Daily Pfennig : Japan

Japan Posts a 4.8% GDP!

Chuck Butler — Mon, 16 Nov 2009 15:19:00 GMT

..But First, A Word From Our Sponsor..
Gain exposure to currencies of emerging BRIC countries-and don't lose a dime on market risk

Don't let market risk get in the way of potentially rewarding exposure to the BRIC currencies. Our 3-year MarketSafe® BRIC CD shields you from any market risk and provides 100% principal protection on deposits held until maturity.

* 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 Dec. 3rd, 2009. Apply today or learn more at http://www.everbank.com/001CertificatesMSBRIC.aspx?referId=11808
.

In This Issue..

* Risk Aversion goes away mad...
* China just says "no" to currency flexibility...
* Maybe a return to fundamentals?
* Gold continues to soar!

And Now... Today's Pfennig!

Japan Posts a 4.8% GDP!

Good day... And a Marvelous Monday to you! It's raining here, so it's one of those Rainy Days and Mondays... But I won't let it get me down, as opposed to the song! I got a chance to check out our new digs in the building next door to us here... Very nice! And... A long way from that small office I sat in on Olive St. a decade ago, when we started EverBank... To think back 10 years ago, and where we are today... Simply amazing!

OK... As I told you Friday, the President was in China this past weekend, trying his best to get the Chinese to agree to a greater flexibility for the renminbi... Well... There were a few stories this past weekend that hinted about the Chinese agreeing to do such... But I prefer to go with this story that appeared on Reuters last night... "The Chinese government has sought to distance itself from speculation surrounding a central bank statement earlier this week that was interpreted as a shift in currency policy towards a stronger yuan. However, a report on Saturday by Xinhua, the state-controlled Chinese news agency said that the government would not allow the currency to gain against the dollar in the short term."

Wang Qing, chief Asia economist for Morgan Stanley in Hong Kong, said in a report to clients: "I consider this article an official effort by Chinese authorities to dismiss the renewed speculation of yuan appreciation in the near term."

So much for that visit to China, eh? Put that one down next to the visit to Copenhagen earlier this year... Ahem... 3 strikes and you're out in baseball... But, getting back to the trip to China... The Asia-Pacific members were pretty tough with their questions for the U.S. President, questioning his commitment to free trade... And then let him know that China is going to fight protectionism, and keep the renminbi on a leash...

On Friday, we had the currencies add a bit to their rally on Thursday, as the Risk Aversion campers were sent home without a ball... No need to go away mad... Just go away! There was a bit of interesting data reaction that happened on Friday, which only gave me some hope of returning to fundamentals... The U. of Michigan Consumer Confidence Index fell in October, which wasn't expected one iota... And... The dollar sold off! That's exactly what should happen when a country's economic data prints badly! So Hur-ray! YAHOO! But... Just like I always say... On swallow doesn't make a summer, and one reaction to a data print doesn't make for a shift in fundamentals... But could it be a start? Yes, it could... But we'll need to see more of this type of trading after data prints to indicate that the old "trading theme" has been put in our rear view mirrors, and that fundamentals have returned... But wouldn't that be a happy day? Oh happy day... Oh happy day...

I'm going to tell you this next bit, and you're not going to believe it at first... But stay with it... There was good news in Asia overnight, as the Japanese printed a 3rd QTR GDP report that showed an annualized rate of +4.8%! That was 2.9% higher than the "experts" forecast for Japan! So... Even Japan is joining the other Asian and pan-Asian countries (Australia) in posting strong economic growth!

The Asia-Pacific leaders pledged to keep stimulus measures in place until there's a "durable growth"... Hmmm... Here's hoping that the Asia-Pacific leaders let us know when that happens, for 4.8% annualized growth for Japan, sure seems like "durable growth" to me!

And... In keeping with our hopes that fundamentals return to currencies and commodities... The strong economic data for Japan, did not quash the yen! In fact, the yen has traded stronger VS the dollar overnight!

Speaking of trading stronger VS the dollar overnight... Have you seen the price of Gold? WOW! Gold has set, yet another, all-time record high overnight of $1,133! It has since given back some of that to trade at $1,127... But still... WOW!

You know... Just about 10 days ago, the dollar was looking as if it was going to make a comeback / correction... I even saw a cute little poem a trader wrote about it being the end of euro strength... But here we are 10 days later, and the dollar is looking quite weak again... The euro is back to pushing the envelope to 1.50 VS the dollar, and I just told you about Gold's run VS the dollar...

Of course this doesn't mean that a correction couldn't take place today, tomorrow, or the next day... I'm just pointing out something that I've told you all about for years now... And that is: short term forecasting for currencies is usually wrong! So, then, people ask me... Why then do you write a daily letter about currencies, Chuck? Ahhh, grasshopper, because, someone has to make sense of this daily noise, and... You never know when a "turn" might happen in the currencies...

The Aussie dollar (A$) spent the overnight sessions trying to get past .9350, but failed to do so, especially on the back of a note from a local bank analyst who went out on a limb and said the Reserve Bank of Australia (RBA) would be on hold at their next meeting on Dec. 1st... Well, that may be... But I still believe the RBA will hike rates in December! But if they don't, then we could look for an even larger hike when they come back in January! So, this keeping the A$ below .9350 won't last long, in my humble opinion!

We could get some traction from the euro and other Euro-type currencies this week, as the Euro Finance Week in Frankfurt will take place with top leaders speaking on the financial crisis and lessons to be learned from it... German Chancellor Angela Merkel, who's always good for some interesting quotes, will speak, as will European Central Bank (ECB) President, Jean-Claude Trichet...

Speaking of Euro-type currencies... The Norwegian krone, continues to follow the Big Dog, euro... But when the Big Dog, euro gets going, the krone normally out performs the euro... So... The Big Dog, euro is the key here...

OK... For some time now, I've been trying to point out to you that monetary inflation is going to sneak up on us and rip apart our investments... My good friend, David Galland, had this to say in his Friday letter... Here's David!

"Just because it's not readily apparent doesn't mean it's not there. Of course, I'm referring to the government's monetary inflation, which, thanks to a combination of factors, still hasn't jumped out of the closet to scare bond markets into cardiac arrest."

David then goes on to show his readers a table that had useful details on the progression from normal to very much not normal, leading up to the German Hyperinflation of the early 1900's... David then says, "As you can see, the situation in Germany was not so bad - until it was."

If you would like to see the "table" David refers to... Or read his excellent letter... Click here... http://www.caseyresearch.com/quick-guide/free-publications/

OK... You know, the soaring Gold price has been mostly tied to the weak dollar... But, you would have to think that "smart investors" with an eye on this monetary inflation is having some push to the price of Gold too... I know that's why I own Gold... The weak dollar thing is just icing on Gold's value in my opinion... The inflation hedge... The Deflation hedge... Or... As I call it... The "uncertainty hedge"...

And then there was this... The other night I was discussing the Health Care stuff, and told the person I was talking to that the stimulus bill, you know the one that was pushed through so fast last winter because we as a country were "near total collapse"? Well, the stimulus bill had hidden in it, part one of the Obama Health Care Plan... Hmmm didn't know that? Well, yes, grasshopper... It's the "death panels" that Sarah Palin coined them... They are called the rationing and enforcement board. And... The President has already funded them with $20.6 Billion of our taxpayer dollars!

Now... I'm not going to get into a discussion of the Health Care here... My point was simply to show that when bills are passed, it is important that they are read aloud to the people, to keep from "hiding" things in the bills... $20.6 Billion of money that the Gov't did not have!

Ok... Enough of that... My good friend, Dr. Dave Janda, was the first to expose this "hidden gem" And he's been on the speaking circuit trying to get anyone that will listen to him, and they should, to understand what's going on...

Currencies today 11/16/09: American Style: A$ .9340, kiwi .7445, C$ .9555, euro 1.4970, Sterling 1.6720, Swiss .9920, European Style: rand 7.3910, krone 5.5730, SEK 6.8060, forint 178.90, zloty 2.7375, koruna 17.0530, RUB 28.68, yen 89.50, sing 1.3850, HKD 7.75, INR 46.22, China 6.8269, pesos 13.01, BRL 1.7125, dollar index 75.03, Oil $77.19, 10-year 3.40%, Silver $17.85, and Gold... $1,130.30

That's it for today... Our resident TV personality, Ty Keough, was announcing the Missouri Valley Conference Soccer match yesterday on Fox Sports Midwest... Ty had a great line during the match, referring to one shot by a player as being a "venomous shot!" I made a drive to the country yesterday to visit my graves of my parents and oldest sister... It had been a couple of years since I made that drive, my bad... The little country town that our family farm sat outside of, hasn't changed... It's still the same quiet little country town in mid-Missouri... Went to dinner with good friends, Lisa and Kevin on Saturday night, they used to be our neighbors, and now we rarely see them... UGH! OK... Mike's here, so that means it's time to hit "send"! I hope you have a Marvelous Monday!

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

G-20 Heats Up...

Chuck Butler — Fri, 25 Sep 2009 14:28:46 GMT

...But First, A Word From Our Sponsor...
Gain exposure to currencies of emerging BRIC countries-and don't lose a dime on market risk

* 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..

* Dollar's rally is cut short...
* Major problems for loans still exist...
* Yen rallies on exporter repatriation...
* Kiwi gets whacked!

And Now... Today's Pfennig!

G-20 Heats Up...

Good day... And a Happy Friday to one and all! It's still raining here in St. Louis this morning, but I won't that get me down, as it is a Friday! G-20 has gotten a bit ugly, folks... Seems everyone just can't seem to get along! Imagine that! 20 different countries, and now they want to be able to watch another country's finances and comment on them! Oh, I can see that working out real well! NOT!

So... Yesterday, we had the dollar gaining back the ground that it had lost the previous day, but at the end of the day, we're looking very much like the currencies hadn't moved from morning to morning... And overnight, didn't bring about much movement... So... When you get to the currency round-up below, you'll see the dollar's gains were small, and short-lived.

The U.K. and France are a bit upset with the U.S. and the President's plan to reduce the number of board members to the IMF, and guess who is on the chopping block? That's right... The U.K. and France! I really don't care about all this stuff, except to watch the saber rattling, and jockeying for "supreme leader"... I won't say any more about that here...

I did notice thought that, just as I said months ago, regarding the BRIC countries, that they would have to be reckoned with, due to their HUGE Treasury Chests of reserves, and the fact that they have a good portion of the World's population... Ok, where was I? Oh!, I noticed that it was going to be announced today that G-20 was going to take over as the main forum for global economic coordination. They will take that over from the G-8...

Well, guess who's a part of G-20 that wasn't a part of G-8? The BRIC countries! They will have more say in what goes on economically! Just like I said they would! This is a big deal, in that this shifts the power from the rich countries to the emerging markets... Yes, the rich countries are still in the Group of 20... But, the emerging markets outweigh them now!

And already, we can hear China taking shots at the U.S.... And, now that everyone can comment on other countries' economies, the U.S. took a shot at Germany, saying that they haven't done enough to spur Domestic Demand... Germany's chancellor, Angela Merkel, who is up for election on Sunday, shot back at the U.S., and said... "We should also look at imbalances between currency regions and not pick on specific countries within the Eurozone."

OK... Let's talk about something else... I was reading the Financial Times last night, and came across a story that really said something... Here it is... The FT...

"Losses on loans at U.S. banks and other lenders rose to $53 Billion in the first quarter, almost triple the previous high, reached in 2002, said a group of regulators, including the Federal Reserve and the Federal Deposit Insurance Corp. Nonbank lenders, particularly hedge funds, hold $1 of every $3 in troubled loans and 47% of all distressed loans. Loans made to media and telecommunications companies were in the worst state. Lending to the financial-services sector was the next worst, followed by loans to property companies."

But Hey! According to people in power that should know better, it's time to sound the all-clear horn!

And that brings me to something I wrote about the other day, regarding the delayed foreclosures... A reader was kind enough to send me this that maybe explains the delays...

A landmark ruling in a recent Kansas Supreme Court case may have given millions of distressed homeowners the legal wedge they need to avoid foreclosure. In Landmark National Bank v. Kesler, 2009 Kan. LEXIS 834, the Kansas Supreme Court held that a nominee company called MERS has no right or standing to bring an action for foreclosure. MERS is an acronym for Mortgage Electronic Registration Systems, a private company that registers mortgages electronically and tracks changes in ownership. The significance of the holding is that if MERS has no standing to foreclose, then nobody has standing to foreclose on 60 million mortgages. That is the number of American mortgages currently reported to be held by MERS. Over half of all new U.S. residential mortgage loans are registered with MERS and recorded in its name. Holdings of the Kansas Supreme Court are not binding on the rest of the country, but they are dicta of which other courts take note; and the reasoning behind the decision is sound.

