting... One would have to think that the Corporations have cut to the bone... And now, we'll get to the cheese that binds for earnings... A lack of revenue...

I really liked the reaction of the non-dollar currencies, led by the Aussie dollar, after the RBA rate hike... It was like "old days"... Uh-Oh, I have a song in my head... "Old days
Good times I remember, Fun days, Filled with simple pleasures, Drive-in movies, Comic books and blue jeans, Howdy doody, Baseball cards and birthdays, Take me back, To a world gone away,
Memories, Seem like yesterday....

Yes, the "old days"... Well, in this case I was talking about currencies trading on "Fundamentals" not stupid trading themes, not flights to safety, not deleveraging, but plain and simple fundamentals, things that ordinary people, like me, can understand, and place a value on a currency based on the fundamentals!

But... We've not really seen a fundamental trend since July of 2008... However, if we begin to see the rate hikes that I think we'll begin to see, it could be the harbinger of a return to fundamentals... And that, my friends, and dear readers would be like manna from heaven for your Pfennig writer!

Well... Since I came in this morning, Gold has gained $5 more, to $1,025! Looks like the all-time high of $1,033.90 that came in March of 2008, could be in jeopardy... My love's in jeopardy, baby... Oooh, ooh, ooh, ooh...

Maybe Gold moving higher can get Silver going too! My friend, the Mogambo Guru, reported yesterday that silver analyst, Ted Butler, reports that in the last 10 months, "some 150 million ounces of silver can easily be documented to have been bought by investors.
Undocumented purchases would add tens of millions more ounces."

In fact, when you add it all up, "Investment demand for silver this year is running at a full 25% of world mine production and over 20% of total production (including recycling). This is a remarkable historical turnabout."

Chuck here... Back from a trip to the Mogambo's letter... I just love the way the Mogambo ends his letter each week... He talks about how people should be buying Gold, Silver, and Oil, and then says... "Hey! This investing stuff is easy! Whee!"

OK... To recap... The RBA did raise rates 25 BPS last night, and sounded quite upbeat in their after rate hike statement. Look for other countries to follow now that Pandora's Box of rate hikes has been opened. There's a story going around about countries banding together to remove the dollar as the pricing mechanism for Oil trades... It's being denied, but there's smoke... And you know what I say when there's smoke... And Gold is pushing the envelope on its all-time high of $1,033.90...

Currencies today 10/6/09: A$ .8875, kiwi .7355, C$ .9395, euro 1.4730, sterling 1.59, Swiss .9745, rand 7.4230, krone 5.6920, SEK 6.97, forint 181.15, zloty 2.8370, koruna 17.3360, RUB 29.81, yen 89, sing 1.4025, HKD 7.75, INR 46.99, China 6.8263, pesos 13.56, BRL 1.7593, dollar index 76.35, Oil $71.13, 10-year 3.22%, Silver $16.99, and Gold... $1,025.45

That's it for today... I did get to watch the 1st QTR of the "Epic Battle" last night before going to bed! I don't understand why they start those Monday Night Games so darn late, I mean on the east coast, it would be past my bed time! The New Orleans Investment Conference, also known as the "Granddaddy of Investment Conferences" takes place later this week... The Big Boss, Frank Trotter, will be there to talk on Thursday and Friday night. I'm not going this year... Last year, I had to cancel at the last minute, after finding out my left eye was being taken over by cancer. The cancer in the eye is all gone, but it left me very little vision with the eye... So, if it looks like I'm winking at you, I'm not... Just closing it to keep light refraction from giving me a headache! WOW! The sky just lit up followed immediately by one of the loudest thunder-boomers I've ever heard! Ok... Kristin returns today after speaking last week in Las Vegas, so we've got that going for us! Yay! Time to go... Hope your Tuesday is Terrific!

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

A Currency Rally Takes Shape...

Chuck Butler — Fri, 28 Aug 2009 14:38:14 GMT

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In This Issue..

* Currencies rally overnight...
* A$'s rally for 7th consecutive month!
* Will the ECB be vindicated?
* Sweden tries negative deposit rates...

And Now... Today's Pfennig!

A Currency Rally Takes Shape...

Good day... And a happy Friday to one and all! So, yesterday didn't turn out the way I thought it would go, but that's OK... I think my body is trying to tell me something, as I overslept again this morning! I'm heading out the door this morning to go "fishing"... Should be a ton of fun, with neighbor friends this weekend...

Well, front and center this morning, we are smack dab in the middle of a currency rally VS the dollar. It has all the makings of such, as the Japanese yen is getting sold, along with the green/peachback. The improved economic data this week, finally caught up with the dollar, as risk assets are back on the table.

The euro is back above 1.43, and the Aussie dollar is back above 84-cents... These two have become the two indicators of a currency rally... With euros being the offset currency to the dollar, and Aussie dollars being the proxy for global growth. The Aussie dollar is not part of the dollar index, so... If you just watch the dollar index, you won't catch the global growth proxy in that figure... In fact, I've tried to tell people for years that the dollar index is not the "end all" to currency watching.

Let's go through the dollar index, while we're on the subject... Today's lesson if you will! The dollar index is made up of 6 currencies, Euros, sterling, yen, francs, Swedish krona, and Canadian dollars... It is heavily weighted toward euros, which took over from 5 currencies that used to be a part of this index... You know, the "legacy" currencies from the Eurozone that became euros.

So... If you just watch the dollar index, you'll miss the moves of Aussie, kiwi, Brazil, South Africa, and Norway... 5 of the 6 resource countries with Canadian dollars being the 6th.

OK... Class is over... Time to get back to work on what's going on to end this last full week of August 2009.

Speaking of Aussie dollars, as we were above, it appears to me as though the A$ will put in a monthly gain for August, which, by my calculations would be the 7th month of gains for A$'s... Even in the go-go days of A$'s when it was amassing a 75% gain VS the U.S. dollar, circa 2002- July 2008, it didn't put together 7 consecutive months of gains! It's been 20 years since the A$ put together a string of monthly gains like that!

That reminds me of my trip to St. Petersburg last past March to speak at the Investment University Conference... I told people then that the dollar's run since the previous July looked as though it was ending, as investors were growing tired of taking a beating with the "safe haven" trades they went into the previous fall. Boy... That sure was "bang on", eh?

Oh... I also said it in the Pfennig, but you have to remember, I was officially "on vacation" when I went to St. Pete, and therefore didn't come back to the office to write the Pfennig for 10 more days!

A "new" reader sent me a note the other day, and said that the stock market was looking quite overbought, and asked me if a sell off in the stocks would promote the "flight to safety" (Treasuries and dollar buying) once again... I told him that I had talked about this a couple of weeks ago... But, realized there are handfuls of new readers all the time... So... Just in case you missed class that day... I asked the question about whether or not everyone else was seeing this stock move and not believing it had legs... I then said that should stocks sell off and go into the dumpster like they did after the Lehman Brothers collapse, that a return to Treasuries just might be in the cards, and would adversely affect the gains the currencies have booked since March.

We've seen glimpses of such the past couple of weeks, when "risk assets" are shunned.... But, each of those times, the selling didn't last long.

Now that we're beginning to see some countries like Australia and Norway, begin to talk about raising interest rates early next year, and some countries like Germany, France, and Japan, all pulling themselves out of recession, there's a new feeling going around, that countries around the world, will be ahead of the U.S. with regards to economic growth, and a return to higher yields... So... As a currency and precious metals holder, we all have to hope that this would be enough to offset a U.S. stock sell off...

We would then, be back to fundamentals... And oh what happy day it would be! Oh happy day... Oh happy day! Something we could all hang our hats on, and each day say... Well, fundamentally speaking, this should do this, and that should do that! Not all this crisis, investing, hodge podge bundling of risk assets that have little or no correlation to each other, and different pricing mechanisms, and looking over our shoulders for the next shoe to drop...

There was a story in the Financial Times this morning, and it reminded me of something that Chris said last week, when I was in San Francisco. Chris had talked about how the Eurozone economy was pulling itself up from the ashes, and how he thought it probably reflected on how the European Central Bank (ECB) had dealt with their recession, which was quite a bit different than here in the U.S.... The story in the Financial Times said about the same thing this morning!

Let's see what the FT had to say... "As the European Central Bank prepares for its meeting next week, the 16-country Eurozone appears to be recovering, deflationary risks have subsided and an effort to bolster bank lending is in place. The Economy appears to be vindicating the ECB's strategy."

Yesterday, the 1st revision to 2nd QTR GDP here in the U.S. printed and while I thought it would show a revision to -1.5% from -1%, it did not... It printed as unchanged at -1.%... I don't see the economy that strong, do you? I mean -1% is still a negative growth number, but it just feels like to me that it's weaker than that... You have to recall back to the months in the 2nd QTR, we were still booking some HUGE unemployment numbers each month, and the ISM Manufacturing Index was below 45, which you may recall 50 being the line in the sand to indicate expansion or contraction... But, I guess that's what the Gov't says GDP was, and you know me, whatever the Gov't says I go right along with all the time.... NOT! Geez Louise, that, in my mind, would be a crime to do that!

