Daily Pfennig : Jobs

When 8.5% Is Really 15.6%!

Chuck Butler — Mon, 06 Apr 2009 14:30:10 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.

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

In This Issue..

* Job Losses Continue To Mount!
* Currencies rally on the day...
* Shhhhh! The Gov't wants to keep this quiet....
* Richard Russell...

And Now... Today's Pfennig!

When 8.5% Is Really 15.6%!

Good day... And a Marvelous Monday to you! OK, it's Opening Day here in St. Louis, so traditionally I bring this to you on Opening Day... Beat the drum, and hold the phone, the sun came out today, we're born again, there's new grass on the field... A-rounded third, and headed for home, it's a brown eyed handsome man, anyone can understand the way I feel.....

Yes, baseball freaks like me, believe we're born again every spring on Opening Day, for before that first pitch is thrown, everyone is in first place!

OK... Enough of all that... I've got some serious stuff to talk about here... And it all begins with Friday's Jobs Jamboree.... I was heading to the airport when the number was released that showed 663,000 more U.S. jobs lost... March's number of -663K, put the unemployment rate at 8.5%... But seriously folks... I'm not using "new math" when I tell you that the real unemployment rate is around 15.6%! I know, I can hear you saying, "Chuck, where in the world did you get that number?"

Ahhh grasshopper... You get 15.6% when you add in all the people that are laid-off but their unemployment benefits have expired... You may recall me telling you this over and over again in the past... But... The Bureau of Labor Statistics (BLS) does NOT count people that are unemployed and have had their benefits run out, as unemployed.... What do they count them as? Who knows, but they sure don't count them for what they are! And isn't that really questionable? Why not call them for what they are?

Dean Baker, who is the co-director of the Center for Economic and Policy Research in Washington, said this about the report.... "There's just no way we're anywhere near a bottom. We'll be really lucky if we stop losing jobs by the end of the year." He went on to say..."We're clearly looking at a worse downturn than they (the Obama administration) had been anticipating when they planned the stimulus. We're going to need some more."

And finally... The thing that really TICKS ME OFF! Was the revision of the Feb job losses... Stealth like, the BLS slid a revision of 86,000 additional jobs lost in Feb to bring the total to 741,000! My friend Ian Mathias over at the 5-Minute Forecast (which by the way if you don't read it, you should!) had this to say about the revision... "That's actually the biggest monthly drop in 59 years. Such a number would have sent stocks to the woodshed back in early February, but since the revision is now so backward looking, there isn't much traders can do. Clever trick, eh?"

Geez Louise, will the talk of stimulus ever end? More later, but first... Let's see what the currencies did in reaction to this data...

Currencies enjoyed another day in the sun on Friday (except yen) as the more everyone talks about stimulus, and bailouts, and so on, the more the risk takers expose of their body to the currency waters. One would think it to be the other way around, BUT! Not now... Everyone heard it from G-20 this week, they are going to make it all right on the night for everyone, no worries!

The euro traded up near 1.35 on Friday, and saw the Aussie dollar (A$) push higher to .7155... So.... Remember on Thursday when I told you that the euro had backed off some because of the Eurozone's jobs report, and that I said it won't be as bad as the U.S. report... It all goes back to what I was saying the other day... Other countries might be experiencing their own problems right now, but they don't compare to what's going on here in the U.S!

Last night when I returned home from San Diego (plane was delayed over 3 hours! UGH!) The euro was trading well into the 1.35 handle, at 1.3560! I don't know if you been following the A$ closely since I said before I left on vacation, that it appeared to have turned the corner... But if you have, then seeing A$'s trade close to 72-cents again is not a shocker to you... For those of you not keeping score at home, it probably is a shocker to you... But in a good way, eh?

But... Just as always the prosperity just can't seem to hold serve, and in the overnight markets the profit taking set in, with the euro coming back to 1.35... But hey! It's still 8 figures higher than it was before I went on vacation last month!