And... As another reader pointed out to me... It sure doesn't make the holder of the loan any richer to foreclose on it, given the state of the housing market today...

Ok... Enough of that! Yesterday, I talked about how Japanese yen was living right these days, rallying when the dollar is weak, and rallying alongside the dollar when it's not! Well... One of the reasons this could be happening with regularity, is that it is believed that Japanese exporters are repatriating their profits, as their fiscal first half ends this month...

So, does that mean the rug gets pulled out from beneath yen next week? Hmmm... I don't think so... I think that the one thing that's really underpinning yen right now is this new found appreciation by the Bank of Japan for yen strength! Just last night, Japan's Finance Minister Hirohisa Fujii reiterated his opposition to intervention in foreign- exchange markets.

Now, I don't know how long the exporters in Japan are going to go along with this new found appreciation for yen strength... But for now... Yen is on the verge of gaining even more ground...

In New Zealand overnight... The string of good data prints ended with a thud! New Zealand's Trade Deficit widened almost double what was expected! UGH! Remember, New Zealand has to import lots of things, and when the exports of wool, dairy, and lumber aren't strong, their deficit gets whacked! So, New Zealand would always have a Trade Deficit... But, at times it gets completely out of hand, and this is one of those times... Kiwi, got taken to the woodshed after the report printed, as well it should!

The Swiss National Bank (SNB) had a board member giving an interview last night, and when asked about the SNB's repeated jawboning to get the franc weaker, he had this to say... "with regards to the Swiss franc this means that we counter an appreciation of the franc against the euro decisively."

Now, that's a horse of a different color! All this time we were led to believe that the SNB would intervene to get the franc weaker VS the dollar! No wonder the franc has kicked some dollar tail lately, without a peep from the SNB... The franc was allowed to get stronger VS the dollar, as long as the euro was moving in the same direction, same general percentage move VS the dollar!

Our mortgage production guru, Stacy Blair, was talking the other day in a meeting, and mentioned that mortgage rates had edged down again, and production was picking up once more... Well, that plays well with a story I read last night... The average interest rate for U.S. home mortgages fell to less than 5%, and loan applications surged 13%, the Mortgage Bankers Association said. The nationwide average rate on a 30-year fixed-rate mortgage declined to 4.97%. The application surge amounted to a 50% increase compared with the end of June.

OK... So... I would guess that most of that stuff is re-financing loans, but hey! Like I told everyone on our desk 6 months ago, when the rates were in the 4% region... Go refinance your home loan! And then put the money you save each month in savings!

We get back to some data in the U.S. today, and I think that it could have a lot to do on whether the currencies rally or not VS the dollar. Durable Goods Orders for August prints first, and is expected to really fall back from July's strong 4.9% print... August is expected to print just a .4% gain for Durable Goods... That won't get the "strong recovery flag wavers" out, and that won't be good for the non-dollar currencies...

Then later we get the U. of Michigan Consumer Confidence report, which could turns things around for the non-dollar currencies... As the Consumer Confidence report is expected to be strong... ????? Why? I have no idea... (besides the obvious, stock strength)

We'll also see New Home Sales data for August...

Have you noticed the collapse of the Oil price? Pretty steep drop in just a couple of days! I told you the other day that the G-20 might put pressure on commodities... Oil is off, and Gold has fallen back below $1,000 wink, wink...

So... To recap, the dollar's rally was stopped short. The G-20 is the new global economic monitor, and the U.S. is ticking the U.K. and France off, regarding seats on the IMF board. G-20 is getting hot and heavy... Japanese exporters are repatriating their profits thus propping up Yen... And, New Zealand's Trade Deficit widens again...

Currencies today 9/25/09: A$ .8650, kiwi .7185, C$ .9175, euro 1.4685, sterling 1.6010, Swiss .9720, rand 7.4280, krone 5.7850, SEK 6.9170, forint 184.25, zloty 2.8550, koruna 17.15, RUB 30.09, yen 90.20, sing 1.4160, HKD 7.75, INR 47.98, China 6.8286, pesos 13.48, BRL 1.7995, dollar index 76.73, Oil $66.28, 10-year 3.36%, Silver 16.31, and Gold $997.32

That's it for today... Well... The Cubs lost last night, which means the Cardinals' magic number remains at 1... They could clinch tonight in Colorado... My beloved Missouri Tigers play on ESPN tonight as they take on Nevada, in Reno... And my little buddy Alex, plays football tomorrow as his 8th grade team takes on their big rival! Tomorrow night is our subdivision's big block party, so it will be a grand weekend for yours truly, especially if, the Cards clinch, Mizzou and Lindberg 8th graders win, and the rain stops! I think I'm going to go to the Mizzou game VS Nebraska next Thursday night, now that will be exciting! OK... Suzy Q is here, so I must be running late... Time to go.. I hope you have a Fantastico Friday, and Wild and Wacky Weekend!

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

More Strong Data Sinks The Dollar...

Chuck Butler — Thu, 17 Sep 2009 14:37:00 GMT

...But First, A Word From Our Sponsor...
Gain exposure to currencies of emerging BRIC countries-and don't lose a dime on market risk

* 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..

* Currencies near 1-year levels...
* Canadian loonies are best performer!
* Dangling a carrot...
* Oil trades above $72...

And Now... Today's Pfennig!

More Strong Data Sinks The Dollar...

Good day... And a Tub Thumpin' Thursday to you! Why Tub Thumpin'? Why not? Besides, the non-dollar currencies are darn near where they were a year ago, having a good chunk of the ground they lost during the Financial Meltdown last fall and winter... Not that I'm a cheerleader, but more of a "this is what I believed would happen, and glad to see a plan come together" kind of guy!

And since I, unlike throngs of people that like to point out errors, put my beliefs in writing every day... Right out there / here, in the open, for anyone to take pot shots at... But, I learned long ago that there will always be those that disagree, and not to let it upset or change the things I believe...

OK... So... Here we are, one year later, having survived the Lehman Bros. collapse, and credit default swaps, and Gov't bail outs... According to Big Ben Bernanke, he saved the world... Hmmm... I'll save those words for my grandchildren, and their children... For what we're doing to them is immoral! But that's not what I was going to talk about with the one year later stuff, so, let's skip over to that!

A year ago, I was on the road with FX University, giving one-day instructional presentations on currencies... At the end of each day, all the "professors" HA! Would get in front of the "students" and it was time for them to question us... One day, we had a heated debate, among us, when one of the guys said that, "the euro would collapse" and that it was happening now... Hmmm, you know me, I couldn't let that pass, so I stood up, and said that may be true, one day, but not now, and not in the next year, and that the euro should bottom our around 1.25 (It was 1.47 at the time, having fallen from 1.60)... The euro bottomed out around 1.23, and hasn't seen those levels in over 10 months! I'm not gloating here, just putting this all into perspective...

So... The euro isn't the only currency taking liberties with the dollar these days... And so, as I said above, they for the most part, all taking advantage of this dollar weakness and gaining back ground that was lost last year.

But as long as I was on the euro, I might as well stay there... BNP issued a report overnight that is calling for the euro to reach parity to the British pound sterling... In a combination of euro strength, and pound sterling weakness, this would be achieved, the report writer said... Hmmm... While this makes sense on one hand, it doesn't on the other hand... On the other hand.... How could the euro continue to gain VS the dollar, and not drag sterling along on the crosses? This would be a strange twist of fate for sterling should it find it trading at parity to the euro...

Tuesday it was the strong Retail Sales figure that dropped a bomb on the dollar... Yesterday, it was combo bombs of Strong Industrial Production, and a rising CPI... Holding with the trading pattern that has existed, except for rogue days, that whenever the data is strong in the U.S. the dollar gets hammered, this day was just like many others we've seen. The thought that is on every trader's minds, and investors, and hedge fund managers, and whomever else is out there participating in the markets, is... That what's good for the U.S. is good for the rest of the world, and they are spending money they don't have like there's no tomorrow!

My friend, Bill Bonner, of The Daily Reckoning fame (www.dailyreckoning.com) says it best... Bill was talking about how the Fed is desperately trying to get consumers to spend, and to that they will artificially inflate CPI... Here's Bill... "If they can successfully inflate consumer prices (not just producer prices) the whole picture might change. Then, we'd have an inflationary depression rather than a deflationary one."

He went on to make some very good comparisons of Japan's 20 lost years, and what's going on here... I've made a lot of these over the years... Remember when I would due the 80's song, I'm turning Japanese, yes, I'm turning Japanese I really think so... I'm sure you do... But it's important to revisit these things from time to time so that people don't forget...

Did you know that the Japanese introduced 11 different stimulus packages worth 30 Trillion yen? The Japanese thought that bailing out banks that should have been allowed to fail, was the way to go... And today? Well, the Gov't is saddled with a huge debt, and the banks are still wobbly... And when it you know what hit the fan in Japan, the Japanese began to save... They had always been savers... But now they were really saving! And thus the on again, off again deflation that has existed in Japan for 20 years...

Doesn't that sound like us? I mean the consumers... We used to spend, spend, spend, more than we made... But when the you know what hit the fan here, we began to hunker down and save again... Which is why I think the Retail Sales data the other day is nothing but Government spending programs, and cooked books... The U.S. Consumer looked spent! Oh, But looky here! They showed life when they saw the Cash for Clunkers program, and this is what the Gov't is licking their chops about... They dangled a carrot and U.S. consumers were led down the same debt taking road as before...

So, maybe this is where we don't follow the Japanese any longer... If the Gov't can get U.S. Consumers spending again, they can re-light the spending torch... There's one big problem though... Unemployment... All those millions of consumers that are unemployed! I'm sure the Gov't has a plan to deal with this though...

OK, I've got to stop here... I just get so darned ticked at this stuff, and really don't understand why U.S. citizens aren't just as ticked as I am... For if they were... Oh, forgetabout it Chuck... Go on to something else!

The best performing currency in the past 24-hours is the Canadian dollar / loonie... Yesterday, it was reported that: Manufacturing sales in Canada, rose by a stronger-than-expected 5.5% in July following June's revised 2.2% increase. So, loonies are being marked up VS the U.S. dollar... This was a good report for a recovering economy that I believe has exited their recession...

Speaking of Canada... The Canadian newspaper, The Globe and Mail carried an article written by Nassim Taleb on 9/15 that I think had some good thoughts... Here a couple of them...

"In the first place, the financial crisis was not a black swan. It was perfectly predictable. They ignored the phenomenal buildup in leverage since 1980. They acted like airline pilots who'd never heard of hurricanes!

Today we still have the same amount of debt, but it belongs to governments. Normally debt would get destroyed and turn to air. Debt is a mistake between lender and borrower, and both should suffer. But the government is socializing all these losses by transforming them into liabilities for your children and grandchildren and great-grandchildren."

Ok... Let's go to another country and see what we can find there!

Well...it's not another country, but a commodity! Don't look now, but Oil has pushed past $72 overnight... The price of Oil rose 2.2% yesterday and last night after a report showed that stockpiles in the U.S. had dropped to their lowest level in 9 months...

A strong Oil price, though not appreciated at the gas pump, does help push certain currencies higher, as they have a "petrol" component to them... Currencies from countries like: Norway, Brazil, Canada, Mexico, U.K., and Russia...

Speaking of Russia... Not that we can trade / offer this currency except in our BRIC MarketSafe CD, but the ruble has been on quite a tear in the past two weeks, gaining 11 of the past 12 days, VS the dollar... I talked to a lot of people when we first issued the BRIC MarketSafe CD, and they told me they wished we had made it a "BIC CD" and taken out the "R" for ruble, as they were very leery of Russia and the ruble... I would tell them, I understood, and the only way I would ever think of Russian rubles was in a "MarketSafe CD"... And... To think of rubles as an "Oil Play"... Let's hope that continues to be the case, eh?

Hey! Did you hear the President the other day talking about the $200 Billion Supplementary Financing Program (SFP)? He was happy that the Gov't was going to be able to remove it from the Budget, because Financial Institutions are getting healthy... Well... Not that I'm going to pull a Joe Wilson here, and call him a liar, but I am going to throw my 2-cents in here, and say that I believe removing the SFP $200 Billion from the Budget is due to the fact that Congress is having to raise the debt ceiling again, and this would give them some extra room...

So... I'm watching the currencies trade this morning, and ever since I came in the euro has been weakening VS the dollar... It has gone from 1.4755 when I came in, to 1.4715, and it doesn't look as though it will stop there! But... Before you panic, we've seen this a lot lately... Overnight, the euro gets traded upward, and then late in the European session (like now) it gets sold... Then the NY traders take it back up again... Looks like a classic example of profit taking in Europe to me!