The weekly Initial Jobless Claims hit 570,000 last week, with the previous week revised up to 580,000... So... The Bureau of Labor Statistics (BLS) may tell us next Friday that job losses continue to fall... They lie! Just do the calculations of the Weekly Initial Jobless Claims...

OK, today, to end the week, we get two of my fave reports... Personal Income, and Spending... I saw a report that was calling for stronger personal spending, because of the "cash for clunkers" program. Well, let's hope that's the only reason Spending is forecast to be higher than Income once again! You may recall that in July, we saw Personal Income fall -1.3%, while Spending rose .4%... That's not good folks, and part of the reason we're in this mess today!

Before I head to the Big Finish... I wanted to share this story with you... In the last month, Sweden introduced negative interest rates on deposits, to spur banks to lend more... I wonder how that's working for them? Apparently, other Central Bankers are watching this to see how it works out. You see, they would follow this lead by Sweden, in a heartbeat if it meant they had a "tool" to remove the monetary medicine that Central Banks have given to the patients for a year now...

Currencies today 8/28/09: A$ .8460, kiwi .6880, C$ .9265, euro 1.4375, sterling 1.6375, Swiss .9475, rand 7.7525, krone 6, SEK 7.06, forint 188.10, zloty 2.8425, koruna 17.70, RUB 31.55, yen 93.75, sing 1.4380, HKD 7.7510, INR 48.66, China 6.83, pesos 13.22, BRL 1.8660, dollar index 77.98, Oil $73.19, 10-yr 3.49%, Silver $14.55, and Gold... $953.15

That's it for today... I want to wish Mike Meyer good luck today, as he will go to have Lasik done to his eyes this afternoon... Like I said above, I'm heading out this morning, but first I have some trading to do. Yesterday, I was reading the revision to Financial Reckoning Day, called Financial Reckoning Day Fallout, by Bill Bonner and Addison Wiggin. They've also done a revision of Empire of Debt... If you never read the first editions, I suggest you pick up the "updated" versions, you won't be disappointed! I believe you can get them on Amazon or Barnes and Noble websites... It's very easy to do this! My little buddy, Alex, has his "football Jamboree" tomorrow. These teams all get together and rotate scrimmaging with each other. It's a great way for the coaches to see what they need to work on before the first game. So... Good luck to Alex and the Lindbergh Flyers 8th grade team on a good and safe season! OK... Time to get this show on the road, I have a nice calming lake waiting for me this afternoon! I sure hope your Friday is Fantastico, and you have a wonderful weekend!

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

Riksbank Holds Off On QE...

Chuck Butler — Tue, 21 Apr 2009 13:34:22 GMT

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In This Issue..

* Currencies trade in a tight range...
* German Investor Confidence rises!
* Thoughts from Jim Rogers...
* Kohn on the economy...

And Now... Today's Pfennig!

Riksbank Holds Off On QE...

Good day... And a Terrific Tuesday to you! I'm staring at all this white space on the Pfennig template, and I absolutely drew a blank... I couldn't think of, or can't think of a thing to say! Whoa there partner! That can't happen! There's got to be something, anything, to talk about... OK! I'm back now, I really have no idea where that was going, it was an out of body experience! HAHAHAHA!

OK... The currencies traded in a very tight range yesterday, after the dollar had ambushed them on Friday and in the Sunday night trading sessions. It's been a week since we saw currency strength, other than Japanese yen. So, we should be due for a bounce. There continues to be more whispering about the eventual dollar weakness, but for now, it's not enough to get us back to where the dollar should be trading on a fundamentals basis.

The euro got a lift this morning when German Investor Confidence as measured by the think tank ZEW, rose to the highest level in nearly two years during April. WOW! The index rose to 13 from a -3.5 in March... Quite the turnaround, eh? It is reported that Investor Confidence rose due to the Gov't's efforts to revive the economy. Don't know if you follow this or not, but European stocks just posted their 6th consecutive week of appreciation... You have to wonder if the stocks are telling us something here... Like, has the financial crisis in Europe bottomed out and is now on the recovery path? Don't know... And like I always say, one report doesn't make a trend, just like one swallow doesn't make a summer.

Sweden's Riksbank met this morning and surprised the markets (and me) by cutting only 50 BPS (75 BPS was the consensus), and in the other more important announcement... Riksbank Gov. Ingves said, "measures such as buying bonds were not on the cards at the moment". So, no Quantitative Easing (QE) for Sweden, just yet... But, unless things turn around soon in Sweden, the Riksbank will have to come back to decide on QE at sometime in the future... But for now, the krona is seeing a nice bid, and rallying on the news...

You know... Yesterday I talked about Canada, and how I "believed" that the Bank of Canada (BOC) was going to introduce QE, and IF they did I would mark them off my Hit Parade... But, I didn't say that the BOC was going to do that for certain! So... They could put it off like the Riksbank did... We'll just have to wait-n-see! Of course, I certainly fully expect them to go that route now, rather than later... But, I'm just saying, you never know...

Fed Head Kohn, was speaking yesterday, and said something that I sort of agree with... Kohn said the, "U.S. economy may stabilize this year, and begin a slow recovery". Hmmm... Well... By the end of the year, I see unemployment, by BLS accounting methods, at 10%, maybe 11%... Of course if you count all the people that have seen their unemployment benefits expire, or people that are working part time jobs because they can't find full employment, the unemployment rate is probably somewhere around 16% now... And heading to 20% when all the heads are counted as unemployed that should be counted as such.

So... With that in mind, I have to wonder how the economy "stabilizes"... Credit will still be hard to find, and so on... But, I do believe that our -6% GDP now, will turn to something better by year-end... Maybe -1 or -2% or, we might even squeeze out a small positive number, which you would then hear the media and politicians claim, that "we're out of the recession"... HOGWASH! But, that's just my view on it... But, I liked the fact that Kohn at least sounded a bit worried, and with caution regarding the economy. Apparently he left Big Ben Bernanke's rose colored glasses at home!

Even with a small gain in GDP, the Fed will keep interest rates at current levels, as they can't appear to smashing the golden egg too soon...

The high flying high yielders, which basked in the early spring sun during March, have retreated to their dressing rooms, as risk aversion has cast a shadow on the high yielders. Risk Aversion is a result of the earnings season for equities. So, that means the like of Aussie, kiwi, rand, real, are all softer and not looking as perky as they did a couple of weeks ago. But... Once currencies and stocks hit splitsville, and get back to fundamentals, investors looking for any yield, no matter how small, as long as it beats the paltry yields they get now in the U.S., Japan, and most of Europe, will look to these high yielders... So... That could mean that buying them now, when they are cheaper than they were a couple of weeks ago, just might be the ticket! But who's to say that they won't get cheaper? Ahhh grasshopper, that's the dilemma we face everyday with every purchase we make, weather it be the Aussie dollar, or auto tires, or new computers... You see my point, I'm sure...

Speaking of the Aussie dollar... The Reserve Bank of Australia (RBA) just released their minutes of the last meeting, where the RBA voted to cut interest rates 25 BPS... It appears that the decision was a close one between no cut and 25 BPS. RBS Gov. Stevens believes the Aussie economy is well placed to rebound... All this has helped the A$ to remain above 70-cents overnight and this morning.

OK... I've been champing at the bit all morning to get to this interview in Barron's with our long time friend, and investment guru, Jim Rogers... I can't get to all of the interview, so I pulled out a few quotes that plays well with what I've been talking about... Here's Jim Rogers!

"Yes, politicians are making mistakes. In Japan, the problem has lasted for 19 years. I hope that it doesn't last 19 years in the U.S. The approach that works is to let them (U.S. banks and automakers) collapse and clean out the system. The idea that phony accounting is the solution (through changes in mark-to-market rules) is ludicrous. And the idea that a debt problem and an excessive spending problem can be cured with more debt and more spending is ludicrous.

It's laughable on its face, but politicians think they've got to do something. Unfortunately, they are doing the wrong things and they are going to make it worse."

He then talked about something that I've been talking about for a couple of months now... The Treasury bubble... Let's listen in...

"I am anticipating shorting bonds -- the U.S. long bond. It's about the only real bubble around that I can see right now -- other than the U.S. dollar. I am not shorting bonds at this moment because I've shorted plenty of bubbles in my day, and I have learned that you better wait because they go up higher than any rational person can anticipate. But my plan is to short the long bond in the U.S. sometime in the foreseeable future."

Isn't that amazing... I just talked about this again the other day!

So... The Gov't's "stress test" results are going to be revealed beginning this Friday... It will be interesting to see what the results are... But, I wouldn't get too excited about all of this, as I don't think we'll get a chance to look under the hood at these financial institutions... Not that I want to or have the time to anyway! But I'm sure there are those out there that would love to get that chance... Buzzzzzzzz, wrong answer! Thank you for playing, there's a nice parting gift for you at the door!