I saw this report on the AP newswire Saturday regarding Modified Mortgages...

Remember how Modified Mortgages were going to be the end all of what ails the mortgage meltdown? The first reports of these aren't so rosy.... "Fewer than half of loan modifications made at the end of last year actually reduced borrowers' payments by more than 10%. The report based on an analysis of nearly 35 million loans worth more than $6 Trillion, was published by the Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision (OTS) The report helps to explain why many loans are falling back into default after being modified. Many borrowers and consumer groups contend that the modifications offered by the lending industry are very generous, despite public prodding from regulators."

Hmmm... Looks like they need to go back to the drawing board, eh?

And... In another item from Washington that appears to have gone back to the drawing board, at least with the accountants is the story that appeared in the WSJ on Sunday regarding how much the TARP is going to end up costing taxpayers... I'm sure we need to deal with this delicately and quietly... So.... SHHHHHHHHHHHHHHH.... I'll whisper this next part, because the Gov't doesn't want you to realize how much of their spending is going to cost you!

OK... "The Congressional Budget Office has quietly altered its estimate of the ultimate cost to taxpayers of the $700 billion Troubled Asset Relief Program, now figuring the initiative will be much more expensive in the long run than it previously figured. In January, the CBO pegged the ultimate cost to taxpayers of the $700 billion TARP at $189 billion. When the agency issued revised numbers in late March, it revised that to $356 billion, a change that drew little attention."

See... They tried to keep it quiet, so that's why I SHHHHHHHHHHH'd!

Have you heard Neil Young's new song? (it just new words to an old Neil Young song)
There's a bailout coming
And it's not for you....

Old Shaky got pretty tricky with those words...

I have to tell you something about Saturday Night's Richard Russell Tribute Dinner, which by the way was a grand time had by all... First of all... Richard was asked, "if you, Richard Russell, were named president what would you do in these times?" to which Richard answered... "I would do nothing... I would let the bear markets run their course"... Now, I sat there gleaming, because how many times have you all read that from me since the stimulus and bailouts started? Many, would be the answer, so it was good to hear it from the "maestro"...

Then, my eyes lit up even more when my good friend Mary Anne Aden told me that she had met with Richard earlier, and he asked her to list who she knew was coming. When she got around to my name, he stopped her, and told her that he read the Pfennig almost daily on Kitco, and that he really like it, and me.... WOW! Talk about making my day! OK, I don't want to come back down from this cloud, it's taken me all this time to find out what I need.... But I guess I will...

Currencies today 4/6/09: A$ .7135, kiwi .5895, C$ .8115, euro 1.3510, sterling 1.4950, Swiss .8860, rand 8.9930, krone 6.52, SEK 7.9620, forint 218.27, zloty 3.2890, koruna 19.6925, yen 100.80, sing 1.5050, HKD 7.7510, INR 50.05, China 6.8330, pesos 13.50, BRL 2.1470, dollar index 84.04, Oil $52.63, Silver $12.45, and Gold... $882.80

That's it for today... The weather people are saying it's going to be a winter wonderland at Busch stadium today for the home opener... Hmmmm... Those job losses keep mounting don't they? I'll tell you something though, the restaurants are still pretty busy... The airplanes I've been on recently are still full... Makes you shudder in fear that these mounting job losses could go on for some time before it shows up in the economy... The good news is that the losses to date haven't clamped down the entire economy... OK... It was great to see a lot of old friends at the Richard Russell Tribute on Saturday... As I said, Mary Anne Aden was there along with sister Pam, Bonnie and Rick Rule, Steve Sjuggerud, Bill Bonner, Addison Wiggin, John Mauldin, and the list goes on!

Addison Wiggin said in the bar afterward that he looked around the room and saw about 400 people that would for the most part agree with the things we try to tell people about the deficits, etc. but that the media would think we were all kooks... That's OK I said... We think the media are all kooks! It goes both ways! I've carried on enough... Hope you have a Marvelous Monday... And Opening Day... Why isn't Opending Day a National Holiday?