Yesterday, I told you about the Japanese Finance Minister, Fujii, and his announcement that a strong currency was a good thing for the economy... Well, those words were echoed last night by Japan's Central Bank Chief, Shirakawa... Mr. Shirakawa said, "In the medium and long term, a strong yen can help push up the economy."

Hopefully, these two statements on consecutive nights will be enough to push the fears of traders, that the Bank of Japan would intervene to keep yen from getting too strong, into the back seat...

Gold was unable to add to yesterday's push up to $1,018. I'm convinced that Gold can go higher... But, it could very well go lower first! I've seen some calls for Gold to go to $3,000 and even higher! All I have to say whenever I see that, is simply... That would be nice for Gold holders (like me!), but I sure wouldn't want to see what the shape of the U.S. economy is in, if Gold is at $3,000! YIKES!

Geez Louise, I wrote all this, and haven't mentioned the data results from yesterday! UGH! OK... Real quick, because I'm running late... CPI was up .4% VS July... Industrial Production was strong, gaining .8% (VS .6% forecast), and Capacity Utilization edged higher to 69.6% (still a long ways to go to get back to the days of 85%!) And finally, the TIC's data... Total Net TIC Flows into the U.S. were a negative $97.5 Billion! OUCH! I'm going to spend a lot of time today trying to find out what China's purchases or lack of them were!

OK... To recap... The non-dollar currencies are close to their levels a year ago. Yesterday's move came as a result of strong data from Industrial Production and CPI. Canadian loonies were the best performer in the past 24-hours, and we had more jaw boning for a strong yen in Japan...

Currencies today 9/17/09: A$ .8720, kiwi .7110, C$ .9385, euro 1.4715, sterling 1.6520, Swiss .9675, rand 7.37, krone 5.8550, SEK 6.8650, forint 183.50, zloty 2.80, koruna 17, RUB 30.34, yen 91.40, sing 1.4150, HKD 7.75, INR 48.15, China 6.8266, pesos 13.16, BRL 1.8015, dollar index 76.25, Oil $72.49, 10-year 3.47%, Silver $17.37, and Gold... $1,016.50

That's it for today... Well, I just heard that Puff the Magic Dragon sings no more, as Mary Travers of Peter, Paul and Mary has died at 72 from leukemia... It's been a tough week for my beloved Cardinals, as they've backed off their strong showing of August and early Sept. I hope they can hold on for a couple more weeks! Another day, and less pain in my knee, although the swelling is a real problem, that won't seem to go away. Maybe this weekend, I can stay off it, and see if that works. Thanks to those who send me remedies for this swelling... I had better get going, people are streaming in, and it's not like me to be still typing when that happens! Well, so far today, it's a Tub Thumpin' Thursday... I hope it's Tub Thumpin' for you!

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

Renminbi To Become An International Currency?

Chuck Butler — Mon, 31 Aug 2009 15:02:46 GMT

...But First, A Word From Our Sponsor...
Gain exposure to currencies of emerging BRIC countries-and don't lose a dime on market risk

* 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..

* Currencies give back ground overnight...
* Don't look too closely at U.S. data...
* India posts strong GDP...
* Lots O'-data this week!

And Now... Today's Pfennig!

Renminbi To Become An International Currency?

Good day... And a Marvelous Monday to you! A Wonderful Weekend was enjoyed by your Pfennig writer, with good friends, and Chamber of Commerce weather, on a beautiful lake! It's back to work today though. I don't understand why I didn't plan on taking today and staying an additional day at that beautiful lake! Oh well... Time to go to work!

When I signed off on Friday morning, the currencies were enjoying a very nice rally, which remained in place the rest of the day. The Consumer Income and Spending data was very much as I describe it would be, and so there was no surprise for the markets to deal with. You may recall, that I told you that Spending would be greater than Income, as the "Cars for Clunkers" probably had something to do with the Spending be so much stronger than the Income piece...

The currencies ran into a speed bump in the overnight markets though... When I checked the Japanese market last night, stocks were rallying on the news of the election results. The ruling party was voted out, and a pro-consumer driven growth party was put in... But, I guess what turned this around overnight was the fact that while the opposition party in Japan ran on a platform that promised change, when the dust settled, there are many questions... And when there are questions about leadership, risk assets don't fare too well... And thus, the reversal of the currency rally.

So, as we all know, the trading pattern of the last 9 months... When risk assets don't fare well, the dollar and Japanese yen do... And vice-versa. Yes, even though Japanese stocks sold off overnight, the yen was in play. It's just some strange phenomenon that has a grip over the markets for 9 months...

It will be interesting to see if the opposition party in Japan will actually change the way the Gov't does business... And if it does, what kind of "change" will take place. One would hope for the Japanese economy that it lifts the economy from the doldrums that have hung over the Japanese like the Sword of Damocles for a very long time now... That's right! We're not talking 2-3 years, not 5-6 years, not even 9-10 years... Japan's problems go back to the early 90's... YIKES!

Every time, the economy would attempt to pull itself up by the bootstraps the Japanese Gov't would introduce some sort of stimulus, and burden its Gov't with more debt... I know it sounds familiar... And I long ago told you all that the U.S. was following Japan's steps, but hoped that the U.S. would not take 15 years or more to reverse their steps... Unfortunately, those hopes and dreams are taking a beating!

Which is why I questioned the reappointment of Big Ben Bernanke last week. The leader of the Fed Heads, has really, in my opinion, stepped in the doggie dookie and followed the Japanese even though he said he wouldn't! My friend Bill Bonner had an interesting thought about Bernanke's reappointment... "Obama picked him to continue as head of America's central bank, the Federal Reserve...even though his predecessor, a Republican, appointed him."

I know, I know, the media is making Big Ben out to be the "savior of the world" right now... I suggest we all wait-n-see if all that he's done really does "save the world" or if it just masks the problems, and they come back even worse in the near future... If I were a betting man, I would put money on the latter of those things.

I noticed a story on the Bloomie this morning that says "The Federal Reserve will be unable to prevent the Trillions of dollars in Government stimulus pumped in the U.S. economy from stoking inflation later this decade, according to a survey of business economists."

They didn't ask me... But I would have been all about that idea!

In fact, I think the cartel, I mean the Fed Reserve will have to accept the fact that inflation is growing at first, because they 1. won't recognize its beginnings, and 2. won't have the guts to raise interest rates, and remove quantitative easing at the first signs of inflation, because the economy's recovery will be nascent at best. So, a higher level of inflation will have to be accepted by the Fed... And unfortunately, you and me!

OK... Let's stop talking about the Fed, they make my stomach turn any way!

When I got home last night, I was reading a story that really got me thinking... The story was about how China has gone from Exporter to Importer. The story explains that the stimulus that the Chinese Gov't put into the economy this year, has really spurred consumer demand, and exports from South Korea jumped 26.6%, Taiwan 41%, Japan 30.2%, and the European Union 23.5%...

The idea here was that the Chinese Gov't wanted to reduce their dependence on the U.S. consumer... You see, from my vantage point, the Chinese Gov't has done their part in curbing the global imbalances that used to exist, and I used to rant about almost every day! Now the trick is to see if the domestic demand can really take off from here now that the stimulus has, well, stimulated the economy! And did you see where China announced that they are going to begin to build light trucks? Putting people to work making things... Wow! What a concept! It's what made the U.S. economy powerhouse that it once was...

The South China Morning Post had a very interesting story in it this morning regarding the Chinese renminbi becoming an international currency. Let's go to the tape! "Vice-Premier Wang Qishan has been put in charge of a task force to make the renminbi (yuan) a currency for international trade. The recession has encouraged Chinese officials to speed up the currency programme. As the downturn erodes U.S. influence, China is losing faith in the dollar and sees the time coming for the renminbi to become a major world currency.

The renminbi is not convertible for purely financial purposes, ruling it out as a reserve currency for now, but China has started to carve out a bigger international role for it, beginning with the currency swap agreements China has put in place."

SEE! I TOLD YOU! I TOLD YOU that was what China was doing when it signed those currency swap agreements with 6 different countries, and is currently working on ones with Brazil and Thailand! China was gaining a wider acceptance for their currency... Slowly but surely (who's Shirley?) China was begin to provide convertibility to the renminbi, and then and only then will it be picked up by currency dealers all around the world! It's all happening right before our eyes folks... Don't close your eyes, this won't go away by closing your eyes!

Staying in Asia... The Indian GDP surprised on the upside when it printed last night... A 2nd QTR 6.1% rise in economic growth VS last year, is a very good performance for India. The rupee has been hanging around a corner for the past couple of months, so maybe this kind of news will attract foreign investment once again, and drive that currency higher VS the dollar...

You know... The data that printed in the U.S. last week, wasn't half bad! In fact, as long as you don't want to turn it over to expose the rot on the underside, you might begin to feel as though the economy is recovering... Unfortunately, there is that rot on the underside to deal with... Therefore, I'm pinning my colors to the mast of a "W" shaped economic future... I know Chris talked about this while I was in San Francisco, and gave all his reasons for his thoughts... So I won't go over them again... But just to say that the rot on the underside of the economy is what leads me to think this...

The data cupboards all over the globe will get a workout this week... There are 2nd QTR GDP's to print, Manufacturing Indexes to print, Jobs Jamborees, and Central Bank meetings... So, the currencies won't have to take their only direction from stocks! The currencies will bet taken in so many directions this week, which is why I'm saying right here, right now, that this will be a very volatile week... This Friday will be interesting in that, a lot of the "big boys" on currency trading desks will be gone to add a day to the Labor Day Holiday weekend, and volume will be thin, but Friday is also a Jobs Jamboree Friday...

The sell off that I saw going on in the currencies when I first began writing this morning, has picked up steam... But still, not a strong sell off just yet...

And on that note, I'll head to the Big Finish! But for one more thought... The U.S. 10-year Treasury Note yield has fallen in the past week, which means there had to be some buying of the note to drive up the price (remember, with bonds, when the price goes up, the yield goes down, and vice-versa). You don't think it could be more Fed buying do you? I have my suspicions for sure!

Currencies today 8/31/09: A$ .8380, kiwi .6815, C$ .9060, euro 1.4280, sterling 1.62, Swiss .9415, rand 7.7875, krone 6.0250, SEK 7.1550, forint 190.30, zloty 2.8750, koruna 17.77, RUB 31.8350, yen 93.25, sing 1.4435, HKD 7.7505, INR 48.82, China 6.8305, pesos 13.29, BRL 1.8810, dollar index 78.49, Oil $71.15, 10-year 3.41%, Silver $14.72, and Gold... $955.37

That's it for today... It's going to be a hectic week here, so I had better get my rest when I go home! Mike Meyer just walked in, and he had Lasik done on his eyes Friday, and he's smiling from ear to ear! So... I guess it all went OK! A great weekend for the Cardinals, who are really on a roll, and probably hate to see August end! We were all sitting around a campfire on Friday night, listening to the ballgame, when Albert Pujols hit his "walk off" home run... High fives all around! This coming weekend will be a 3-day Labor Day Holiday weekend. College football begins this weekend, which means my beloved Missouri Tigers play Illinois at the Dome downtown. Go Tigers! It's a rebuilding year for the Tigers, but I still expect them to be good! And congrats to the U.S. kids from California who won the Little League Championship yesterday... OK... Time to go... I hope your week starts off with a Marvelous Monday!

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

Dollar continues it’s slide...

Chuck Butler — Fri, 31 Jul 2009 14:45:32 GMT

...But First, A Word From Our Sponsor...
Gain exposure to currencies of emerging BRIC countries-and don't lose a dime on market risk

* 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

Some experts believe these 4 countries may become economic powerhouses in coming years. Now could be the right time to add these currencies to your portfolio. And you can do so-safely-with the U.S. denominated MarketSafe BRIC CD.
Don't miss this unique opportunity. Deadline to buy the BRIC MarketSafe CD is August 18, 2009. Apply today or learn more at http://www.everbank.com/001CertificatesMSBRIC.aspx
.........
In This Issue..

* Dollar continues to slide...
* US GDP contracts but not as fast...
* Nordic currencies outperform...
* Japanese yen continues to fall...

And Now... Today's Pfennig!

Dollar continues to slide...

Good day... The last day of July is upon us. Time just seems to keep moving faster as it seems summer just got started. The fall of the dollar also accelerated yesterday as investors moved back out of the 'safe haven' of US$ and continued to shop for more yield. The greenback tried to stage a bit of a rally in early European trading, but has fallen back off again as I sit down to write the Pfennig.