Yesterday, Leading Indicators for March printed worse figure than forecast, but the previous month's -.4% initial print was revised to -.2%... March's figure was -.2%... So... Leading Indicators is still telling us that there will be more pain to suffer through ahead... Hey! That's why they are called "Leading Indicators!"

The U. of Michigan preliminary reading of Consumer Confidence for the first two weeks of April, printed stronger than expected at 61.9, up from the previous month's total of 57.3... Of course when this report was compiled, stocks were still in rally mode... Before earnings season, etc. I doubt the final report will be so pie in the sky...

No real data to deal with today in the U.S. or Europe... So... Once again, focus will be on the earnings... We will get some more Fed speak this morning from Fed Head Hoenig... And then mid morning will see U.S. Treasury Sec. Geithner testify before the oversight panel... Would that be oversight on TARP or Tax returns? HAHAHAHAHA!

I did it again last week... I placed the kiss of death on a currency by talking nice about it! This time it was Indian rupees... Last week I talked about how the rupee had performed nicely / stealth like, under the radar... But, the rupee has now given back all that stealth-like gain! In the past, a move like this would have the Central Bank's hands all over it (with intervention)... But this move might just be associated with the high yielders, and the risk aversion.

Gold rebounded nicely yesterday, up about $15, and has added $3 this morning... Just didn't see right to see it getting sold like that last week... Maybe calmer, cooler, more intelligent heads took over!

Well... It's time to head to the Big Finish. We have a birthday girl here today, and I've got to get to work on my presentations for Bermuda! UGH!

Currencies today 4/21/09: A$ .7005, kiwi .5540, C$ .8075, euro 1.2950, Sterling 1.4535, Swiss .8555, rand 9.13, krone 6.80, SEK 8.63, forint 231.90, zloty 3.4125, koruna 20.90, yen 98.10, sing 1.5080, HKD 7.75, INR 50.41, China 6.8317, pesos 13.39, BRL 2.2375, dollar index 86.58, Oil $45.87, Silver $12.18, and Gold $888

That's it for today... Except to say a Big Happy Birthday to our accountant magnificent, Mary Owens... Mary is not only a magnificent accountant, but also a magnificent quilt maker! It's down to the last 5 hours for my fave show 24... It's so intense! Did you see the Washington Nationals' jerseys they had on Friday night? Nationals was spelled Natinals... How embarrassing, and they wore them! That's a shame, Washington waited so long for a baseball team, and now they have one that can't win, and a marketing department that can't spell! Crazy! The NFL Draft is this Saturday. Our Rams have the second pick... I sure hope they don't blow it! This team needs help! Good luck to our Blues tonight, they are down 3 games to none. Their goal is almost impossible.. Slim and none, and Slim just left town... But... You have to believe! I hope you have a Terrific Tuesday!

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

Bad news for GM and Chrysler rallies the US$...

Chuck Butler — Mon, 30 Mar 2009 14:16:47 GMT

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In This Issue..

* Bad news for car makers rallies the US$...
* Yen comes back strong...
* Singapore to devalue?...
* German Chancellor Merkel gives warning...

And Now... Today's Pfennig!

Bad news for GM and Chrysler rallies the US$...

Good day... And good Monday morning to all of you. I can't believe March is nearly over, it seems as though it just started. March will end up being a pretty good month for the currency markets, as investors exited the safety of US treasuries and started moving funds back into higher yielding assets. But the markets continue to be volatile, and news released on Friday and over the weekend has sent these investors rushing back to the safe haven of the US dollar.

The Japanese Yen and US dollar benefited after a US Government official said Friday that bankruptcy may be the best option for GM and Chrysler. The dollar continued to gain strength this morning after US Treasury Secretary Geithner warned yesterday that some financial institutions will need "large amounts" of aid. When the Treasury Secretary says large amounts, you know it is going to be billions or trillions! Geithner was making the rounds of Sunday morning talk shows to try and justify the money already spent and prepare the taxpayers for another request of funds.

Bad economic data released on Friday here in the US helped drive investors back into the US$. Consumer confidence in the US remained near a three decade low this month as the jobless rate continues to climb. The number of US states with a double digit jobless rate almost doubled in February; with Nevada, North Carolina, and Oregon joining Michigan, South Carolina, California, and Rhode Island with unemployment rates above 10%.

The Japanese yen benefited from the safe haven buying, with the yen turning in the only positive performance vs. the US$. A report in Japan which indicated a cut in inventories added to the yen's good day. Inventories fell 4.2% last month, and companies said they would increase production in coming months, indicating the worst of the manufacturing slump may be over. But with exports falling, and retail sales tumbling, I don't expect manufacturing to pick up anytime soon. Deflation continues to be a problem in Japan, as consumer prices remain stalled. With benchmark rates as close to zero as possible, the Bank of Japan has little ammunition left to combat the falling prices. If you still own the Japanese yen, take advantage of these small rallies to exit your position, as the yen will probably not be able to maintain this strength.

Another currency you may want to consider exiting is the Singapore dollar. According to a story I read on Bloomberg this morning, the Monetary Authority of Singapore may devalue their currency and allow it to drop 4 percent against the US dollar in the next few months. The central bank reviews the currency's position twice a year, and some are now predicting it will shift the value of the Singapore dollar in April. Singapore's exports continue to fall and some are blaming the strength of the Singapore dollar vs. its regional competitors. While I believe the Asian economies will lead the world out of the global recession, the Singapore dollar will likely come under some selling pressure going into April.

With a general move back toward safety, the higher yielding currencies of Australia and New Zealand suffered. The Australian dollar dropped below .68 but will still end March with over an impressive gain vs. the US$. The New Zealand dollar also gave back some of its recent gains, moving down to the .55 handle. But like the Australian dollar, the kiwi will still end march with nice gains vs. the US$, likely to be in the double digits.

Other commodity based currencies also suffered, with the US dollar moving higher vs. the Brazilian real and Canadian dollar. But many investors still feel these commodity currencies will be some of the first to recover, as countries invest stimulus money into infrastructure projects.

News from Europe fed into the dollar's strength as a report showed industrial orders plunged 34% in January, the most on record. Another report showed France's economy shrank by 1.1% in the fourth quarter, the steepest decline since 1974. With all of this negative data, it isn't hard to see why European confidence fell to the lowest on record in March. An index of executive and consumer sentiment in the euro region released this morning fell to a record low. All of this negative data is boosting calls for further rate cuts by the ECB. After the 50 basis point cut at the beginning of March, most currency traders expected the ECB to pause and hold rates steady for a couple of meetings. But now the calls for further cuts are becoming louder.

The Euro had the worst day vs. the US$ in nearly three months on Friday, and is not holding just above 1.32. Some are now even suggesting the ECB follow the US and UK down the path of "quantitative easing", buying bonds to pump more money directly into their economy. As I have written recently, this is one of the most inflationary moves a central bank can take, and would be a dramatic step by the typically hawkish ECB.

But not everyone in Europe is wanting the ECB to follow the paths of the US, UK, and Japanese central banks. Germany's leader, Chancellor Angela Merkel warned against inflating the global economy to revive growth. Frank Trotter sent me an article from this weekend's Financial Times in which Merkel rejected calls to spend more public money in Germany to speed the recovery. "This crisis did not come about because we issued too little money but because we created economic growth with too much money, and it was not sustainable growth," Merkel said, according to the FT. "If we want to learn from that, the answer is not to repeat the mistakes of the past."
Merkel's position is in stark contrast to our own administration, who have taken a somewhat short sighted 'grow now, worry about inflation later' stance. In fact, the US administration is excited about how they have been able to manufacture a new 'refinance' boom by forcing mortgage rates back down. But the concern I share with Merkel is how will policy makers unwind all of this 'easy money' once the recovery begins?

Does anyone think the Fed will have the courage to end their emergency-lending programs while the unemployment rate remains near double digits? You know the administration is going to push the Fed to wait until there are clear signs the US is in recovery before moving rates back up. But any slight hesitation on the Fed's part will probably spark inflation which could quickly grow out of control if left unchecked.

But Treasury Secretary Geithner said yesterday that the Fed's injections of reserves into the economy are "not going to create the risk of hyperinflation in the future." "We have a strong independent Federal Reserve with a very strong mandate from the Congress, and they will do what's necessary to keep inflation low and stable over time," Geithner said on ABC's Meet the Press. At the same time, he warned policy makers shouldn't "put the brakes on too quickly."

I hate to disagree with the Treasury Secretary (ok, you caught me, I actually kind of like disagreeing with the Treasury Secretary) but I just don't think they have the ability to keep inflation at bay. The Fed has injected record amounts of liquidity into the system, using some untested 'quantitative easing' procedures which will need to be reversed. With the Fed pledging to purchase another $1.25 trillion of mortgage debt and $300 billion of Treasuries, inflation is inevitable.