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

A Jobs Jamboree for Friday!

Chuck Butler — Fri, 03 Apr 2009 13:43:21 GMT

.........But First, A Word From Our Sponsor..........
Banking IRAs from EverBank®: FDIC insured and high yielding

Our wide range of IRAs even includes two high yield banking options: the Yield PledgeSM Money Market Account and Yield Pledge CD. Both accounts let you safely save for retirement while taking advantage of EverBank's commitment to delivering high bank yields.

Build for retirement your way, only at EverBank®. Visit http://www.everbank.com/002IRA.aspx?referid=11808.

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

In This Issue..

* G-20 Gives the green light to risk takers....
* Currencies rally on the day...
* A discussion on capitalism...
* Yen continues to weaken...

And Now... Today's Pfennig!

A Jobs Jamboree Friday!

Good day... And a Happy Friday to one and all! A Fantastico Friday, as I head to my fave city in the country, San Diego. I'll be heading to the airport shortly after sending this out. The currencies rallied nicely yesterday, and I'll tell you why... So, let's go to the tape!

Well... Remember all the talk about relaxing the FASB mark-to-market rules in the past couple of months? The announcement was made in the communiqué of the G-20 meeting. The Financial Accounting Standards Board (FASB) revised the rules to allow companies to use their "judgment" to a greater extent in determining the "fair value" of their assets. The board also made it easier for companies to avoid having to take impairment charges against earnings when they suffer losses on their investments.

Talk about opening Pandora's Box of risk appetite! Stocks soared... And everyone was feeling the euphoria of the day... Well, everyone but me! I can guarantee you this folks... If little old Joe's Bank had complained that these rules were too stringent they would have fallen on deaf ears... But... Let's see if it works, right? Shoot, these financial institutions made such "great" decisions to own the junk they "used to have to write down", I bet they'll make even "better" decisions when using "judgment" on what gets marked down and by how much.... You make the call...

So... The with risk appetite on the rise, the currencies are cooking with gas once again... The euro, Aussie, Canada, and Swiss were BIG WINNERS on the day...

Another thing that pushed the euro higher on the day was the European Central Bank's (ECB) decision to cut rates by only 25 BPS or 1/4%. It was widely expected that the ECB would do 50 BPS to keep up with the Joneses of the world. Not so fast Tim! There was a hint from ECB President Trichet about quantitative easing, but at this point, it hasn't happened, and as I explained yesterday.... That's a good thing!

And, what do we have here? Oh! It's A Jobs Jamboree Friday! But before we go there... Let's recap this week's employment numbers leading up to the Jobs Jamboree, eh? First we had the ADP report show 742K jobs were lost in March... Then yesterday we had the Weekly Initial Jobless Claims show that 669K new claims were filed, and that the previous week's 630K figure was revised up to 672K... What's really scary here folks is that the 4-week moving average is now up to 649.5K...

All the King's Men and all the King's Horses that believe the Humpty Dumpty economy will be recovering by the end of this year, might want to look over those forecasts and come clean on what they really think, not what the Gov't wants them to say, to make it look like everything will be right on the night, because... These unemployment numbers are not shaping up to be anything close to a recovering economy!

Getting back to G-20 for a minute... G-20 also announced that they would give the IMF $1 Trillion to help countries in crisis... Well... Just who do you think the majority of that $1 Trillion came from? Well, that's right, it would be the only country currently running their printing presses 24-hours a day, and 8 days a week... It's not enough to show I care!

Ok... I read a story on the WSJ web site yesterday that said, "hey, Chuck! This story's for you!"

So... Here you go...

"Anticapitalist protesters gathering in London for two days of demonstrations are missing the point. If there is one myth the credit crunch has surely exploded, it is that the financial system is a free market. The world is in a mess because the financial system wasn't capitalist enough.