I got a call from a Reuters reporter yesterday mid morning to ask why the dollar was rallying at the same time stocks were moving higher. I quickly paged through my Bloomberg looking for some sign why both were heading higher. The trading pattern which has been established over the last few months has these two asset classes moving in opposite directions; good news for the US economy sends stocks higher and the dollar lower as investors retreat from defensive 'safe haven' positions in the US$. The opposite occurs whenever there is data which shows the global economic recovery is faltering, stocks move lower and the dollar rallies with safe haven buying.

But yesterday morning, for a short period both were moving up. I first looked at the jobs data to see if they held any clues. The Initial Jobless claims came in slightly higher than expected, confirming our calls that the labor market will continue to be a drag on the US economy. But the reporter pointed out the continuing claims has dropped. I explained to her that the continuing claims were dropping because people are falling off the rolls. Drops in continuing claims are not due to people going back to work, but are due to people being out of work longer than the labor department's records. So I didn't see anything in the jobs data which would cause stocks to rally.

Unable to find anything in the data to support the short term market movements, I moved the conversation to the longer term trends which I feel much more comfortable speaking about. And by the time the conversation was over, the quick rally in the dollar had subsided, and the dollar index was moving back down. The short term market movements are very hard to call, as the currency and equity markets can move on emotion and rumor for short spans of time. But they will always move back toward the underlying trend line. Right now, the trend is for the US$ to weaken vs. the major currencies; as investors begin to look for currencies with higher yields and better underlying fundamentals.

So the dollar continued to fall vs. every currency except the Japanese yen. The Nordic currencies of Sweden and Norway led the charge vs. the US$ with Sweden moving up over 1.5% and Norway appreciating just under 1%. As I wrote yesterday, the Swedish krona has been one of the best performers recently as their economy has begun to recover ahead of mainland Europe. Sweden's central bank, the Riksbank, was more aggressive with rate cuts than the ECB, so they will now have more room to increase them as the global economy recovers. Like Norway, Sweden went into the global recession in a fundamentally solid position, with a good trade surplus and low national debt. But Norway seems to be a bit better positioned going forward, as they rely on commodity based exports and while Sweden is geared more toward manufacturing. Both should continue to move higher vs. the US$.

The focus today will be on the 2 quarter GDP report which will be released this morning. GDP is expected to have contracted 1.5% after a 5.5% contraction in the first quarter. If the number comes in as expected, the dollar will likely sell off as investors move back into riskier assets. But as I mentioned earlier, the currency markets have started to show signs of moving away from the safe haven / risk aversion pattern recently. Investor's focus will eventually shift toward interest rate differentials. But I still think it is a bit too early for this shift to occur, and a stronger GDP figure will likely cause a further drop in the US$.

We will also see Personal consumption data for the second quarter which is expected to show US consumers are continuing to increase savings. Consumption is expected to have fallen .5% after rising 1.4% during the 1st quarter. In spite of government efforts to stimulate spending, US consumers are worried by rising unemployment and won't likely loosen their tight grip on their wallets anytime soon. Finally, we will end a busy week of data releases with the Chicago Purchasing Manager's index which is expected to show a slight increase to 43 from 39.9 reported last week. This would be a second consecutive monthly increase, a sign that the manufacturing sector is bottoming out. Even though the number continues to move higher, any number below 50 is seen as a negative indication for the economy. Even with inventories near record low levels, manufacturers will likely wait for consumers to start spending again before increasing production.

The pound sterling continued to rise against the dollar after a report showed British consumer confidence held at the highest level since April of last year. It seems the pound sterling has moved to a upward trend, after dropping most of last year.

The Japanese yen continues to fall vs. the US$ as investors sell the currency and move to higher yielding assets elsewhere. Japan's unemployment rate rose to a six year high in June and consumer prices fell at a record pace. The Japanese economy continues to be stuck in a stagnant deflationary state and will be dependent on a global economic recovery to spark exports. Increasing growth in other Asian nations (mainly China) has sparked production increases by Japanese manufacturers. This has been the one positive sign out of Japan recently, but this one piece of data couldn't halt the selling of the Japanese yen.

Elections in Japan will be held at the end of next month, and the opposition party is all but guaranteed to win. The ruling Liberal Democratic Party is in a shambles, and has produced 4 prime ministers in the last 4 years. The new government is expected to increase spending on government programs, but like the US administration, no one has figured out how to pay for these increases. The opposition's spending proposals add up to 3.5% of GDP, and the party has ruled out raising Japan's 5% consumption tax for at least 4 years. Much of the funding for the new programs will come from cutting 'waste' in existing spending programs (sound familiar?). Gross national debt in Japan is currently 180% of GDP and rising as the stimulus packages kick in.

Many factors in the Japanese economy are eerily similar to those in the US, and neither looks to recover quickly. Both the US$ and the Japanese yen will continue to be sold as investors move into currencies of countries with much better economic potential. The short and medium term prospects for these two currencies certainly look negative.

Two currencies which seem to be on a much different path than the Japanese yen are the Australian and New Zealand dollars. Both are headed for their longest set of monthly gains since 2004. With interest rates expected to start rising, and China continuing to consume commodities which both produce, these currencies should continue to perform well. Barclays Capital raised their forecasts for both currencies saying rising risk appetite will boost demand for them in the short term. "A better than expected US GDP result would be the final icing on the cake for July and would provide great opportunity for the Australian dollar to retest 83.38 cents," according to the report.
Currencies today 7/31/09: A$ .8284, kiwi .6561, C$ .9269, euro 1.4139, sterling 1.6552, Swiss .9231, rand 7.804, krone 6.1628, SEK 7.2825, forint 187.92, zloty 2.9328, koruna 18.089, yen 95.70, sing 1.4405, HKD 7.7500, INR 47.935, China 6.8321, pesos 13.2126, BRL 1.883, dollar index 78.966, Oil $66.81, 10-year 3.61%, Silver $13.63, and Gold... $938.42

That's it for today... The EverBank kickball team played or final regular season games last night and ended up victorious in both. More importantly, we were able to make it through both games without an injury! We finished in third place, so we will have a pretty good seed going into the end of season tourney. Happy Birthday to Ann Hopkins today! I have worked with Ann off and on since I started in the banking industry back in the late 80's, and she is a real treat to have on the desk. Hope everyone has a Fantastic Friday, and a wonderful weekend!!

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

House prices move up, but consumers still aren't confident...

Chuck Butler — Wed, 29 Jul 2009 15:01:37 GMT

...But First, A Word From Our Sponsor...
Gain exposure to currencies of emerging BRIC countries-and don't lose a dime on market risk

* 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

* House prices move up...
* US consumers are worried...
* Japanese retail sales drag...
* Australian rates to rise...

And Now... Today's Pfennig!

House prices move up, but consumers still aren't confident...

Good day... We finally had a bit of volatility in the currency markets yesterday, as conflicting data released in two separate reports moved the markets in opposite directions. The dollar started off the day drifting lower, as has been the pattern over the past 2 weeks. But during the late morning the dollar started gaining strength, and has barely paused its ascent overnight.

Many of you probably heard the news reports that home prices finally rose during the month of May, and this is what had the dollar on the ropes yesterday morning. The S&P/CaseShiller Home Price Index reported that home prices in the US rose ever so slightly in May compared to April. But if we look at the annual figures, home prices are still down just over 17% across the country. Media outlets trumpeted this 'feel good' story with many economists declaring that housing has now turned a corner. This is a good sign, as prices have to stabilize before the housing sector can recover, but it is hard to get overly excited about a 17% drop YOY. The monthly figure rose just .5%, reflecting the first monthly gain since July 2006. Another report showed the share of homes sold as foreclosures or otherwise distressed properties fell to about 31% in June, down from a high of 50% seen earlier this year. With unemployment still creeping up, and the US consumer continuing to save instead of spend, I am going to need to see a couple of months of stabilized prices before I am convinced housing is turning the corner here in the US.

Just an hour after the surprisingly good news on the housing front was received, consumer confidence numbers for July were released, and spoiled the party. Higher unemployment is being blamed for dropping just under three points from the Conference Board's consumer confidence index. This was the second consecutive decline, and shocked economists who had predicted no change. Our economy is still consumer driven, so this number resonates with investors who had started moving money back into riskier assets believing the economic recovery was well under way. But US consumers are concerned about the job markets, and will likely continue to keep tighter control of their spending. Despite the rhetoric coming out of the Chinese/US talks (more on this later), the administration is counting on consumers to help pull us out of this recession/depression.

But consumers have a right to be worried, and will likely continue to keep a tight hold on their wallets. After all, the economy has lost 6.5 million jobs since the recession began in December 2007; the biggest employment slump in over 80 years. Official estimates predict double digit unemployment by the end of this year, and our unofficial estimates have pegged the number in the double digits since the first quarter of 2009. Without good prospects for employment, US consumers are finally realizing the intelligence of being frugal. Savings rates in the US continue to climb, but while that is good in the long run (and exactly what I believe they should be doing) it doesn't help fuel a quick turn around for the economy.

Investors and the administration worry that the higher savings rate and slower economic growth will lead to deflation, and have been hoping instead to see some signs of inflation. But a bit of deflation is really not that bad, and can actually be healthy for the economy. While he was in Vancouver last week, Chuck sent me the following quote from our friend Doug Casey regarding deflation...
"Deflation is actually a good thing, because in a deflation prices drop and money becomes more valuable, so deflation encourages people to save money. Deflation rewards the prudent saver and punishes the profligate borrower. The way a society, like an individual, becomes wealthy is by producing more than it consumes. In other words, by saving, not borrowing. And during a deflation, when money becomes more valuable, everybody wants money. They want to save. Whereas during an inflation, you want to get rid of the money. You want to consume. You want to spend. But you don't become wealthy by spending and consuming; you become wealthy by producing and saving.

Inflation encourages people to borrow, because they expect to pay the debt off with cheaper dollars. It encourages people to mortgage their future.

The basic economic fallacy in this is that a high level of consumption is good. Well, consumption is neither good or bad. The problem is the emphasis on consumption financed by debt -- which leads to the national bankruptcy we're facing. It's much healthier to have an emphasis on production, financed by savings."

I think Doug hit the nail on the head, but as he points out, most economists fear deflation and have convinced the administration that the only way out of our current recession/depression is to borrow and spend. Hopefully US consumers will continue to fight the urge to re-leverage, even if it does extend the downturn. A bit of pain now can and will avert a whole lot of pain in the future.

But the markets don't like the thought of frugal US consumers so the stock market sold off, and investors ran for the cover of US treasuries sending the dollar higher. Asian markets continued the sell off overnight causing a reversal of the carry trades which had just started to be popular again. Risk aversion is back in vogue, so the high yielding currencies which had been benefitting got sold off. The biggest drop was in the Australian dollar which fell nearly 1% vs. the US. As you would expect, the South African rand and Mexican peso also sold off, but surprisingly so did the Japanese yen.

Japanese retail sales fell for a 10th month in June, extending the longest losing streak since 2003. Deflation is still gripping the Japanese economy, and a report released earlier this week showed Corporate prices dropped 3.2% from a year earlier. As I stated earlier, a bit of deflation isn't necessarily a bad thing, but it certainly stalls out any sort of economic recovery. The problem with deflation is that once it takes hold, it is very hard to combat. Japanese consumers have traditionally had one of the highest savings rates, and their economy has been treading water for a number of years. The Japanese are relying on the global economic rebound to help stimulate exports which will drive their economy back up.

The ideal situation is some happy medium between the two extremes. A slow growth/ low inflation environment is what we should strive for. Not high growth fueled by high leverage, or no growth with very high savings rates. So the current swing by US consumers toward a higher savings rate is a good thing, as long as we eventually start spending these savings and keep leverage to a minimum.

Numbers to be released later today will continue to call into question the recovery of the US economy. Orders for Durable Goods in the US probably fell in June for the first time in three months. The major automobile factories shuts down for part of the month, causing a drop in the overall number. Ex autos, the number will likely be unchanged from the May figure. Mortgage applications were already reported this morning, and showed another dramatic drop. The 'refinancing boom' which the government created earlier this year has petered out, and unless additional stimulus money is thrown at home buyers, the housing recovery will be a long drawn out process. And finally, the Fed's Beige book will be released later today. This report details how the economy is performing in each of the Fed's districts, and is expected to confirm the US economy is starting to bottom out, but no rapid recovery is in sight.

An economy which seems to be starting to recover more rapidly is Australia where central bank Governor Glenn Stevens signaled rates may rising sooner rather than later. "I've never seen written down or heard in discussion some rule that says we wait until unemployment is peaking before we lift the cash rate," Stevens said in Sydney yesterday. Stevens also said the economy may rebound faster than the central bank forecast six months ago as consumer and business confidence surges. The AUD$ touched its high for 2009 yesterday at .8338 before retreating back below .82 on the carry trade reversal. I would think any pull back by this currency is an excellent opportunity for investors to jump into this currency which we predict will end up one of the best performers of the year.