Finally, I read where Wednesday has been dubbed 'Financial Fools Day' in London. Protestors attracted by the G20 summit plan to target London bankers for their role in the financial meltdown. This should make things interesting on Wednesday, as protestors plant to try and block roads and prevent people from getting to work at the heart of the global currency trading.

Currencies today 3/30/2009: A$ .6808, kiwi .5625, C$ .8001, euro 1.3192, sterling 1.4183, Swiss .8706, rand 9.7274, krone 6.7765, SEK 8.2889, forint 234.97, zloty 3.595, koruna 20.89, yen 96.63, sing 1.5213, HKD 7.7502, INR 51.2825, China 6.8364, pesos 14.539, BRL 2.2911, dollar index 85.66, Oil $50.57, Silver $13.03, and Gold... 912.14

That's it for today... Mizzou just couldn't get it done vs. UCONN on Saturday, and a terrific Tiger season came to an end. But the Blues had better luck vs. Columbus, winning back to back games and moving into a tie for the final playoff spot. They still have their work cut out though, as they play 6 of their last 7 games on the road. We did end up getting a quick shot of snow which had been predicted, but nothing more than a dusting which melted in a few hours on Sunday. I guess we got lucky, as areas just to our west got dumped on with up to a foot. Mike and Chachi are here now, so better get this out and get the week started. Hope everyone has a Marvelous Monday!!
Chris Gaffney, CFA
Vice President
EverBank World Markets
1-800-926-4922
1-314-647-3837

Geithner tanks the dollar, but then pushes it back up...

Chuck Butler — Thu, 26 Mar 2009 14:02:42 GMT

EverBank is a Member FDIC and Equal Housing Lender.
......................................................
In This Issue..

* Geithner sends the dollar on a thrill ride...
* A failed UK gilt auction...
* China set to recover first...
* AUD and NZD rally again...

And Now... Today's Pfennig!

Geithner tanks the dollar, but then pushes it back up...

Good day... The currency markets took back what little strength the dollar mustered over the past two days with the Euro moving back above popping back above 1.36 and the Australian dollar moving back up over .70. The cause for this dollar weakness? Data released in the US yesterday was surprisingly strong again, so investors dumped the 'safe haven' holdings of Treasuries and moved money back into higher yielding investments.

At one point yesterday the dollar index dropped precipitously (more than 1.5% in less than 10 minutes), and then bounced back up within a half hour. Jennifer McLean, who takes care of our currency trading while Chuck is away from the desk, said the sudden moves were due to Treasury Secretary Geithner's comments. Apparently Geithner was asked about China's call for a new international reserve currency yesterday at a NY event. He said that while he hadn't read the proposal, he understood it as a plan "designed to increase the use of the IMF's special drawing rights. And we're actually quite open to that." After hearing those words, currency traders immediately starting selling off the dollar. After all, if the Treasury Secretary of the US says the administration is open to a new international reserve currency, why do you want to hold dollars? I guess Geithner got wind of what he had done to the currency markets pretty quickly (the power of Blackberries!) and 15 minutes later he clarified his comments to say the US dollar should remain as the world's reserve currency.

So the Treasury Secretary got a quick lesson in just how sensitive the currency markets are. The props which have held up the US dollar can be kicked out from under it with a few words from him. I have got to believe the quick sell off yesterday is a sign of what will happen in the coming months as we here more and more rhetoric about the need for an alternative reserve currency. Foreign nations are not going to want to continue to invest a majority of their reserves in a currency which is likely going to be losing value because of the inflationary impact of all of the debts and deficits here in the US. If the Euro zone can show some signs of stability, it could take advantage of the weakened state of the US$ to challenge for the reserve currency status. Just what Chuck has been talking about over the past few years.

The big story out of Europe yesterday was the failure of the UK bond auction. The UK Government held an auction to sell 1.75 billion pounds of bonds (commonly called gilts) yesterday. For the first time in 7 years, not enough buyers showed up at the auction so the UK couldn't sell all of the gilts. This auction 'failure' sent interest rates up in the UK as investors demanded higher yields. The main reason the UK couldn't attract enough buyers were their quantitative easing efforts of late. You see, the Bank of England was one of the first to announce they would be buying UK gilts in an effort to bring down interest rates and stimulate the economy. Sound familiar? This is what the Obama administration is going to do with last weeks announcement that it would be purchasing $300 billion of US treasuries.

This effort to drive rates lower than what the market dictates causes investors to just stay away from the auction. So it creates an environment where the government is the only willing buyer of their own debt, a situation that can become hyper-inflationary. So the government must eventually attract outside investors back into the debt auctions. To do this, they either have to let interest rates rise or let their currency value fall, making the purchases more attractive to outside investors. A combination of the two is the most likely scenario. This is the path the UK has started to walk down with the US close on their heels.

Chuck alerted me to the failed gilt auction yesterday, and sent me this note: "Oh... And did you hear that in the U.K. their Gilt auction (their treasuries) failed yesterday? Now, hasn't just about everything that happened here in the U.S. during this financial meltdown happened first in the U.K.? Well... I think this is an ominous omen that they couldn't get enough buyers for their debt auction... "

As I reported in the first paragraph, the US data releases continued to be surprisingly strong. Both durable goods and sales of new homes unexpectedly rose in February according to yesterday's reports. Durable goods orders jumped 3.4% in February, after dropping a revised 7.3% in January. This increase was the largest in more than a year, and the first positive move in seven months. The other big piece of data released by the Commerce Department showed New home sales increased 4.7% vs. the January sales. These two positive numbers eased fears in the equity markets, and encouraged investors to take more risks. This is why positive economic data releases in the US cause a sell off in the US$ (the reversal of the trend we were seeing earlier this year).

Does anyone find it odd that all of the data we are seeing this week are surprisingly strong, while the revisions to the prior month's data show even bigger drops? I'm not accusing the government of massaging the numbers (wink wink) but it just seems odd. Today we will see the GDP numbers from 4th quarter of 2008. The economists are predicting a drop of 6.6% during the last quarter, but the trend with data releases this week would suggest the number will come a bit stronger. We will also see the weekly jobless claims which are expected to show another 650k US citizens were out of a job last week.

This would be the eighth consecutive week of a 600k+ number for jobless claims. The jobs numbers will have to start improving if the US is going to really turn things around.

The strength of the Euro was somewhat tempered by the release of German business confidence data which fell to the lowest level in more than 26 years. The global economic slump is weighing heavily on German companies who rely on exports. The data gave support to those calling for another rate cut by the ECB. The Euro has been caught in a fairly narrow trading band this week, as it has benefited from calls for an alternative reserve currency, but sold vs. poor European economic data.

China's central bank Governor Zhou Xiaochuan helped investor confidence with a statement that the Chinese economy is recovering. "Leading indicators are pointing to recovery of economic growth," Zhou said in an article on the central bank's website today. The government "has taken prompt, decisive and effective policy measures, demonstrating its superior system advantage when it comes to making vital policy decisions," he said. China continues to try and keep their economy growing above 8%, and will continue to be the growth engine of the global economy. A strong Chinese economy is good for the commodity markets, and global recovery.

As predicted, New Zealand's current account deficit widened to a record last year as exports fell. Finance Minister Bill English said this week the deficit is "uncomfortably large" and makes New Zealand dependent on foreign funding. It is actually nice to hear a Finance Minister worried about the long term impact of running large current account deficits! Here in the US all we hear is 'deficits don't matter'. But the growing current account deficit is the main reason Chuck suggested investors move out of the kiwi last year, and we still think the Australian dollar is a better currency to own.

Both currencies rallied again yesterday, as investors moved out of 'safe haven' US treasuries and into these higher yielding currencies. The Australian dollar also benefited from an statement by the Rio Tinto Group that predicted the metals markets would recover in the second half of 2009. Commodities account for over 60 percent of Australia's exports, and 70% of exports in New Zealand. If data continue to show China is on solid footing, these two currencies should continue to appreciate.

It is getting late, so I will head right to the currency wrap-up:

Currencies today 3/26/2009: A$ .7020, kiwi .5770, C$ .8142, euro 1.3574, sterling 1.4561, Swiss .8883, rand 9.4226, krone 6.4553, SEK 8.0229, forint 222.57, zloty 3.3561, koruna 20.1542, yen 98.35, sing 1.5080, HKD 7.75, INR 50.5625, China 6.8319, pesos 14.172, BRL 2.2378, dollar index 83.77, Oil $53.53, Silver $13.575, and Gold... 935.77

That's it for today... Going to be a late night for me this evening, as I get to attend the Blues game here in St. Louis and then stay up to watch the Mizzou / Memphis game on the television. The Blues are just one point out of a playoff spot, so every game is a must win. Hopefully tomorrow I will be telling all of you about two terrific wins! I hope everyone has a Tub Thumping Thursday! (I heard on the radio last night that Tub Thumpers are what they call politicians in England, and that Tub Thumping is campaigning or getting up on your soap box. We have been doing a lot of that lately in the Pfennig!)
Chris Gaffney, CFA
Vice President
EverBank World Markets
1-800-926-4922
1-314-647-3837

A New Year’s Jobs Jamboree Friday...