True, there were some terrible regulatory failures, and politicians lacked the stomach to stop excess as bubbles formed. But successive bailouts over many years also distorted the banking system to the point where real price signals were swamped. Nothing in the current global recovery proposals suggests this lesson has been learned.

In a capitalist system, prices are set in the free market and providers of capital bear responsibility for their losses. Neither of these characteristics hold true of the banking system. The price of credit, the basic commodity of the financial system, was distorted first by implicit government guarantees to depositors and other providers of capital, and second by the tendency of governments to cut interest rates at the first sign of financial trouble.

Financial theory says the cost of capital to an enterprise should rise in line with risk. But banks during the boom were able to leverage themselves more than 50 times yet see their cost of funding fall.

That is hardly the sign of a well-functioning free market. Those who provided funding to banks correctly gambled that governments would ride to their rescue. Since the crisis began, implicit guarantees have become explicit and thresholds have been raised. The U.K. is even proposing to raise depositor protection in certain circumstances to £500,000 ($717,360), further undermining the principle of personal responsibility.

This government protection effectively extends to wholesale funding, too. With a few exceptions, including Lehman Brothers, bondholders have been spared losses as a result of bank failures.

Indeed, it has been axiomatic of the policy-maker response that bondholders should be kept whole to avoid the threat that the banking system would seize up completely or that the insurance industry, with large bond portfolios, would become the next domino to fall. Most Western bank bonds are now issued with an explicit government guarantee. The result is a distorted global financial system in which the true cost of capital is obscured.

In a fully capitalist system, there would be no guarantees. The market would ensure banks didn't become too big or too leveraged.

At least the current crisis is sure to lead to higher common-equity buffers for all. But since removing the guarantees and breaking up the banks is outside the realm of political reality, an alternative solution is to charge banks explicitly and upfront for all guarantees. The charges would rise in line with leverage. That at least would raise the cost of funding, helping to generate a price signal to the market.

Instead, global governments are taking the opposite tack. Unable to remove the guarantees and unwilling to properly charge for them because the banks remain too weak, they will try to limit the risks through more intrusive regulation.

The results, if that goes too far, should be clear enough: lower bank profits, less capital generated, less credit created, lower economic growth and more bureaucratic control over the banks and the wider economy.

The protesters should be careful what they wish for."

>>>>>> back to me... It was as if this writer basically interviewed me! WOW! That was really strange! But right up my alley of beliefs!

OK, back to the return of risk appetite once more before we head to the Big Finish... Now, if you've been paying attention in class for the past couple of years this will be an easy pop quiz for you.... What currency will NOT perform well when risk appetite returns to currencies? (sure wish I could do a sound bite here, and play the Jeopardy music) ready? YEN! By, Joe I believe that everyone was on board!

Japanese yen briefly weakened above 100 for the first time since Nov. 4th 2008 in the overnight markets... It has slipped back below 100 as I write. G-20 didn't do yen any favors that for sure!

Currencies today 4/3/09: A$ .7140, kiwi .5830, C$ .8065, euro 1.3450, sterling 1.4740, Swiss .8810, rand 9.1660, krone 6.5660, SEK 8.0560, forint 219.90, zloty 3.32, koruna 19.79, yen 99.70, sing 1.5050, HKD 7.75, INR 50.40, China 6.8355, pesos 13.75, BRL 2.23, dollar index 84.33, Oil $53.07, Silver $12.81, and Gold... $905.30

That's it for today... Thanks to Cheryl Harper for making me my fave cake (pineapple upside down cake) for my birthday. She waited until I returned... What a sweetheart! It was great to come back and see everyone in the office yesterday. Well... I was watching the weather forecast on TV last night, and the forecast for Monday's Home Opener for my beloved baseball Cardinals is not very baseball like! Snow Flurries? Only 37 degrees? YIKES! I just came from watching games in sun and 80 degrees! Oh well... Who knows, by Monday it could all change, this is St. Louis weather I'm talking about! I was thinking about traveling this weekend to San Diego for the Richard Russell Tribute without my laptop... Dare I? No... I get there this afternoon, and will work the rest of the day... Almost left without it though... Man, wouldn't it be nice to... Oh, never mind, I almost went into a Beach Boys song there, and that would have really thrown us off course! So... Strap yourself in for this wild ride of the Jobs Jamboree, and have yourself a Fantastico Friday!