Whenever I talk about the Aussie dollar, I naturally move to its kissin cousin across the Tasman, the New Zealand dollar. New Zealand central bank Governor Alan Bollard will probably match Governor Steven's moves and keep rates unchanged at their meeting tomorrow. The recent reversal of carry trades has caused this currency to turn around, but as with the AUD$, a move lower should be seen as a buying opportunity.

India left rates unchanged overnight, signaling an end to its deepest round of interest rate cuts. The central bank is concerned that inflation will creep up as the Asian economies recover. Interest rate expectations have turned the currency around as the Indian rupee has increased about 1.5% vs. the US$ during the last two weeks.

I'm filling in for Chuck this morning on a conference call with the Big Boss, Frank Trotter, so I'll have to end it here and move to the currency wrap-up:

Currencies today 7/29/09: A$ .8204, kiwi .6574, C$ .9212, euro 1.4136, sterling 1.6379, Swiss .9274, rand 7.9065, krone 6.2205, SEK 7.4936, forint 190.64, zloty 2.9671, koruna 18.0674, yen 94.91, sing 1.4418, HKD 7.7500, INR 48.4262, China 6.8324, pesos 13.2659, BRL 1.8809, dollar index 79.092, Oil $65.84, 10-year 3.65%, Silver $13.6125, and Gold... $935.79

That's it for today... My wife qualified for combat pay as she took my 10 year old daughter, Lauren and three of her friends to the Jonas Brothers concert last night. I love my daughter, but I'm not sure I would have been able to stand 3 hours of 20,000 screaming tweens. Finally got some summer thunderstorms last night, and it continues to rain today. I hope Chuck and his family are staying dry camping down in southern Missouri. The Cardinals looked great last night, as the new offense which they have picked up in their recent moves seems to be starting to click. Hope everyone has a Wonderful Wednesday!!
Chris Gaffney, CFA
Vice President
EverBank World Markets
1-800-926-4922
1-314-647-3837

Blood in the streets.....

Chuck Butler — Tue, 14 Jul 2009 15:05:50 GMT

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

On election night, Amazon.com's top-selling book wasn't about Obama or even McCain. Instead, it was a book about the four American deficits that threaten to steal your wealth-and the steps you can take to reverse them.

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

If you missed your chance to see the film-or just want more of its in-depth interviews and analysis-the IOUSA book should be at the top of your reading list. The issues it explores and the solutions it provides are too important to ignore.

Get your copy today
.................
In This Issue..

* Red ink flows...
* Japan suggests diversification for their reserves...
* Commodity currencies rebound...
* Data galore for the rest of the week...

And Now... Today's Pfennig!

Blood in the streets.....

Good day... Chuck had a late night down at the ballpark watching the home run derby, so he asked me to take the helm of the Pfennig this morning. I'm going to try to get this one out a bit earlier than I did last Friday, so I'll get right to it.

The biggest news to hit the markets yesterday was the Treasury Department's report that the deficit in June totaled $94.3 billion. This monthly deficit pushed the deficit for the fiscal year to over $1 trillion dollars for the first time, and we still have another quarter to go until the fiscal year ends in September. It comes as no surprise to readers that the deficit is above $1 trillion, but what is a bit unnerving is the speed at which the red ink is flowing.

According to the Treasury department's report, spending in June surged 37 percent to $309.7 billion while revenue fell 17 percent to $215.4 billion. June is typically a good month for revenues, and the reported deficit was the first since 1991. Individual and corporate tax receipts are falling while unemployment continues to rise. But the revenue picture isn't nearly as bad as the other side of the ledger. The administration is just starting to ramp up the spending from the $787 billion stimulus package President Obama signed into law in February. And as Chuck has reported, the administration has already started to lay the groundwork for another big stimulus package.

Congress seems to be turning a blind eye to the deficit, why let some red ink keep them from accomplishing all they set out to do? Just this morning, the day after we surpassed the $1 trillion deficit mark for the first time, the democrats have unveiled their long awaited health care reform. The program, by most estimates will add another $1 trillion to the deficit over the next several years. Sure, I think we all would like to see an improvement on the current health care system, but what a time to try and shove it through congress! I'm sure you will start to hear a chorus of 'deficits don't matter' by the media; as they try to convince all of us that these new programs are just too important to let a little thing like red ink keep them from passing.

But deficits do matter! Other than the fact that someone is eventually going to have to pay all of this debt off, financing this shortfall is going to continue to get more difficult. Interest rates will certainly rise from their current low levels, and for the fiscal year to date, the interest expense on the government's outstanding debt was $320.7 billion. As rates rise, this interest component will also rise, chewing up a larger percentage of our overall spending. Rising interest payments will continue to push out spending for other, more productive programs and force either a reduction in government services, or a dramatic increase in government revenues. Look out for some dramatic tax increases!

The huge deficit continues to worry our foreign investors, who have thus far financed all of our free wheeling spending. China, Russia, and some of the oil rich Arab states have all expressed their concerns regarding the security of US debt and the stability of the US$. Japan's opposition party, leading in polls ahead of next month's election, is the latest country to question the long term viability of the US$ as the global reserve currency. Japanese investors are the biggest foreign holders of US Treasuries after China, so the talk of diversification away from the US$ could have a big impact on the currency markets. "In the medium to long term, we need to do what we can to avoid the risk of currency losses or economic turbulence that could result if the dollar were to swing," said the opposition party's finance minister in an interview. "Many countries are starting to diversify their reserves."

The biggest currency gainers vs. the US$ yesterday were the commodity currencies of the Canadian dollar, Brazilian real, New Zealand dollar, and the Australian dollar. Yesterday Chuck let everyone know he had finally put the finishing touches on our latest index cd. It just so happens that the new index combines three of these top performers. The new index CD, named the Global Power Shift Index is a combination of the Australian dollar, Canadian dollar, Brazilian real, and the Norwegian krone. Chuck designed this new index CD to take advantage of commodity price increases which are bound to occur as the global economy starts to recover. Call the desk for more information on this newest addition to our stable of offerings.

The Australian dollar got a boost from the business sentiment which turned positive in June for the first time since December of 2007. This should help convince the central bank to keep interest rates stable as the Australian economy starts to show signs of a recovery. The kiwi also got a boost as Reserve Bank Governor Alan Bollard said "Early signs of a global recovery have now emerged." Rates in New Zealand will likely remain stable as the commodity driven economies turn the corner.

Today and tomorrow will bring us a plethora of data, with PPI, Advance Retail sales, Business Inventories, and the ABC consumer confidence numbers today followed by the release of the CPI numbers, Empire manufacturing, Industrial production, Capacity utilization, and the minutes of the June 24 FOMC meeting to be released tomorrow. Thursday we will get the weekly jobs data along with the TIC flows and Philadelphia Fed index. We will close the week out on Friday with news on the US housing market with the release of Housing starts and Building permits. All of this data could bring some excitement to the currency markets, which have settled into a fairly stable summer trading pattern.

Currencies today 7/14/09: A$ .7878, kiwi .6336, C$ .8742, euro 1.3983, sterling 1.6317, Swiss .9227, rand 8.1989, krone 6.4653, SEK 7.8388, forint 197.26, zloty 3.1216, koruna 18.6183, yen 93.14, sing 1.4590, HKD 7.7505, INR 48.84, China 6.8328, pesos 13.654, BRL 1.9782, dollar index 79.97, Oil $61.10, 10-year 3.45%, Silver $12.935, and Gold... $926.19

That's it for today...The home town favorites, Albert Pujols and Ryan Howard couldn't quite get it done at the derby last night, but it sure looked like everyone had a great time. Three of the guys on the desk went down to the derby last night, and I actually saw both Mike Meyer and Tim Smith in the right field bleachers scrambling for one of Cecil Fielder's 16 homers. My wife and I were lucky enough to get invited to tonight's game by a good friend. I've heard we will have to be heading down a bit earlier than normal with President Obama in town to throw out the first pitch. Should be a great time; I just hope the rain holds off. Should turn out to be a Terrific Tuesday! Let's go National League!!
Chris Gaffney, CFA
Vice President
EverBank World Markets
1-800-926-4922
1-314-647-3837

German Investor Confidence Is On The Rise...

Chuck Butler — Tue, 16 Jun 2009 15:24:59 GMT

.........But First, A Word From Our Sponsor..........
The Ultra Resource Index CD: 6 foreign currencies, 1 unique opportunity

With our latest multi-currency Index CD, we've united the currencies of 6 nations rich in resources, finances, innovation and cash. The idea being that when global growth resumes, these countries may benefit more than most.

The Ultra Resource currencies (each is equally represented in the CD):

*Australian dollar
*Canadian dollar
*Hong Kong dollar
*New Zealand dollar
*Norwegian krone
*Singapore dollar

Are you ready for the return of global growth? Ultra Resource is. 3- and 6-month terms available. Apply today or learn more at http://www.everbank.com/001CurrencyCDIndexUltraResource.aspx?referid=11808.

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

In This Issue..

* Currencies stop the dollar's run...
* BRIC meeting could get ugly for the dollar...
* RBA meeting notes good for Aussie dollars...
* Depressing data / forecasts for housing...

And Now... Today's Pfennig!

German Investor Confidence Is On The Rise...

Good day... And a Terrific Tuesday to you! Thundering storms moved through here this morning, as I was preparing to leave home and drive to the office. As slow as I am with getting around these days, I got pretty wet from my car to the office building. But, I didn't melt, as most would have thought! HA! And, I'll dry out soon enough... Well before anyone else comes in!

OK... Well... When I left you yesterday, the dollar was on a rampage, from the comments by the Russian Finance Minister, Kudrin... Was it an overreaction, I asked? A resounding YES was my answer... I think the proof is in the pudding on that this morning, as the dollar buying has hit a roadblock, and reversed overnight, with the euro gaining back about 1%...

The euro also got a needed boost this morning, as German Investor Confidence jumped to a three-year high. Seems most investors believe the economic slump in Germany, the Eurozone's largest economy, is easing... Of course, we know that while Investors believe the economic slump may be easing, it may, in reality, not be easing... It's all about perception, right? Any old way, the currencies have rebounded from yesterday's bloodbath... And now the currencies have a bid tone, and not the dollar!

And now a news flash just came across that these countries are "considering buying each other's bonds, and swap currencies" to eliminate the dollar from those transactions... OK... Skip back to yesterday... Here's what I said... Pfennig 6/15/09: "I would have to think that the Finance Ministers of these countries would be interested in knowing how they can avoid another downward spiral caused by dollar buying... And... This... Would be the key, folks... I don't know what it would be, but if they did something like a currency swap / foreign exchange line between each other for trade, that would be colossal! Which is bigger than HUGE!"

The BRIC (Brazil, Russia, India, China) meeting I told you about yesterday, actually happens today. Sorry for the mix-up, as I thought it would happen later this week. There were already comments hitting the news wires that Russian President Medvedev, wants to talk about issue of the dollar as the reserve currency... Now, if he does, and I'm not saying that he will, but if he does talk about that, doesn't that wipe out the Finance Minister, Kudrin's, comments about Russia's belief in the dollar? And... If he does, and again, I'm not saying that he will, but if he does, my thoughts yesterday, that this would happen at the BRIC meeting, would come to fruition...

There's always been a clamoring for a basket of currencies consisting of the BRIC countries... The problem is that the Russian ruble just isn't liquid enough to get this done, like EverBank World Markets does their other CD's... So... How about dropping the "R" and doing a BIC? Well... Again, even though EverBank does offer these currencies of Brazil, India and China individually, it's not easy... In fact it's quite the ordeal to get them done... But, eventually, we'll think of something!

OK... Now back to the goings on in the markets... This BRIC meeting today seems to have quite a hold on the markets' attention today... And it is a BIG thing, IF they do discuss the alternative reserve currency talk... Talk the talk, and walk the walk... These countries can't keep complaining about the need for a new reserve currency, and not do anything about it...

Looks like all the stimulus and money supply in the U.K. is beginning to show up in the inflation data... U.K. May CPI jumped .6%, thus pushing the year-on-year (YOY) figure to 2.2%! Now, this is important for a couple of reasons, folks... 1. it could signal an end of the easy money in the U.K. IF they are prudent in removing the stimulus, as they and their friends over at the Fed claim they will be... And 2. and more importantly... Is... The U.S. has actually been behind the events surrounding the financial meltdown in the U.K.... So... If the U.K. is beginning to see inflation rise, it stands to reason that it won't be long before we see it happening here too...