Chuck Butler — Fri, 09 Jan 2009 15:36:12 GMT

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

In This Issue..

* Will the ADP report be a good indicator?
* China to slow treasury purchases?
* Gold as a store of wealth...
* Dealing with the devil...

And Now... Today's Pfennig!

A Jobs Jamboree Friday...

Good day... And a Happy Friday to one and all! A Fantastico Friday, as it is forecast to get to 50 degrees today here in St. Louis. Never mind that tomorrow's high will be 29! It doesn't take away from today! What a trading day in the currencies yesterday... Whew! It's a Jobs Jamboree Friday, so let's not beat around the bush... It's time to Jamboree!

Today is the day the Gov't prints the December Jobs Jamboree, and if Wednesday's ADP report did what they said it was going to, and that is change their methodology to mirror the BLS (Bureau of Labor Statistics) then this morning's Jobs Jamboree will be a nightmare. Of course not the kind of nightmare that the over 2.5 million people that lost jobs in 2008 had! I was once in those numbers, as our old Bank, Mark Twain Bank, was bought by a bigger bank, Mercantile Bank, and Mercantile decided after a few months to perform ethnic cleansing of Mark Twain employees... I called it "my retirement" but with a 3 year old at home and on my lap most of the day, "retirement" couldn't last too long! My point is that you don't know the emptiness and failure you feel when they show you the door... So my thoughts are always with those that lose their jobs...

OK, back to the Jobs Jamboree... Earlier in the week the "experts" were forecasting a -500K in job losses... But as the week has gone on, that forecast has inched up to -515K and then -523K... It's like the BLS is setting us up for a BIG number, but wants the media to carry on their charade of reporting the jobs numbers by saying they came in "just above the forecast" (as if the forecast wasn't bad!)

The other thing to think about prior to the print is the shenanigans the BLS plays with the jobs numbers... I'll tell you this... Given what we know about the state of the economy, should the Jobs Jamboree print lower than the -525K that's now forecast, then you will know in your heart of hearts that the BLS "cooked the books"... That's all I'll say about that...

The Weekly Initial Jobless Claims came in under 500K for the second week in a row... I would put this down to the Holidays... I fully expect this to catch up next week! UGH!

So... The currencies yesterday rallied hard, sold off, rallied hard again, sold off, and this went on for the bulk of the day. As I signed off yesterday, the Bank of England (BOE) cut rates 50 BPS, and sent the pound sterling higher... I know, I know, that shouldn't be, but it is, and the mental giants that are running these trading desks, reward countries that debase their currencies!

But in the end... The euro was higher on the day, along with yen, and Swiss francs... The high yielders took one to the chin, as risk takers have gone back under the covers to get warm, as the chill in the air got to them!

I had more than a few people send me a story that appeared in the NYT that played well with my screaming from the rooftops about the Budget Deficit announcement from the day before... Here is a snippet, of the story that can be read in its entirety at: http://www.nytimes.com/2009/01/08/business/worldbusiness/08yuan.html?hp

"In the last five years, China has spent as much as one-seventh of its entire economic output buying foreign debt, mostly American. In September, it surpassed Japan as the largest overseas holder of Treasuries.

But now Beijing is seeking to pay for its own $600 billion stimulus - just as tax revenue is falling sharply as the Chinese economy slows. Regulators have ordered banks to lend more money to small and medium-size enterprises, many of which are struggling with lower exports, and to local governments to build new roads and other projects.

All the key drivers of China's Treasury purchases are disappearing - there's a waning appetite for dollars and a waning appetite for Treasuries, and that complicates the outlook for interest rates, said Ben Simpfendorfer, an economist in the Hong Kong office of the Royal Bank of Scotland."

OK... Back to me... So... If, what President-Elect Obama said regarding "expecting Trillion dollar Budget Deficits for several years" is to come to fruition, then what pray-tell will we do with all the Treasuries we issue to pay for the debt?

Uh-oh! Spaghetti-o's! The Gov't will have to ratchet the yield on these bonds up so high to attract investors... OR... Allow a general debasing of the dollar to allow those purchases of Treasuries to be made at a discounted clearing price. I've said this all along folks... Over and over again and over again until I'm blue in the face... Or was I holding my breath again? Both! I hold my breath in hopes that it is all a nightmare!

I have to tell you all, especially new readers that haven't heard me screaming from the rooftops about the direction of this country, to socialism, that this is all getting completely out of hand! The Fed is well down the path to controlling the markets, taking the term "free markets" away for good... And do we expect anyone to stop them? Not unless it's us... We The People...

Ty Keough sent me a note yesterday from James Quinn on investmentrarities.com... "As the politicians scurry to "save" capitalism through the use of communist measures, more Americans are becoming disheartened. The definition of communism according to Webster's is:

A system in which goods are owned in common and are available to all as needed.

George Bush, Henry Paulson and Ben Bernanke have decided to seize money from the vast majority of Americans who lived within their means, utilized debt sparingly, and worked hard to get ahead, and give it to the most appalling failures in our society. They have shoveled billions to banks that operated their businesses like gambling parlors. They have shoveled hundreds of millions to people who bought houses with no money down, interest only mortgages and fraudulent loan applications. They are now rewarding automakers who made the wrong vehicles, pay 30,000 workers per year to not work, and have only been able to "sell" cars by giving them away with 0% financing to any schmuck who could sign on the dotted line. These acts fit the definition of communism. We are now more communist than China."

I spent a long time with a Wall Street Journal reporter yesterday... The reporter, who has interviewed me before, going back to 2002, was interested in my take on Gold as an inflation hedge... I know there are people out there that will dispute this, but if you go back to where Gold was issued when Nixon closed the Gold window in 1971 ($34), and not from it's previous high in 1981, you can see it not only is an inflation hedge but a store of wealth, and as people that own dollars look at the loss in purchasing power of their dollars, and look at the store of wealth Gold has held... It makes abundant sense to have Gold... I wonder if this will get printed in the WSJ....

And Savers... I'm a saver, are you a saver? Yes, I spend money, just like a lot of people, but I also save... And that's what ticks me off these days! The Fed has lowered rates to 0%, so there's no incentive to save if you only look at yield... But, if you look at the fact that saving has to start somewhere, then maybe the Gov't will get the hint / clue, and stop overspending! But doesn't it tick you off that the Fed has lowered rates to 0% and have basically told you, the saver, to go out and seek risk to offset that loss of yield? They don't want us to save, people... So... You know me! SAVE, SAVE, SAVE! And then SAVE some more!

And that... Leads me to a book, that a reader sent me, that he wrote! The title of the book is: Debt is Slavery... And 9 Other Things I Wish My Dad Had Taught Me About Money... The author is Michael Mihalik... I think most people don't believe they have a debt problem... But... If this financial meltdown continues at its current pace, I think they've got a rude awakening coming. Just like the U.S. and their debt problem... It's relatively the same ordeal...

So... The Bank of England (BOE) did cut rates 50 BPS yesterday, which puts their total of the last three rate cuts at 300 BPS... And what did the pound sterling do? It rallied! These are strange times, my dear reader friends... But in my humble opinion, I would view this rally as an opportunity to look to sell at these higher levels, because my view on the pound is not good... The U.K. has the same problems as here in the U.S. (not the deficit problems, but they could get there in heartbeat should they continue to bail out institutions) just on a smaller scale... And in the end, that will be enough to push pound sterling down... My long time friend, Joe Losos, asked me if he could write a piece for the next monthly newsletter to clients of EverBank World Markets. Of course I said yes... And he came back with a piece on the prospects for the pound... So look for that in the monthly Review & Focus at a newsstand near you, sometime in the future!

The Japanese yen is back on the rally tracks, as the risk takers have gone AWOL... Yen is back to below 91, trading with a 90 handle, and looking perky... Should the Jobs report in the U.S. today be rotten, yen should have a field day VS the dollar. Now there's something to look for!

The Brokerage House that owns a Bull, issued a report that said, "Dollar would slide if U.S. loses more than 700,000 jobs"... They really went far out on the limb with that one, eh? HAHAHAHAHAHAHA! No, I'm not taking a shot at our friends there, just pointing out that even the Big Boys right now, don't have a strong conviction on the direction of the markets right now... So, they tip-toe through the tulips...

Canada will also print their employment data this morning... About 1/2 hour before the Jobs Jamboree. I also didn't like hearing what the Canadian Finance Minister had to say yesterday about Canada seeing a "substantial deficit later this year"... The Finance Minister, Flaherty will present his budget on April 1... Let's hope he's setting us up for an April Fool's Day joke! Unfortunately, I don't think these Gov't people have a sense of humor, so I think it's safe to rule that thought out right here, right now!

I'll finish this up with a brief snippet from a report by one of my fave writers, William Pesek of Bloomberg... Mr. Pesek's complete piece can be found here: http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_pesek&sid=aHOuXTmCv61Y

Here's William Pesek... "Beijing bookstores would be wise to stock up on Johann Wolfgang von Goethe. His work will help Chinese officials understand the "Faustian bargain" in which they are engaged with the U.S.