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

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

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

.........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..

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

And Now... Today's Pfennig!

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

A Horrific Jobs Report!

Chuck Butler — Mon, 09 Mar 2009 14:47:02 GMT

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

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

Diversify your retirement portfolio globally. You can seek gains (though loss of principal is possible), hedge against inflation and lower overall portfolio risk. Simply choose your account type and the currency that's right for you. Our currency IRAs are FDIC insured against bank insolvency only.

Build for retirement your way, only at EverBank®. Visit http://www.everbank.com/002IRA.aspx?referid=11808.

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

In This Issue..

* 651K jobs lost in Feb...
* Dec. and Jan Job losses revised up...
* Talking Norway, Canada, Australia...
* Brazil stealthlike for 3 months...

And Now... Today's Pfennig!

A Horrific Jobs Report!

Good day... And a Marvelous Monday to you! A wonderful weekend here in St. Louis, a taste of spring was in the air. I got to spend some time with some of my closest friends on Friday night, a good time was had by all!

Well... Our Fantastico Friday was interrupted by that horrific Jobs Jamboree number that printed Friday morning... 651K jobs were lost in February, which let me remind you is a couple of days shorter than other months. So, it could have been worse! Hard to believe that could be the case, but it's true. The unemployment rate rose to 8.1%, from 7.6% in January. The jobless rate is the highest since 1983. The economy has now shed 4.4 million jobs since the recession began in December 2007, with almost half of those losses occurring in the last three months alone.

Remember a year ago, when I kept harping that we had entered a recession, but the NBER hadn't announced one yet, nor were the Un-dynamic duo of Paulson and Bernanke agreeing with me, as they kept denying what was right in front of them, for if little old me, could see that we had entered a recession, then why couldn't these two? Oh, well, we now know that the recession began in December 2007... And now we know that 4.4 million jobs have been lost since that time. Of course if the Bureau of Labor Statistics (BLS) didn't add jobs throughout the year that didn't exist, we would be even more worse, so I don't know whether to thank the BLS or curse them...

One thing to not let slip by you, is the fact that the previous months' totals of -577K and -598K were revised upward by large amounts to -681K and -655K respectively... So, you've now got to ask yourself if the Feb figure will be revised to -700K... Of course it's my opinion that the BLS would never dare print that figure on a first run printing, but only as a revision, that can be swept under the rug.

So... The currencies reacted a bit differently on Friday than we had seen recently when bad news printed in the U.S. Recall, that the Trading Theme that rewarded the dollar, whenever bad economic data printed, had held a grip on the markets for some time... But Friday morning, I mentioned that the trading looked different, with no Trading Theme in place, and that carried on even after the Jobs data printed.

The euro was stronger for most of the day on Friday, but as I left the office at the end of the day, it was beginning to look a little worn around the edges, and as I turn the currency screens on this morning, I see that the single unit has given back some ground.

I got a kick out a story that a reader sent me over the weekend... It was a story that appeared on the Bloomie regarding rate cuts... I told him, "yes, this is the stuff I keep harping on about how it's not the cost of the credit that keeps banks from making loans, so why keep cutting interest rates?" So... Here's a snippet of the report so you can see what it is that I'm talking about...