Down Under... The currencies of Australia (A$) and New Zealand (kiwi) both fell flat on their respective faces with the dollar on the rampage yesterday... But were able to rebound a bit overnight. They were moved higher, when the minutes of the last Reserve Bank of Australia (RBA) hinted that the RBA was going to maintain their easing bias, but move to the sidelines for the foreseeable future... Folks... That's Central Bank parlance for... This is it! Unless the sky falls! This is the bottom as far as rate cuts go! But... It will be awhile until they move up...

Well, that's how I read their statement! And I've been reading Central Bank statement for 17 years now... I think the traders that cover A$'s think the same thing... And kiwi, just grabbed on to the coat tails of the A$...

Did you see the color of the TICs data yesterday? WOW! Or should I say, UGH? The net security purchases by foreigners for April showed a HUGE drop! The total net purchases were $11.2 Billion... VS $55 Billion in March! And... The ongoing holdings of Treasuries feel a net of $2.6 Billion... Now... Here's where I get all ticked off folks... We've had Japan, China and Russia all say publicly that they have full faith in U.S. dollar denominated assets (read Treasuries)... But when it came to backing up the talk with the walk... They failed to show that they have full faith in these assets, didn't they!

These countries and their Finance Ministers caused investors HUGE losses with their statements, but when it comes down to the cheese that binds, these Finance Ministers didn't have the intestinal fortitude to back up the statements... Well, at least in April they didn't!

And $11.2 Billion a month is not going to be enough to finance the Current Account Deficit... Which will print tomorrow, how convenient! But that's for April, and we won't get all that data for months! However...

Right now, the "experts" believe the Current Account Deficit, which consists of the Trade Deficit, and the Federal Direct Investment, will be a deficit of $85 Billion (recall that the Trade Deficit had come down in the 1st QTR) for the 1st QTR... And going back, which is exactly what the Gov. doesn't want anyone to do, I see that the total purchases in the 1st QTR were a mere $40.63 Billion... There's a $46 Billion gap there folks...

I've gone over this financing thing so many times in the past that it make my head spin (yes, you should see it spinning right now!) just thinking about explaining it again... But, for those new to class... When a country has a financing problem (like it looks we had one in the 1st QTR) the gap gets pushed to the next quarter and so on, until... The chickens come home to roost... And then, a country has only two choices... They can raise interest rates aggressively to make the assets more attractive to the foreigners, or... They can allow a general debasement / weakening of their currency, to make purchases of the assets cheaper by discounting the clearing mechanism... The dollar, in this case... So... Which one do you think a Gov., especially one like ours, will choose to use? Yeah, right, like they would choose number 1!

Ok... Some more depressing news about the housing sector came through yesterday in the National Association of Home Builders Home Price Index (NAHB) printed worse than expected yesterday... The "experts" forecast the NAHB would be a 17... And it printed at 15... Soon afterward, economist Robert Shiller, said that the housing downturn "was not over yet"... Economist Nouriel Roubini, said that "house prices will fall another 15-20%" and... Banking analyst Meredith Whitney said that "she is even more bearish than either Shiller or Roubini on housing."

That's not good news folks... Nouriel Roubini as been dubbed as a gloom and doomer by the media (I don't think so... He just tells it like it is, he can't help it that it's not all seashells and balloons for the economy, like the media would have you believe!) and when another analyst, as prominent as Meredith Whitney says she's even more bearish than Roubini, you've got to sit up and take notice!

I just can't end the day's letter with those two depressing stories back-to-back... Oh! Here's an interesting story... The Japanese Finance Minister, believes the recession in Japan is nearing an end... Yeah, right... If I had a 1-oz Gold American Eagle Coin for each time a Japanese Finance Minister has said those words since 1990, I would be quite the "rich man"! But, the markets swallowed his statement hook, line and sinker, which is good for the yen! Japanese yen outperformed all the currencies overnight, and is trading with a 96 handle once again!

Speaking of Gold... It has rebounded by $8 this morning, as the sentiment to buy dollars has faded...

Currencies today 6/16/09: A$ .8020, kiwi .64, C$ .89, euro 1.39, sterling 1.6440, Swiss .9220, rand 8.00, krone 6.42, SEK 7.8070, forint 201.50, zloty 3.2550, koruna 19.2780, yen 96.83, sing 1.4575, HKD 7.75, INR 47.75, China 6.8335, pesos 13.36, BRL 1.95, dollar index 80.55, Oil $72, 10-year 3.72%, Silver $14.35, and Gold... $937

That's it for today... The rain that came through this morning was very a "hard rain"... And no, I'm not going to go into Bob Dylan here... We've had our share of "hard rain" lately, and the low lying areas are seeing flooding. The river that runs through my little river town, is on the rise again... I thought I had a doctor's appt today, but my calendar tells me it's next Tuesday! Yahoo! OK... Not too much else to talk about this morning, so, I'll just end it here, and send you on your way to a Hopefully Terrific Tuesday!

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

The ECB Clash Over Policy Again...

Chuck Butler — Thu, 14 May 2009 16:11:59 GMT

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

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

Get your copy today: http://rcm.amazon.com/e/cm?t=dailyreckonin-20&o=1&p=8&l=as1&asins=0470222778&fc1=000000&IS2=1<1=_blank&m=amazon&lc1=0000FF&bc1=000000&bg1=FFFFFF&f=ifr
.................

In This Issue..

* Initial Jobless Claims rise...
* PPI does too!
* Euros get hung out on a line...
* Gold makes a comeback!

And Now... Today's Pfennig!

The ECB Clash Over Policy Again...

Good day... And a Thunderin' Thursday to you! It may not be Thunderin' where you are, but apparently it was yesterday in my little river town, as I heard we had some shingles blow off... And... It certainly is Thunderin' over in the Eurozone this morning, I'll tell you why in a minute. So, let's get going don't want to get caught in any of that Thunder!

I finished the last of my 3 presentations yesterday, and called it quits, as far as walking back and forth to the Conference Center. They'll just have to do without me at the booth! But the presentation was good, I think, and I made some very important points. None of which, were brand new to Pfennig readers!

Once again yesterday, the currencies traded in a very tight range, with a bias to buy dollars... Something quite opposite to what we've seen in recent trading sessions. Earlier this morning, the Weekly Initial Jobless Claims printed at 637,000 (forecast at 610,000), so once again the euphoria that was in the markets last week with the thought that the U.S. was coming out of the recession is turning into hogwash... Oh, and the continuing claims, which to me is just as important as the new claims, rose much more than expected too at 6,560,000...

And, we've already seen the color of the PPI data this morning. (Not that it accounts for a hill of beans! In my opinion, that is!) PPI rose a bit in April, but nothing, according to the Gov't., to be worried about, with regards to pipeline inflation... Yeah, right... The Gov't also probably believes we are all dumb enough that we would have to be told what the answer to 2+2 is!

So... Regarding the Thunder in the Eurozone this morning... Reuters is reporting this morning that the: "ECB HAS REJECTED C.EUROPEAN CBANKS' REQUEST TO ACCEPT LOCAL CURRENCY BONDS AS COLLATERAL - HUNGARIAN CBANKER KIRALY"

Recall that the European Central Bank (ECB) adopted Quantitative Easing two weeks ago, but there were some very important and powerful dissenting votes. For instance, the Bundesbank, Germany's Central Bank, and the most influential Central Bank in the ECB, was totally against Quantitative Easing...

So... Now today, apparently, the ECB's Quantitative Easing has a line drawn in the sand... And it's for "members only"... ECB President, who just a week ago engineered a truce among Eurozone Central Bankers, will need to polish up his negotiating tools once again... While this is happening, the euro, gets hung out on a line.

Recall that I told you that the Swiss National Bank (SNB) was watching for currency appreciation, as they did not want the Swiss franc to gain. Because... The Swiss are fighting deflation, and a strong currency would fight inflation.. The SNB has said they would intervene if the franc got too strong... Well, this morning, an SNB official told the markets once again that he's concerned with the franc's recent strength... HEY! SNB! GET OVER IT! You should never, ever, not in a million years, want a weak currency... You should be careful what you wish for!

A reader sent me a story that is very interesting... Here's the skinny, from the BBC... Japan's opposition party said that it would refuse to buy U.S. Treasuries denominated in dollars, if elected... Whoa there partner! What's this again?

The chief finance spokesman of the Democratic Party of Japan, Masaharu Nakagawa, told the BBC he was worried about the future value of the dollar.

"Japan has been a major buyer of US government bonds, helping the US finance its Federal budget deficits. But, he added, it would continue to buy bonds only if they were denominated in yen - the so-called samurai bonds. If it's [in] yen, it's going to be all right. We propose that we would buy [the US bonds], but it's yen, not dollar."

OK, before everyone begins to panic... Observers say that it is unlikely that Mr. Nakagawa's party will win the forthcoming election in Japan. But... What happens if they get enough attention to this position? Could it be adapted by the winning party too? I don't know... I tend to think no, as this would be a large reversal of current policy, and the Japanese aren't known for major shifts of policy!

So... The main point of this exercise was to point out that it's not just the Chinese who are running scared of the U.S. deficit spending...

Meanwhile, back at the ranch... This week's data, so far, has really put the risk takers off balance, and risk aversion seems to be sneaking back into the markets... If that's so, and we need a couple more days of this type of trading to tell for sure, then stocks will take a hit, and so will the currencies... Again... This is why I want this link to break... I've never seen it before and would hope to never see it again! Fundamentals! That's what I want to see!

I've talked so much about Gold here in Las Vegas, and haven't really touched on it much in the Pfennig lately, so... I'm here to change all that! With the stocks wobbling again, Gold gets some McLovin... The shiny metal pushed higher yesterday and overnight to settle in this morning at $924... While the stocks were getting bought, Gold had to take a back seat to the proceedings... But now that we've seen a few days of stock weakness... Gold gets to move to the front of the car! (Hey don't forget to buckle up!)

A lot of people here at the Las Vegas Money Show are interested in buying Gold... But... They are all convinced that the U.S. is going to confiscate it again like they did in the 30's... If I've told one of these people, I've told 100, that 1. in the 30's Gold was a part of our money. Dollars were backed by Gold, and with the problems of the depression, the Gov't needed to print more dollars, and thus needed more Gold to do so. That's certainly not the case today, the dollar is no longer backed by Gold, and Gov't sure doesn't have any governor to hold back their printing of dollars! And 2. So, confiscation doesn't do the Gov't any good, unless they want to see thousands of people storming the White House with pitchforks and rakes!

And on that note... Let's go to the Big Finish!

Currencies today 5/14/09: A$ .7550, kiwi .5905, C$ .8515, euro 1.36, sterling 1.5150, Swiss .9020, rand 8.58, krone 6.50, SEK 7.89, forint 212.15, zloty 3.29, koruna 19.7725, yen 95.65, sing 1.4650, HKD 7.75, INR 49.85, China 6.8249, pesos 13.27, BRL 2.0980, dollar index 82.60, Oil $57.33, Silver $13.92, and Gold... $924

That's it for today... I ran into an old colleague from Mark Twain Bank yesterday... Neil George... He's not changed a bit! After Mark Twain Bank was bought by the old Mercantile Bank, the buyers performed what I call "ethnic cleansing" of Mark Twain employees, and Neil and I went our separate ways... Man, we used to have some arguments across the desk! Oh well, that was over 10 years ago! Onward and upward! I'll miss my little buddy, Alex's, baseball game tonight... So... Get a couple of hits, Alejandro! (he's taking Spanish these days) OK... Time to get this out the door, and on your computer screens! I hope your Thursday is Thunderin' in a good way, and not stormy Thunderin'!

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

A shrinking US economy puts pressure on the US$...

Chuck Butler — Thu, 30 Apr 2009 14:54:18 GMT

.........But First, A Word From Our Sponsor..........
Record 2008 results take EverBank® to new heights.

In a year that saw many of the nation's largest financial institutions falter, EverBank excelled. Our 2008 achievements, which came as no surprise to us, included:

.Record net income of $46.0 million, a 52% increase from 2007
.Assets grew by 28% during the year to over $7.0 billion
.Bank deposits grew by 29% during the year, an increase of $1.1 billion and the largest annual deposit growth in company history to over $5.0 billion

The numbers-they say it all. We've solidified our place as one of the nation's strongest and most stable banks. And there's no mystery to our success. We're well-diversified, we've never engaged in subprime lending and we've got smart, dedicated folks working for us. Take advantage of our strength and stability. Visit http://www.everbank.com/?referid=11808.

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

In This Issue..