The reference here is to a compromise of principles for fleeting gains. In literature, Goethe's Faust is a mythic German alchemist who made a deal with the devil. And that, in a nutshell, is where China, the biggest foreign holder of U.S. debt, finds itself as America re-inflates its economy.

Treasury Secretary Henry Paulson isn't the devil, yet on his watch the U.S. has morphed into a huge debt-issuing machine. The Congressional Budget Office says the U.S. deficit will more than double this year to at least $1.18 trillion, the biggest since World War II.

Barack Obama has even bigger plans. The CBO's estimates don't include the cost of the president-elect's stimulus package, which will probably add at least $750 billion to the total over the next two years. Last year's shortfall totaled $455 billion. The U.S. needs China's money more than ever.

"I spent most of the first two quarters of 2008 marveling at the pace of Chinese reserve accumulation," Council on Foreign Relations economist Brad Setser in New York wrote on his Web log this week. "I expect to spend the first few quarters of 2009 marveling at the size of the U.S. fiscal deficit."

Currencies today 1/9/09: A$ .7065, kiwi .5920, C$ .8435, euro 1.3710, sterling 1.5260, Swiss .9150, rand 9.69, krone 6.9350, SEK 7.8350, forint 201.70, zloty 2.9575, koruna 19.3150, yen 90.75, Sing 1.4790, HKD 7.7570, INR 48.25, China 6.8355, pesos 13.76, BRL 2.2980, dollar index 81.65, Oil $41, Silver $11.18, and Gold... $853.50

That's it for today... Congratulations to the Florida Gators and their fans, as the Gators beat Oklahoma last night 24-14 to win college's BCS National Championship... (the game was tied 7-7 when I went to bed!) Of course, there's always the questions about how a 1-loss team can be national champion when there's a no-loss, undefeated team hanging around... In this case, Utah... But that's someone's else's problem, not mine! OK... On Monday... I'll be interviewed on the Financial Lifeline Radio, which is nationally syndicated. They have a live web stream where you can listen through your computer at: http://www.rockymountainradionetwork.com/FLR/ the interview begins at 3:10 CT... I've done interviews with this show several times in the past. They want to talk to me about the Obama bounce I've been writing about and the $1.2 Trillion Budget Deficit... I think I could talk to them in my sleep about these things... But this should be fun (for me at least!)...

So... Hold on today... The Jobs Jamboree could be earth shattering as far as the markets are concerned... I'm looking forward to the weekend, as this is the first "full week" of work that done in over a month! My fave show 24 returns Sunday night... Jack Bauer rules! Ok, enough of that, time to get to work on this Fantastico Friday... And Wild Weekend! (ok, I have no idea why I said Wild, as I'll probably be a lump on a log all weekend!) So... I hope your Friday is Fantastico!

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

A New Year!

Chuck Butler — Fri, 02 Jan 2009 15:31:00 GMT

.........But First, A Word From Our Sponsor..........
Foreign Currency IRAs from EverBank®: diversify your retirement portfolio

Our wide range of IRAs even includes two foreign currency accounts: the WorldCurrencySM CD and WorldCurrency Access Deposit Account.

Build for retirement your way, only at EverBank®. Visit http://www.everbank.com/002IRA.aspx.

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

In This Issue..

* Currencies range trade...
* With a bias to buy dollars...
* Recession deepens in Eurozone...
* India cuts rates...

And Now... Today's Pfennig!

A New Year!

Good day... Happy New Year! And a Happy Friday to one and all! A Fantastico Friday, I bet it will be, as most people are still on "holiday". I hope your New Year's celebration went well, mine did, spent with good friends, after a simply scrumptious dinner! Yesterday, we spent the day with friends again, as good friend Rick, had everyone and their brother to his new house to celebrate the New Year... I'm worn out! Good thing this is a quick shot work day, and then onto the weekend, because I'm spent!

Well, enough of all that! The currencies traded in a very tight range on Wednesday, and I expect more of that today. The bias has been to buy dollars going into the year-end, and it looks as though that might be the case today, as there's been no data to speak of in the U.S., while the Eurozone printed a very weak manufacturing index report, indicating that the Eurozone's recession is deepening. Of course if we compared apples to apples the bias would be to buy euros, but since there hasn't been any "real" economic data in a couple of days from the U.S. this report from the Eurozone gets all the attention.

Normally, the first Friday of a month is Jobs Jamboree Friday, but with most Gov't workers on holiday, the Jobs report won't print until next Friday. The Weekly Initial Jobless Claims dipped below 500K last week at 492K, but you would have to think that the dip had more to do with the holidays and offices being closed than any reversal of the job loss trend. But you know the mass media, they were all over this report, smiling like Cheshire Cats, as if... As if 492K job losses the previous week was something, to, smile about! UGH! These guys... And gals... I tell you, they must go home at night and either they are brainwashed, and feel good about what they do each day, try to make the U.S. Consumer feel good... Or they go home and vomit!

OK... I'll go onto something else, that commentary was not going in the right direction! Wait! I just read the Economic Calendar incorrectly for today! We will get some data... The ISM (manufacturing) index will print for December, and is expected to fall even further from the previous month's 36.2 print... Remember, of for those new to class, an index reading below 50 represents contraction in the industry... One below 45 for two consecutive months is a lock on indicator of recession... So, that's where we are here in the U.S. dealing with a recession and we keep wishing, and hoping, thinking and praying, that it will not turn into a depression.

As I told you on Wednesday, it looked as though a return to Risk Aversion, was creeping into the markets once again. And that return to Risk Aversion, has had a different affect on the currencies this time. This time, Japanese yen has not blossomed / rallied on the Risk Aversion. (recall that Risk Aversion causes Carry Trades to be unwound, thus supporting yen) Yen has traded back to 91 and change this morning...

But again, the price action this week can't be used as any indicator as to what will happen when everyone returns to the desk with bright shiny faces next week. I think that you need to re-read Wednesday's "Chuck speak" to get a handle on what to expect the first 3 months of this new year... You can always read archives along with the current Pfennig at: www.dailypfennig.com

So... It looks like 13 will become 14 in 2009, as the Czech Republic, once viewed as being on the fast track to euro adoption, will adopt the euro on November 1 this year. It's about time! The other two countries viewed as being on the fast track to euro adoption, Hungary and Poland, have really run into a tough row to hoe, but they'll get there eventually... In fact, I'm still of the thought that the Eurozone / euro will grow to 25 members in the next 10 years... Of course there are those "Chicken Littles" running around squawking that the Euro won't be around next year, much less 10 years from now... Just shows to go you just how different I think from "others"!

And what about Gold in 2009? Well, first of all that was some roller coaster ride that Gold had in 2008, reaching for the stars of $1,000 only to fall back $250, and then rebound $130 to close the year at $880... Well... Going back to my thoughts about an "Obama bounce" in the first quarter of this year, I would have to think that Gold will not have much support given that scenario... But... If my thoughts about the second half of the year hold true, then Gold should have a smashing 2nd half to 2009... So... The "play" in the 1st half of the year, and especially the 2nd QTR, is to look to buy the dips... But that's only if you believe my scenario for 2009... If you don't, then steer clear of Gold and every other commodity!

I see more and more calls for $2500 Gold... WOW! I think to myself, that, would mean that the U.S. economy is really suffering, and if Gold would every reach those "crazy" levels, the dollar must be just about at its intrinsic value... (get it?) So... In my mind, I have to hope the price of Gold doesn't go to $2500, because then we would have a worthless dollar... And I know that there are some out there that truly believe that I "want" the dollar to be worthless, that's not the case... I live here, I need dollars for gas, groceries and giggles...

Well, it didn't take long for another Central Bank to get back to the rate cut table in 2009, as India's Central Bank cut 50 BPS to 5% this morning. With a lot of Central Banks around the globe now pretty much with rates cut so close to the bone, I don't know that we'll continue to see rate cut after rate cut in 2009... For instance, the Reserve Bank of Australia (RBA) could very well be finished with rate cutting... I guess the real question on everyone's mind is how long will the U.S. Fed keep rates close to zero? I would only hope that the answer to that question is "not very long"! But you know the Fed, they most likely will leave them too low for too long, thus fueling the next bubble, whatever that might be...

Of course, the other day I said that U.S. Treasuries were the next bubble to pop, so Treasuries can't be the "next bubble" as they are already a bubble! Just think about all that Treasury issuance that's going to be needed in 2009 to finance the Gov't's goings on...

Speaking of the Gov't's goings on... My friend, Bill Bonner, always has a unique way, and one that I totally enjoy by the way, of explaining things... And here's Bill talking about the current recession and what the Gov't has been doing about it... (www.dailyreckoning.com)

"The bad news is that government meddlers all over the world are making the situation much worse. They don't have any choice. They have to react. And the only things they can do are the usual claptrap remedies. More government spending. More giveaways.
More bailouts. All they are doing is trying to avoid the 'creative destruction' that a real economy needs... and postponing the inevitable adjustments and corrections that must be made.