"European Central Bank Executive Board member Juergen Stark said cutting interest rates won't remedy the financial crisis and pushing them too low may backfire. The financial crisis can't be solved with rate cuts, Stark said in an interview to be published in Luxembourg's Tageblatt newspaper on March 9. Too low a rate level can even be counter-productive."

Hmmm... Finaly a Central Banker with the intestinal fortitude to stand up and say the right thing! Of course, that didn't stop the European Central Bank (ECB) from cutting 50 BPS last week! UGH!

Recall last week I was talking about how fundamentally speaking, Australia was looking healthier than other countries, but then they posted a contraction in their GDP the next day... Some egg on my face with that one, but Hey! I still think they are poised to pull out of this global financil meltdown on the fast track. Apparently, I'm not the only person that thinks that... Derivatives show that the worst is over for the Aussie dollar... And the Royal Bank of Canada (RBC) is telling their customers to buy the Aussie dollar VS Canadian dollars / loonies... I read that this morning, you don't think I make this stuff up do you? It was there in on the screen...

I mentioned to Chris Gaffney last week, that I had been seeing more yen selling coming across the trading desk than I had seen in a long time. I said that these people, if they had held it long enough, were probably taking profits. And why not? In this day an age with deflationary pricing pushing most assets downward, when you see a profit, you take it!

The guy known as "Mr. Yen", Sakakibara, told the press last night that he believed yen may rise to a record 70 VS the dollar... WOW! He also said that it would range trade between 100 and 70... He believes that the yen will be afforded the same kind of love the dollar has received since the financial crisis began in the U.S. With Japan posting a large economic contraction last week, Mr. Yen, is of the opinion that it will help the currency gain to 70.

Hmmm... I just don't know about all that... For one, I'm not convinced the flight to safety that has underpinned the dollar with buying of Treasuries, will be duplicated in Japan... And two... The only thing I saw pushing the yen stronger in 2008 was the unwinding of the Carry Trade, which I said had come to end about a month ago. So... There you have it... I don't like yen's chances to go to 70, but do agree that it could hold 100... It's darn close to 99 as I type...

Recall last week I told you about my neighbor that stopped me in the driveway and was all concerned about what he had heard on the radio that day, regarding the FDIC going broke... I said then, not to worry about it, as the Fed will print more money and keep the FDIC from failing... If they kept AIG from failing, they certainly would do the same with the FDIC... Well, on Friday I saw this... "the FDIC wants a permanent increase in its line of credit with the Treasury Department to $100 billion from the current $30 billion. FDIC Chairwoman, Sheila Bair told key lawmakers in letters Thursday that such an increase "would leave no doubt that the FDIC will have the resources necessary to address future contingencies and seamlessly fulfill the government's commitment to protect insured depositors against loss."

OK... I told you on Friday morning about Gold's rebound to $940, but it failed to add to that figure even after the horrific jobs data. I guess you would have to say that Gold traders had "priced in the jobs data already", eh? Gold is off by about $4 this morning, as it gets pulled down by a report regarding global inflation... The Economic Cycle Research institute assesses that U.S. inflation pressures are at their lowest since 1958, and likely to decline further...

But for every report attempting to pull Gold down, there's one attempting to push it higher... What I'm talking about here is the report that our friends, NOT! At OPEC are going to maintain their 13% cuts in production put in place since September 2008. They may consider more cuts. Oil is trading higher this morning at almost $47, and oil traders believe it will be back to $50 within two months...

Quietly making noise for the past 3 months has been the Brazilian real... The real has gained 4% in the past 3 months, as investors around the world look for yield... And Brazil's interest rates have had the allure of the Sea Hag's song to Pop-Eye! But... There's word out of Brazil that the Central Bank will look to cut rates by 100 BPS / 1% when they meet, later this week. That's too bad, but Shoot Rudy, Brazil's rates will still remain higher than you can get in most ports of call... And... Their GDP will be positive.... And... If traders and investors reward the real for cutting rates aggressively like they did over currencies, then the real has nothing to worry about, eh?