* US GDP falls more than expected...
* FOMC holds course...
* Canadian dollar has a great week...
* Oil helps commodity currencies...

And Now... Today's Pfennig!

A shrinking US economy puts pressure on the US$...

Good day... Yesterday was a big day in St. Louis as President Obama came to visit on his 100th day in office. I can't believe it has been 100 days since the inauguration. Time sure does fly! I'm sure Obama and the rest of his administration would like the calendar to move even faster as this recession will likely last through the end of 2009. While the government has thrown trillions of dollars at the markets in an attempt to turn them around, the key ingredient for recessionary cycles to reverse is time. There is now 'quick fix' for the problems we are in, and the policies the administration has begun will take time to have an impact on our shrinking economy. Obama said as much in his nationally televised press conference last night.

Speaking of shrinking economies, US GDP showed an even steeper contraction in the first quarter than that predicted by economists. US GDP fell 6.1% compared to the 6.3% fall during the last quarter of 2008. This drop confirms that we are now in the worst recession since the Great Depression. There report showed a record slump in inventories and further declines in housing. But another report released by the Commerce Department showed a surprising 2.2% gain in consumer spending in the first quarter, the most in two years. So we have consumers who increased their spending and confidence, while the US economy was contracting at near record pace.

Another report which didn't get much press was the GDP Price Index and the Core PCE which are measures of price inflation. These numbers rose more than expected, with the GDP price index rising 2.9%, nearly doubling economists predictions of a 1.8% increase, and substantially higher than last quarters .5% rise. This sets up the possibility that we could see what many consider the worst case scenario, falling GDP with rising inflation (STAGFLATION). With inventories at very low levels, a slight increase in consumption can lead to a very quick rise in prices. But the Fed doesn't seem to be bothered too much by that scenario, as they continue to focus on efforts to get the economy growing, with no apparent concern about inflation.

The Fed's Open Market Committee voted unanimously yesterday to leave its target interest rate unchanged at between 0 and .25% (they really can't go much lower!!). They also voted to continue to their purchases of long-term Treasuries and housing debt which they began last month. The FOMC statement said the contraction has slowed and the outlook "improved modestly" but the economy may "remain weak". Job losses and a very tight credit market will likely inhibit consumer spending in the coming quarters.

As I said earlier, there was no mention whatsoever of an exit strategy on how the Fed plans to pull in the record amount of money supply it has unleashed on the economy. The Fed said they will continue to monetize the debt at an unbelievable pace: as much as $1.25 trillion of mortgage-backed securities, $200 billion of federal agency debt, and $300 billion of Treasuries. They are making these purchases in an attempt to keep interest rates at below market levels to fabricate a refinancing boom. While they have been somewhat successful in keeping rates lower than they would be under normal market conditions, these purchases are extremely inflationary and won't be easily reversed. But the FOMC believes they will have plenty of time to worry about inflation and have decided to basically ignore it for now. Problem is, inflation can spike pretty quickly, and the FOMC will be hard pressed to raise interest rates just as the economy is starting to pull out of recession. I just don't believe they will have the guts to be proactive with inflation, and will probably see a major spike in prices on the other side of this recession.

Inflationary concerns are at the forefront of the ECB as they prepare for next weeks policy meeting. ECB President Jean-Claude Trichet has imposed a gag order on council members as they argue over what to do next to rescue the European economy. Some members had been taking their cases to the media recently in an attempt to push the ECB into following the UK, US, and Japan down the quantitative easing path. But more conservative members don't believe the ECB should use these untested methods, and are worried about the eventual inflationary impact of them. The ECB cut rates less than expected in April, and pushed a decision to use other methods off to next week's meeting. Germany's Axel Weber wants to make 1% the floor for the benchmark rates, and is against buying debt to pump additional money into the economy, while other council members want to begin asset purchases to force rates lower.

Data released this morning show Europe's unemployment rate rose to the highest in more than three years, and inflation held at a record low, which will increase pressure for the ECB to continue to cut rates. The March unemployment rate jumped to 8.9% in the Euro area, and inflation held steady at .6% in April. Other reports released this week suggested confidence in Europe is stabilizing which could counter some of the pressure to take additional measures. Chuck will bring you the details of the ECB meeting, which will occur a week from today.

The dollar sold off on safe haven reversals, but then moved back up in European trading. So after a bit of a roller coaster ride, we are pretty much right where we started yesterday morning. But the overall market sentiment seems to be shifting back to dollar negative. Two separate reports released by currency trading desks yesterday revised their currency forecasts down for the US$. Bank of America - Merrill Lynch revised their forecasts for the dollar, yen, euro, and pound on the 'rising probability' the global recession has passed its lowest point. Their report stated the euro would recover faster than previously predicted as the global economy turns. A separate report by Citigroup said the dollar would fall if/when the 10 year Treasury note yields rise above 3.06%. Technical analysts at Citigroup wrote that past trading patterns look like they are repeating. "Buying the dollar and US Treasuries was the trade of choice toward the end of 2008 and is now unraveling," they said.

Global deleveraging pushed investors back into US$, but as the global economy recovers (led by an increase in consumption in China), investors will move these funds out of this safe haven. Yield differentials will again determine investment direction, and growing economies will be able to attract more speculative capital. The US$, which has benefitted from the global downturn, will be sold. In order to protect your portfolio, investors should have some exposure to the currencies and metals.

One currency which has turned in one of the best performances vs. the US$ this week has been the Canadian dollar. The loonie touched the strongest level in two weeks on a move up in the price of oil. Equity markets are up, as investors have become much more confident regarding a global turn around. This confidence has carried over to the commodity markets, where oil and some of the industrial metals have been rising again. Canada relies on shipments of raw materials including oil, natural gas, copper, and lumber for more than half of its export revenues.

A report released by TD Securities, a large Canadian trading desk, predicted the Canadian dollar would appreciate by as much as 14 percent by November if it breaks through a key technical level. If the US dollar breaks below 1.1764 CAD$/$ (or above .85 UScents/CAD$) the upside opens up hugely over the next few months. The report puts a target of 1.04 CAD$/US$ (or .9615 US$/CAD$) for the loonie, a 14% increase from today's levels.

As I touched on above, the commodity currencies turned in one of their best performances in weeks as the price of oil shot back above $50. Both Norway's krone and the Australian dollar rallied along with the Canadian dollar. The AUD$ actually rose to the highest level in more than six months against the US$. The Norwegian krone, Australian dollar, and Canadian dollar are three of the best four currencies vs. the US$ on a YTD basis. The top performer vs. the US$ in 2009 has been the South African Rand, but recent rate cuts there may start eating into its recent strength.

South Africa cut its benchmark rate a full percentage point, the fourth reduction since December to help spur their economy. New Zealand's central bank also cut rates to a record low yesterday. Reserve Bank Governor Alan Bollard reduced the overnight rate by 50 basis points to counter the nation's worst recession in more than three decades. He indicated that rates may go lower, and will stay down for the foreseeable future. The kiwi sold off after the announcement.

Good economic news out of Japan has been rare, so yesterdays report that Japan's factory output rose for the first time in six months was a surprise. And even more surprising was the fact that the pace of the output rise was nearly double that predicted by economists. Factory production climbed 1.6% in March from February, when it dropped 9.4%. In a separate report, the Bank of Japan said the world's second largest economy will resume growth in 2010 after shrinking 3.1% this fiscal year. But I still caution investors regarding investments into the yen. The Japanese yen benefitted from the reversal of the carry trade, but global markets seem to be substantially less leveraged than before. The Japanese yen is not going to be able to benefit from another large push by additional deleveraging.

Got to go now, as we have our quarterly officers meeting in a few minutes. Sounds like it will be all good news, as EverBank continues to hit on all cylinders. It really is another Great Day at EverBank!!

Currencies today 4/30/09: A$ .7289, kiwi .5666, C$ .8383, euro 1.3263, sterling 1.4812, Swiss .8790, rand 8.4585, krone 6.5931, SEK 8.0664, forint 218.38, zloty 3.323, koruna 20.125, yen 98.15, sing 1.4775, HKD 7.75, INR 50.035, China 6.8210, pesos 13.74, BRL 2.1796, dollar index 84.49, Oil $51.81, Silver $12.62, and Gold... $889.20

That's it for today... more rain is predicted for today, and the rain is expected to continue all the way through the weekend. Typical spring weather here in St. Louis. The big positive on the rain is that it washes away most of the pollen, and provides some relief for my allergies. Had a great run through a local park with my wife last night, its kind of nice having company on my runs (I can never get her to wake up as early as I do during the week!). Hope everyone has a great day today, as it is Tub Thumpin Thursday!!

Chris Gaffney, CFA
Vice 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

.........But First, A Word From Our Sponsor..........
Record 2008 results take EverBank® to new heights.

In a year that saw many of the nation's largest financial institutions falter, EverBank excelled. Our 2008 achievements, which came as no surprise to us, included:

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

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

Awful Data!

Chuck Butler — Thu, 16 Apr 2009 12:55:23 GMT

.........But First, A Word From Our Sponsor..........
Record 2008 results take EverBank® to new heights.

In a year that saw many of the nation's largest financial institutions falter, EverBank excelled. Our 2008 achievements, which came as no surprise to us, included:

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

In This Issue..

* Weber opens Pandora's Box...
* A record low for Capacity Utilization!
* Do I hear a Chicken?
* China's economy grows 6.1%

And Now... Today's Pfennig!

Awful Data!

Good day... And a Thunderin' Thursday to you! The "Day After" Tax Day... It still hurts! And to think, one of these days, I'll be paying even more, thanks to the direction of our country... And you will be too! There's no two ways about it, the Deficit in funding in Washington D.C. which will be a result of all the spending, is going to require greater revenue... Where does the Gov't get the revenue? From taxes... Of course if it wasn't a debtor nation, it would not have to pay out the large sums of interest on the Treasuries it issues... But, that... Is a discussion for another day.

The currencies saw more dollar strength yesterday, but it wasn't a result of anything the dollar had going for it... In fact, the results of the data yesterday was all dollar negative... No, this time it came from the Eurozone. Right about the time I was hitting the send button yesterday, European Central Bank (ECB) minister, Axel Weber Opened Pandora's Box of questions regarding future direction of the ECB... Let's go to the tape!

Weber was so kind to mention that the ECB will announce a package of "non-standard" monetary measures at their next meeting in May... Brother, you should have seen all the different angles that were taken by the pundits after this announcement! Some believe he was telling the markets to get ready for Quantitative Easing. (not sure why he would do that, the ECB still has room to cut rates lower) Some believe he was telling the markets to get ready for rate cuts down to 0%. (not sure why they would need to go to 0%, or why he would make that announcement now, when rates are 150 BPS away from 0%)

Either way, the euro took the brunt of the message, and got sold, leading the other currencies to a day of dollar strength across the board... The board that stops in Japan that is! The Japanese yen continues to get back in the good graces of currency traders.

So... What about the data prints yesterday? ZOWIE! Talk about negativity! First, let's look at Capacity Utilization, since I talked so much about it yesterday. Capacity Utilization fell to 69.3%, a new all-time low for the series. And, the manufacturing component of the data fell to a new all-time low! Recall, I told you this was a "forward looking" piece of data... So the future doesn't look so bright, eh? Guess I won't have to wear those shades!

Industrial Production also posted a negative number for the month of March posting a -1.5% decline. And... CPI? Well... Consumer inflation posted the first year-over-year decline in the headline rate in over 50 years! 1955 (it was a great year!) was the year... Prices were 0.1% lower in March than in February, contrary to the "experts" that thought prices would increase by .1% This resulted in the annual inflation rate falling to -0.4%, the first negative number since 1955!

So... Don't look for interest rates in the U.S. to be going anywhere for some time... The one thing you can look for though is more Quantitative Easing...

And... Leave it to the media to spin the TIC Flows in a positive manner... TIC Flows (net security purchases by foreigners) posted a figure of $22 Billion in February, which is below the amount needed to finance the Current Account Deficit. However, the media spun it like this: "International demand for long-term Treasuries rose in February as China and Japan added to their holdings." Hmmm... Well, it's a true statement... But, not complete!

OK, enough on the data yesterday... Talk about putting someone to sleep! ZZZZZZZZZZ!

Did you hear about the U.S. Treasury turning yellow belly? OK, let me first set this up... During the Presidential campaign, Obama indicated that China had indeed manipulated their currency... But when it comes down to the cheese that binds, the Treasury Dept declined to name China as a currency manipulator... Bawk, Bawk, Bawk... Chic-ken!