"But it gets worse. Because the world's main debtor - the USA - is also the custodian of the currency that most of the world's debts are denominated in. And Ben Bernanke is hell-bent on making sure that the US does not follow the Japanese example...or the example from the U.S. in the '30s. He won't stand for deflation. He'll wants to fight it in the worst possible way, because he wants to go down in history as the first and only central banker to beat it. What's the worst possible way to fight deflation? Print money."

I went back to January 2008 to see what I had said last year at this time just for grins... This is somewhat interesting, folks... I talked about how we could see a dollar rally taking the euro back to 1.40 (it was around 1.48), and that Gold would hit $900 soon...

I'll finish up today's letter with a snippet from the NYT that Chris Gaffney sent me on Wednesday... I read it and said... "sounds like this writer, reads the Pfennig!" I bet you'll think the same, but here it is....

"he answers to those questions will depend on the availability of credit in all its forms - home mortgages, personal and business loans and bonds sold by corporations, states and municipalities. For now, many banks are hoarding money rather than lending it. Their holdings of cash have nearly tripled to just over $1 trillion in the last three months, according to Federal Reserve data."

All of the money supply the Fed has pumped into the markets is currently being held by the banks. The Fed just keeps pumping out more money supply trying to get the banks to open the tap. But the pressure behind the tap continues to increase; and once the banks crack it open I think we could see a huge flow of funds back out into the markets. The banks won't be able to close the taps, and we will see the inflationary flipside of this temporary deflation.

The Fed says it will be able to 'pull back' some of the excess liquidity it is pumping into the markets, but it will be like trying to stop the flow of water after a damn breaks."

OK... Onto the Big Finish for this first working day of 2009!

Currencies today 1/2/09: A$ .6950, kiwi .5810, C$ .82, euro 1.3950, sterling 1.45, Swiss .9395, rand 9.44, krone 6.9650, SEK 7.78, forint 190.50, zloty 2.99, koruna 19.22, yen 91.20, sing 1.4550, HKD 7.75, INR 48.75, China 6.83, pesos 13.74, BRL 2.3160, dollar index 81.47, Oil $42, Silver $11.12 and Gold $870

That's it for today... Please notice that I will no longer publish the price of Thai baht, and Icelandic krona, as we no longer are able to deal in those currencies. January is not one of my fave months, as it is long, the sunshine is short, and it is too darned cold for me! But, my mom used to tell me that I wouldn't enjoy spring without January... Speaking of spring, just two months away from spring training, and I'm already making my plans! Once again, I will be taking my family to spring training during their spring break (since they're all teachers, or in Alex's case a student, they all get of the same time!) I'll also be going a few days at the end of the month with my friends, Rick and Duane, and maybe an additional friend, Kevin, this year! With visits, for work, to Florida the beginning and near the end of the month, I've worked it out to spend a good part of the whole month in Florida... Don't know how that worked out, but I'm not complaining! I was watching the Rose Bowl yesterday, and thought, man, that looks beautiful there, I would like to attend a Rose Bowl some time... Next year the National Championship game will be in the Rose Bowl, maybe my beloved Missouri Tigers can... Nah... Now that's a pipedream! But dream I can, and doesn't cost me anything! OK, I've carried on enough, time to hit send... I hope you have a Fantastico Friday, and a healthy and prosperous New Year!

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

Dollar bounces back up...

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

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In This Issue..

* Dollar bounces back up...

* Paulson heads back to congress...

* BOJ cuts rates to below the US...

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

And Now... Today's Pfennig!

Dollar bounces back up...

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

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

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

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

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

"As reported by the Wall Street Journal...

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

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

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

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

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

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

Chris Gaffney, CFA

Vice President

EverBank World Markets

1-800-926-4922

1-314-647-3837

Fed brings rates down to near zero...

Chuck Butler — Wed, 17 Dec 2008 15:36:22 GMT

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In This Issue..

* The Fed fires its last bullet...

* Euro breaks back above $1.40...

* AUD and NZD rally...

* Happy Birthday Jen...

And Now... Today's Pfennig!

Fed brings rates down to near zero...

Good day... The 'noise' from the street which I wrote about yesterday turned out to be correct, as the FOMC cut 75 basis points to put the Fed Funds target at .25%. The US now has the lowest interest rates in the industrialized world, even below those in Japan. The dollar lost ground quickly after the announcement and continued to fall overnight to a 13 year low vs the yen and the weakest vs. the Euro in 4 months.

With both Chuck and Frank out of the office, I fielded the calls from reporters after the FOMC cut, and the most popular question asked was what the near zero interest rates would mean for the man on the street. Well it was great news for those on Wall Street, but I told the reporters that the rate cut really wouldn't have much of an impact on US consumers. After all, interest rates at 1% weren't stimulating the banks to start lending so why would .25% rates cause any change?

Fed Funds have been trading at around .25% for some time, so this move by the Fed simply moved their target rate closer to the actual market. In addition, the Fed can't really impact the Libor rates, which most loans are now tied to. So yesterdays interest rate move was largely for cosmetic purposes. Chuck was sick with the flu yesterday, but sent me a quick note after seeing the news from the Fed.

"So... The Fed goes 75 BPS... Japan now has higher interest rates than the U.S.! How is that possible? How many times must I repeat that it's not the COST OF THE CREDIT... IT'S THE AVAILABILITY OF THE CREDIT! That's causing the Credit Crisis!

Well... I saw yen trading below 90 yesterday, less than 5 whole figures from the 85 that I said yen could trade to 2 years ago... I know, I'm always early on these things! There was good news from the Japanese Ministry of Finance (MOF) yesterday... Seems they are not interested in intervening right now... The MOF's head guy, Nakagawa, had this to say...

"We're not considering intervention at all at this time," Nakagawa told reporters in Tokyo today. I'm not that concerned about today's yen moves."

When I woke up last night to look at the currencies... And what to my wondering eyes did appear, but the euro trading very close to 1.41! Oh, those of little faith and patience that sold into the weakness, like catching a falling knife!"

Yes, all of the WorldMarket investors who claimed to be 'long-term' but bailed out after the dramatic dollar rally are probably kicking themselves right about now. Markets like these are a great illustration of why investors need to stick to their diversification strategies, and not try to time the markets.

So Chairman Bernanke has used up all of his remaining ammunition for the main weapon against the economic crisis, and now has to move to other less proven methods to combat the crisis. These 'quantitative' easing methods which the Fed will now use are unproven, but they are all that they have left. The Fed pulled the first new weapon out yesterday with a pledge to buy unlimited quantities of mortgage backed securities. They hope that by purchasing these securities, they will be able to force mortgage rates lower. But as Chuck points out above, it isn't the cost of credit, but the availability that is the big problem.

The problem with these new untested financial weapons is that their longer term impacts are not known. I can assure you of one thing, the new methods suggested by the FOMC will all lead to higher inflation. Most of the press surrounding the announcement suggested that inflation is no longer a problem. And the data released yesterday supports this view, as CPI fell 1.7% MOM in November, bringing the annual change in core prices to just 2%. So US policy makers have decided to concentrate on getting the US economy growing again, with no consideration of the long term inflationary effects of their policies. The Fed is pushing the printing presses to their limit, and while oil prices have kept prices down for now, inflation is still alive, and is waiting just around the corner.

The value of the dollar fell across the board yesterday, but the yen was the biggest mover falling to 88 yen/dollar. The latest move puts the total yearly appreciation of the yen at 26% vs. the US$. Japan's Finance Minister threw water on the yen's rally said the government is prepared to take steps to help their economy. But we haven't seen any intervention this morning, so the yen has held onto its gains.

Australia's dollar rose to a two month high and the kiwi gained on purchases by investors looking for higher yields. Currency markets are starting to return to trading on fundamentals, and interest rate differentials are one factor which traditionally determines currency rates. It looks like the AUD$ has a green light to move back toward .75 while the kiwi will probably move above .60 before year end.

The currency markets rallied dramatically as they seem to have finally come to the realization that the US dollar is not the 'safe haven' which they thought. Many of the stories and opinions which are now coming across my desk suddenly agree with what we have been saying for some time, that the fundamentals of the US dollar are very weak.

Currencies today 12/17/08: A$ .6915, kiwi .5788, C$ .8263, euro 1.4060, sterling 1.5285, Swiss .8971, ISK 177.82, rand 9.9574, krone 6.7496, SEK 7.8235, forint 189.35, zloty 2.9103, koruna 18.718, yen 88.79, baht 34.57, sing 1.4575, HKD 7.7501, INR 47.6575, China 6.8357, pesos 13.01, BRL 2.346, dollar index 80.20, Oil $44.02, Silver $10.98, and Gold... $855.05

That's it for today... Sorry for the short Pfennig today, it wasn't for a lack of material, but I am having to type with one hand this morning. As I wrote a month ago, I am remodeling our basement, and my wife has set Xmas eve as my deadline. Last night I was working on putting in some baseboard and tore my left hand up pretty good with a miter saw. I spent a good part of my night in the emergency room, and will head to a plastic surgeon later today. Needless to say, I finally succumbed to my wife's suggestions and a contractor is headed to my house this morning to finish things up.