OK... So, for the past month I've given you my ideas for the countries / currencies that could be on the fast track to recovery, given their ability to remain off the rosters of countries with failing banks. Norway leads the pack, with Canada, and Australia close behind... I even told you about how Paul Volcker thought we should shift to the way Canadian Banks operate. Well... It's always nice to see someone else follow up on my ideas, not that they read the Pfennig and said, "Hey! Let's write about what Chuck wrote about"... Nah... That wouldn't happen... HA! But, seriously, BNP Paribas' research team has issued a report advising their clients to buy... You guessed it... Norway, Canada and Australia...

BNP said, "we remain friendly on commodity currencies like Norway, Canada, and Australia, and view today's oil price rally as an indication for other commodities to follow. We are bullish on the Canadian dollar, Norwegian krone, and Australian dollar, but unlike last week we like trading these currencies long against the dollar."

So... There you go! It's not just me!

There is no scheduled data to print today, but the rest of the week is chock-full-0-data. On Wednesday, when I board a plane to Florida, we'll see the Monthly Budget Deficit... That should be a doozy! On Thursday, we get the usual Weekly Initial Jobless Claims, and Retail Sales for Feb... I can tell you right now, that the BHI (Butler Household Index) tells me this report for Retail Sales is going to be very disappointing! Friday the 13th, we'll see the Trade Deficit, Import Prices, and U. of Michigan Confidence. There are other 2nd Tier reports sprinkled in all week...

I really do think that the Retail Sales for Feb, is going to be bad... And that may weigh on the dollar, that is, if the Trading Theme keeps to the back of the room!

OK, as I head to the Big Finish, I see the euro has lost more ground than when I first came in... It just can't stand prosperity!

Currencies today 3/9/09: A$ .6360, kiwi .4980, C$ .7735, euro 1.2590, sterling 1.3890, Swiss .8595, rand 10.5930, krone 7.1125, SEK 9.2050, forint 247.90, zloty 3.77, koruna 22.02, yen 99.15, sing 1.5515, HKD 7.7550, INR 51.88, China 6.8410, pesos 15.28, BRL 2.3750, dollar index 89.20, Oil $46.74, Silver $13.22, and Gold... $937.90

That's it for today... Well.. The Butler boys made it through the 5 days on our own... No probs... My beautiful bride returned home last night, but too late for me to see her, as I was in ZZZZZZ-land when she got home. I believe a good time was had by all though, given the messages/ texts I received... I head to Jacksonville on Wednesday, for a corporate event, then drive down to Jupiter on Friday... My family joins me in Jupiter Friday night, and by Saturday, I'll be in heaven... No, I mean, Roger Dean Stadium, watching my beloved Cardinals! Sure hope the weather is warm, to get the "frost" out of my system! I will celebrate my birthday in Jupiter, like I have for the past 7 years... After the events of almost two years ago, I do "celebrate" my birthday now more than ever. OK... I hope you remembered to set your clocks ahead this weekend. This is the second year of doing it this early, so eventually we'll get used to it, of course by then they'll change it again! UGH! Got to get this tied up and out of here, so I hope your Monday is Marvelous!

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

A Jobs Disaster!

Chuck Butler — Mon, 12 Jan 2009 16:35:58 GMT

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

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

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

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

In This Issue..

* Retail Jobs are cut in December!
* Dollar rallies on renewed Trading Theme...
* Looking for the Obama bounce...
* High yielders get sold...

And Now... Today's Pfennig!

A Jobs Disaster!

Good day... And a Marvelous Monday to you! A grand weekend for yours truly with time spent resting, watching football, Alex play basketball, dinner with friends, and finally a wonderful dinner with my kids as we celebrated my oldest son, Andrew's, birthday. Whew! I'm at work about an hour earlier than usual this morning, as I couldn't sleep, and just decided to get up and come in... UGH!