Well, the Fed's Beige Book printed yesterday, and believe it or don't, half of the Fed Districts are seeing a moderation in the pace of the economy's decline. That plays well with the mental note I made yesterday about full planes and restaurants. But is this just U.S. consumers refusing to batten down the hatches and save for a rainy day? You know, denying the recession and maintaining their spending habits? I mean, you know, the generation that comes after me, has never experienced a major slowdown... Maybe they don't know how to act? HA!

China posted at GDP for the 1st QTR of 6.1% Pretty darn good for an economy that was slowing down so much the Gov't had to implement a stimulus package. While it's a far cry from the 11 and 12% growth rates of a couple of years ago, it's still better than a sharp stick in the eye! I still believe that China will be the first economy to come out of the global recession.

Japanese yen got bought on the China GDP number, as traders were disappointed with the figure... I believe this all to be overdone, a little to much drama for my taste... I would be careful with this kind of trade, for you never know what the Chinese (a communist country) will do...

So... If yen is getting bought, that means the high yielders are getting sold, and so it is for the once high flying currencies of Australia, New Zealand, Brazil and South Africa. I still believe that eventually hedge funds, and investors are going to grow tired of the paltry yields on U.S. assets, and look to go elsewhere... Therefore, I like to be ahead of the crowd, if you get my drift...

Indian rupees are stealth like these days in gaining ground once again... I've had my foot stepped on plenty of times by the Indian Central Bank and their intervention whenever the currency gets stronger... But much like most things, I forget the pain, and talk glowingly about rupees once again... Talk about a country that is least likely to implement Quantitative Easing!

And finally, Gold... It just hasn't been a good week for Gold. Every morning the shiny metal posts a gain at the London Morning Fixing, but gives it all back by the end of the day. Today, Gold posted a loss at the Fixing, so maybe, it gains all day! A reversal of fortune if you will! The Uncertainty Hedge is still just that folks... And in these days of uncertainty you have to wonder, just what's going on in the minds of investors without Gold... But that's just my opinion...

Currencies today 4/16/09: A$ .7195, kiwi .57, C$ .8285, euro 1.3165, sterling 1.4850, Swiss .8710, rand 9.0250, krone 6.7150, SEK 8.3075, forint 222, zloty 3.2550, koruna 20.44, yen 98.70, sing 1.4975, HKD 7.75, INR 49.75, China 6.8325, pesos 13.08, BRL 2.1835, dollar index 85.23, Oil $49.71, Silver $12.66, and Gold... $889

That's it for today... The Big Boss, Frank Trotter, was on the Fox Business Channel on Tuesday morning. He was interviewed by one of our faves, Alexis Glick. As I always say, he has the face for TV, I have the face for radio! Tough first game of the playoffs for our Blues. Not to worry, they'll get them the next game. I slept right through the Cardinals' game and my little buddy Alex's baseball game last night! UGH! Tomorrow, I'll have the first of the "feel good" business stories that I've accumulated. I know, it's been some time since I first announced this, but, that was before vacation, and San Diego, etc. Hopefully, the long wait will be rewarded! It's a crazy time in the world of sports, with baseball getting into full swing, Basketball and Hockey starting their playoffs, and spring football for college teams... A veritable smorgasbord of sports... A Whitman's sampler if you will! OK, time to eat my apple... I hope your Thursday is Thunderin'!

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

.........But First, A Word From Our Sponsor..........
New 5-currency Index CD from EverBank®. Apply today.
The new Debt-Free Index CD is comprised of equal parts Singapore dollar, Japanese yen, Swiss franc, Australian dollar and Brazilian real. Why these currencies? All 5 economies have a strong balance of payments-a factor that could aid performance against the U.S. dollar.
Of the 5 economies, only Australia has a trade deficit-and the gap appears to be narrowing. Concerned about investing in a weak U.S. dollar? Consider this new Index CD, it is available in 3- and 6-month terms with a $20,000 minimum deposit. Apply today at http://www.everbank.com/001CurrencyCDIndex.aspx?referid=11808.
This CD is FDIC insured against bank insolvency, but please keep in mind that you could lose principal as a result of currency fluctuation.

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

UK data boosts the dollar...

Chuck Butler — Fri, 27 Mar 2009 17:12:16 GMT

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

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

-- Familiar products: WorldCurrency CDs and Money Market Accounts
-- Many currencies: All major and some emerging currencies available
-- Expert support: Our World Markets Trading Desk is staffed with currency specialists ready to help

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

In This Issue..

* UK data boosts the dollar...
* US GDP falls further...
* Norway cuts rates...
* Big wins by MIZZOU and BLUES...

And Now... Today's Pfennig!

UK data boosts the dollar...

Good day... I want to start this mornings Pfennig with a big congratulations to the MIZZOU Tigers who pulled off what most believed was an unlikely win over Memphis last night. What a game! They move on to the Elite Eight to play powerhouse UCONN on Saturday.

The currency markets weren't as exciting as the basketball games yesterday, as the dollar held in a fairly tight range. The big move came in early morning trading as a report was released in the UK showing their economy's contraction was worse than previously thought. This news was GDP in the UK fell 1.6% in the 4th quarter of 2008 vs. the previous quarter. And the outlook presented by the Bank of England is not rosy. BOE Chief Economist Spencer Dale said this morning that the British economy's short term prospects are 'bleak'. Chuck has brought up the comparison between the UK and US economies several times, as the UK economy looks like mirror image (albeit smaller) of the US. The UK economy has been slightly ahead of the US in the race toward economic meltdown. Unfortunately the US Fed seems to be shadowing every move by the UK, cutting rates to near zero and then using 'quantitative easing' to force them down even further.

Both the UK and US have been flooding their economies with liquidity, by purchasing their own debt. These moves are inflationary, and while we haven't seen signs of any uptick in US CPI, the UK inflation rate unexpectedly rose to 3.2% in February. An ominous sign for the US economy. And by purchasing their own debt and forcing down interest rates below what the market is demanding, the UK and US governments are pushing foreign investors away from the debt sales. This is one reason the failure of the Gilt auction which I wrote about yesterday is of so much concern to the US. We rely on foreign investment in order to finance our deficits, but at the same time we are trying to force interest rates at which these bonds are being sold to below what the market is demanding. This can't continue, and results in failed bond auctions. The solution? The currencies of the US and UK will decline and interest rates will move back up in order to lure back foreign investors. This is inevitable, as the only way we can continue to run deficits while keeping interest rates low is to inflate our economies, which decreases the value of our currency.

The other economy which the US is constantly compared to is that of Japan's which continues to be mired in an economic depression. Japan's inflation rate was flat, and retail sales tumbled the most in seven years, signaling their economy is heading back toward deflation. Prices in Japan were unchanged from a year earlier, and retail sales dropped 5.8% according to reports released last night. It now looks like Japan is back in the deflationary they have been working so hard to get out of.

Hopefully the US can hit the sweet spot between these to 'worst case' scenarios; the inflationary spiral of the UK and the deflationary spiral of Japan. That is the goal of this administration, to hopefully stimulate our economy just enough to keep consumers spending but be able to pull back this stimulus before it becomes inflationary. I certainly hope they will be able to accomplish this, but it is a tall order. Ultimately the US needs to stop deficit spending and start saving. This is what will bring us back out of this economic quagmire.

Data released yesterday morning showed the US economy shrank slightly more than previously estimated in the 4th quarter. GDP fell 6.3% in the last quarter of 2008, just above the earlier estimate of 6.2% but better than economists had predicted. The markets largely ignored this dismal report and instead focused on the positive data released earlier this week. The equity market had another big day yesterday as investors seemed to feel the worst was behind us and the first quarter GDP would show an improvement or at least a stabilization in the US economy. For all of 2008 our economy grew 1.1%, mostly due to government tax rebates.

A bigger reduction in inventories than previously estimated accounted for most of the GDP revision. The report showed inventories fell .9% in February after dropping 1.1% in January, the biggest two month slide since 2003. As Chuck explained earlier this month, these lower inventories are a double edged sword. The decrease in inventories has brought the ratio of inventories to sales down for the first time in seven months. This ratio shows that manufacturers may have to start stepping up production to restock shelves. But it also increases the risk of higher inflation. Manufacturers are probably going to want to wait to see retail sales pick up before gearing up production. And with many factories idle and workers laid off, there will likely be a delay in getting production cranked up again. This delay could prove to be inflationary, as consumers are going to be met with empty shelves; too much money chasing too few goods is the definition of inflation. I'm sure Chuck will continue to watch this inventory to sales ratio for any early signs of inflation.

The Euro has come under some selling pressure this morning after European industrial orders dropped the most on record in January. Industrial orders fell 34%, the largest drop since records began in 1996. The drop emboldened those calling for the ECB to cut rates further to spur the economy. The ECB dropped rates by 50 basis points on March 5, and indicated they would keep them stable for the immediate term. But the further decline in the UK and a deteriorating economic situation in the Baltic region has increased calls for further action.

The Norges Bank cut its key rate by 50 basis points yesterday and said Norway's mainland economy (which excludes shipping and oil), will likely shrink 1 percent in 2009. The Norwegian krone came under some selling pressure after the cut, selling off nearly 2% in the last 24 hours. A slight fall in the price of oil also weighed on the krone. Norwegian central bank Governor Svein Gjedrem indicated he has more room to cut benchmark rates if the global economic outlook deteriorates further.

This is a BLUE LIGHT SPECIAL on the Norwegian currency, and a great buying opportunity for anyone who was waiting to invest. Many feel Norway is the best 'safe haven' currency in the world, and their economic fundamentals are rock solid.

The dollar strength has stalled the advance of the Australian and New Zealand dollars, but they are still headed for their biggest monthly advance against the US$ in more than 20 years. The global equity rally has encouraged investors to start looking at higher yielding currencies again, with money moving out of the yen and US$ back into Australia and New Zealand. With both Japan and the US using 'quantitative easing' to flood their economies with liquidity, the higher yields of Australia and New Zealand are attractive. The Reserve Bank of Australia is not even contemplating 'quantitative easing', indicating a healthier economy. Charts show the Australian dollar will likely strengthen another 10% this year.

China continues to feel its oats in the run up to the Group of 20 meeting next week. Chinese central bank Governor Zhou Xiaochuan lambasted western governments yesterday, blaming them for not taking decisive action to combat the global economic slowdown. Evidence that China's economy is starting to rebound has emboldened Governor Xiaochuan who called for a new international reserve currency to rival the US$ earlier this week. Premier Wen Jiabao started the rhetoric earlier this month when he said he was worried about the value of China's $740 billion in US Treasury holdings and asked for a guarantee of their safety. China is obviously working toward taking a much bigger leadership role at the G-20 meeting.

China's economy has continued to grow, in spite of the global economic recession. The economy grew at 9% for all of 2008 after posting double digit growth in 2007. Chinese leaders have repeatedly stated a desire to keep growth above 8%, and indications are they will may be able to achieve these lofty goals. This is truly amazing, considering the Chinese economy recently surpassed Germany to become the third larges in the world.

We have repeatedly written about China's rising influence on the global economy, and now they seem to be wanting a more dominant place at the table. Their $1 trillion in currency reserves has given them the right to take a more dominant role, and we are going to have to learn to deal with this more powerful nation. After all, they hold a majority of our IOU's.

While I doubt if their calls for an 'international reserve currency' will get much traction at next week's meetings, it definitely puts selling pressure on the US$. Investors (both sovereign and individual) will continue to diversify their holdings, selling the US$.

Currencies today 3/27/2009: A$ .6958, kiwi .5727, C$ .8106, euro 1.3400, sterling 1.4304, Swiss .8786, rand 9.54, krone 6.569, SEK 8.0960, forint 226.07, zloty 3.4218, koruna 20.317, yen 98.12, sing 1.5132, HKD 7.7507, INR 50.603, China 6.8324, pesos 14.2766, BRL 2.2488, dollar index 84.62, Oil $53.50, Silver $13.35, and Gold... 926.95

That's it for today... What a night of sports in St. Louis last night!! I took my son to the Blues game, where we got to watch the new golden boy of St. Louis hockey, TJ Oshie score a remarkable goal. The Blues inched closer to a playoff spot, and have been playing some unbelievable hockey. We left the Blues game and got home in time to watch the Mizzou Tigers advance in the NCAA tourney. Just a great night for sports fans in St. Louis!! I just hope the weekend will bring us more good news for both of these teams. Speaking of the weekend, I just heard we may be getting a last push of winter weather through St. Louis with some calling for up to a foot of snow. Hope everyone has a Fantastic Friday, and a wonderful weekend!!!
Chris Gaffney, CFA
Vice President
EverBank World Markets
1-800-926-4922
1-314-647-3837

A Day Of Healing...

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

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

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

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

In This Issue..

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

And Now... Today's Pfennig!

A Day Of Healing...

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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