Before I sign off, I want to wish my co-worker and good friend Jennifer a happy birthday!! Jen is our trader when Chuck is off the desk, and I've worked with her for close 15 years. In honor of Jen's birthday, we are having a food day today. You got to love food days!! Hope everyone has a Wonderful Wednesday!!!

Chris Gaffney, CFA

Vice President

EverBank World Markets

1-800-926-4922

1-314-647-3837

Santa rally for the currencies...

Chuck Butler — Tue, 16 Dec 2008 18:46:53 GMT

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In This Issue..

* A Santa Rally for the currencies?...

* Waiting for the FOMC...

* AUD and NZD rally...

* China to try and keep growth above 8%...

And Now... Today's Pfennig!

Santa rally for the currencies...

Good day...It was actually a Great day for the currencies yesterday as the dollar index dropped another full point. The Euro moved past $1.35 and then blew through $1.36 to end the day over $1.37. And the Euro wasn't even the best performer, as the New Zealand dollar rallied over 2.1% vs. the US$ to take the title of best performing currency against the greenback. The South African rand was the only currency turning in a negative performance yesterday with the other commodity driven currencies of Norway and Brazil just barely holding their ground vs. the US$.

The currency rally caught Chuck's eye and he fired off the following email for me to include this morning:

"Quite a day in the currencies again... Looks like that Santa Rally for the currencies that I first mentioned on December 8th, is coming to fruition. Of course "I didn't know this would happen" I was just giving market commentary on what looked like was happening!

So... 1.37 and change for the euro, the move from 1.27 and change has been swift and fast. And why not? I've said all along that the dollar's rally was just a bear market rally. Now, we'll have to see if this can continue, which I believe it will, or if this was just a false dawn.

Well... It's Christmas time, so the giving is going on... And it looks like we'll see the Gov't "give" more once the calendar turns to 2009. What was once a $150-200 Billion stimulus package that would be sent through in January when the new lawmakers take their oath, now looks as though it will be in the neighborhood of $600 Billion, that is according to Nancy Pelosi who made that announcement yesterday. Shoot Rudy! What's another $400 Billion among friends?

By my calculations, that will put us nearer to $3 Trillion in bailouts and stimulus packages... There's a total of over $8.5 Trillion that has been allocated with funding facilities, but the actual output of cash is around $2.5 Trillion before the next deal in January gets done.

No wonder the dollar is getting pummeled once again!

I did a 1 hour interview yesterday... It was a "the world according to Chuck" interview... Long time readers all down about what I probably had to say, but it was cool getting to go "free form" and just let it all hang out. I will go to my darling daughter's (Dawn) kindergarten classroom tomorrow and read to them... Dawn has always been a fan of the way I read, The Night Before Christmas... And her kids always get a kick out me doing this, most of them think I AM Santa Claus!"

Chuck loves the holidays, and I think reading to the kindergarten class is one of his favorite parts!

Today the markets will be awaiting the FOMC rate decision and the accompanying statement which should be released around 1:15 CST. As I stated yesterday, a cut of 50 basis points is already cooked in, but noise from the street indicates we could actually see a 75 basis point cut. The market is currently trading Fed Funds at .125%, so a drop of 75 basis points would move the target very close to where the market is trading. But as we have said in past Pfennigs, the FOMC has almost used up all of their interest rate ammunition, and will have to look for other ways to try and steer our economy out of the recession. The markets will be looking at the accompanying statement for any guidance as to the direction the FOMC will take next. 'Quantitative Easing' will be the big buzz words of the next few weeks. We will just have to wait and see just how creative our Fed is going to get.

The Fed will start to use its balance sheet as the key tool for monetary policy. Since he can't cut rates much further, Ben Bernanke will likely start channeling credit directly to businesses and consumers by further enlarging its $2.26 trillion of assets. Bernanke and his compatriots will have to try some new experiments to manipulate the supply of money to try and prevent the worst recession in a quarter century from turning into a depression.

The data released yesterday continued to indicate the US economy is faltering, as the Empire manufacturing and Industrial Production numbers showed pretty large losses. Industrial Production decreased by .6% during November, as US manufacturing output continues to fall. Production has now decreased 7 out of the last 11 months, and the more important Capacity Utilization number also fell. We won't be seeing the manufacturing sector pull us out of this recession any time soon, as the utilization number shows we are only using 75% of our manufacturing capabilities.

The manufacturing numbers were bad, but these negative numbers were largely expected. The surprise of the day came as the Net Long-term TIC flows for October were released. TIC flows were expected to be right around $40 billion, just slightly below what is necessary for us to fund our deficits. But the actual TIC flows were barely positive at just $1.5 billion. Could the rest of the world finally be tiring of our US Treasuries? Actually, foreigners continued to purchase treasuries, but sold a record amount of debt issued by mortgage-finance companies Fannie Mae and Freddie Mac and other agencies, offsetting the treasury purchases.

So investors were shortening up the duration of the US$ holdings, selling longer term securities to buy short term treasuries. This has to have the Fed shaking in their boots, as no investor buys short term paper at near zero rates with a plan to hold them. This money is being parked short term, and will move out of the dollar as soon as the markets start to calm down. China remained the biggest foreign holder of US Treasuries, after its holdings rose by $65.9 billion to nearly $653 billion. Japan is the second largest holder with nearly $586 billion of US debt.

For those of you who may be wondering why the TIC data is so important, this is how we finance our deficits. As Chuck reported last week, the US trade gap unexpectedly widened 1.1 percent in October to $57.2 billion. Yesterday's numbers show we only were able to attract $1.5 billion of foreign capital to finance this gap. So the remaining balance had to be financed with additional debt. It seems we just keep digging the hole deeper and deeper!!

The Euro was helped out by ECB President Trichet who indicated he would pause interest rate cuts in 2009. Trichet told journalists in Frankfurt that ECB policy makers want to "concentrate at this stage on getting what we already decided to be really operational." He went on to say there is a limit to how far the bank can cut rates. "Do we have a feeling there is a limit to the decrease in rates? At this stage certainly yes." Sounds like the ECB doesn't want to follow the US into the zero interest rate environment. Maybe Trichet and his colleagues realize just how dangerous a zero rate policy can be with regard to future inflation.

Data released this morning caused the euro to back off its high of $1.3737 as reports showed European manufacturing and service industries contracted at the fastest pace in at least a decade. These reports showed the Eurozone faces some of the same challenges as the US, but in my opinion, their central bank has done a better job of dealing with the slowdown. With the FOMC cutting rates today, and the ECB indicating that they are going to pause, the Euro will likely continue to gain back some of the losses of the past 6 months.

The Australia and New Zealand dollars both rose for a second day on interest rate differentials. The Australian dollar extended gains after the central bank indicated it would slow the pace of further rate cuts. The Reserve Bank of Australia trimmed its forecast for inflation to 2.5 percent from a November prediction of 3 percent. Policy makers have a target range of 2 and 3 percent for Aussie inflation. With inflation in their target range and a simulative monetary policy, the RBA doesn't need to do much more with rates. Commodity prices have hurt both the AUD and NZD, and any increase in commodity prices during 2009 would have a big positive impact on both these currencies.

Any hope for commodity prices will center around the rebound of the Chinese economy. China's central bank Governor Zhou Ziaochuan continues to call for aggressive action to keep China's growth rate from dropping below 8%. The Chinese govt. pledged last week to boost liquidity after cutting interest rates last month by the most in 11 years to spur lending and consumption. China's economy has slowed, but will likely grow at 6 percent during 2009. This is still an excellent growth rate for the world's fourth largest economy, but below the 8% rate many believe is necessary to avoid social instability.

Currencies today 12/16/08: A$ .6694, kiwi .5589, C$ .8102, euro 1.3659, sterling 1.5246, Swiss .8661, ISK 218, rand 10.3118 krone 6.9629, SEK 8.0583, forint 195.84, zloty 2.9716, koruna 19.319, yen 90.01, baht 34.78, sing 1.4781, HKD 7.7502, INR 47.91, China 6.8457, pesos 13.3631, BRL 2.39, dollar index 82.16, Oil $45.02, Silver $10.49, and Gold... $832.77

That's it for today... We got another blast of winter weather overnight, with single digit temperatures and a mix of ice and snow. The weather is tough on commuting, but it sure puts you in the mood for Christmas! We were slammed on the desk yesterday, as Mondays are always busy and we were a little short handed. Looks like today will be much the same, so I better get logged into the phones. Hope you all have a Terrific Tuesday!!

Chris Gaffney, CFA

Vice President

EverBank World Markets

1-800-926-4922

1-314-647-3837