OK... Well, the big news this morning, is that the Jobs Jamboree was just awful, but "not as bad as some forecast" and therefore the dollar rallied. OK, I'm shaking my head in disgust too, but that's what the headlines reported later in the day on Friday, as the reason for the dollar rally. But let's get to the meat of the Jobs report... First of all, jobs lost in December were -525K, which was bang on the forecasts. But here's the two things I found to be very scary in the report... First of all, November's awful print of -533K was revised downward to -584K (recall, I questioned a month ago if it would reach -600K on the revision)... And here's the really scary number... -67K Retail jobs were cut in December... That's right, December! The month when retailers are supposed to be on fire!

I was very impressed with the network news on NBC with Brian Williams, Friday night, as they did report the numbers as awful, and highlighted the Retail jobs losses as I did above... But then I got to thinking... Who the heck watches network news any more? Oh well, they tried!

Oh... And for those of you keeping score at home... The Bureau of Labor Statistics (BLS) decided that they would ADD 72K jobs in their Birth / Death Model... Makes sense, eh? NOT! So, if they hadn't put their hands in the cookie jar, the total job losses in December would have been within spittin' distance of -600K! Any way... The Unemployment rate rose to 7.2% from 6.7%, that's quite a hefty rise in one month, and is very reminiscent of moves made in previous recessions...

But the dollar rallied, so I'll leave all that Jobs Jamboree stuff, and move on!

The euro is much weaker as we begin this week than it was last week, and besides the mental giants that marked up dollars after the jobs report, the euro was feeling the pressure from some statements from European Central Bank (ECB) President, Trichet... Yes, it sounded as though Trichet had turned dovish... But then there were denials that he said anything, but it was too late, the cow out of the barn!

The ECB DOES meet this week, on Thursday, and while I once thought that the ECB would skip cutting rates at this meeting, I now, with the Trichet comments even if he didn't say them (you know me, where's the smoke, there's fire!), believe the ECB will cut rates this Thursday, and that is also weighing on the euro.

As we, (me, and you dear, long time reader) know all too well, the euro is the Big Dog on the currency porch... It's the offset currency to the dollar, which is quite impressive given the fact that it has only been around for 10 years! Anyway... Back at the ranch, dollar strength shows up here with the euro first and foremost... But guess what happens when everyone finally begins to focus on fundamentals again? Well, Oooh! Oooh! Call on me, teacher! Call on me! Yes, you, in the back, what's your answer? Well, teacher, My answer is that the dollar will come under pressure again, and with the euro being the offset currency to the dollar, this current weakness will be a thing of the past. Very Good, young man, please move to the front of the class!

So... After the dollar performance on the bad news of the Jobs Jamboree, I got to thinking that the Trading Theme that was all so evident... I know, I thought we had put the Trading Theme of second half of 2008, in the closet... But here it is again, all dusted off, and looking as though it might be here to stay... For those of you new to class or in need of a refresher course... The Trading Theme I'm talking about, is the one where the deeper, the darker, the more dangerous things get for the U.S. and the economy, the dollar is rewarded, as dollars are repatriated, and Carry Trades that used the dollar as the funding currency get unwound, thus propping up the dollar...

I've seen this before, as I've explained before... It was Japan in the late 90's... Their economy was circling the bowl, and yen was being repatriated, pushing the yen to 88!

These Carry Trades also use Japanese yen as the funding currency... And that goes to explain why Japanese yen is trading so strong again... Last week, with the risk takers dipping their toes in the risk waters again, Japanese yen was weakening... But not now!

This is all bad news for the high yielders, which had really stretched their legs last week! The usual suspects of Aussie, kiwi, Brazil, South Africa, have all been sold again on this return to the Trading Theme which has risk takers pushed to the back corner of the room...

This is as good of a time as any to repeat my thoughts for 2009... ( I did this the last week of 2008) First of all, I believe, we'll get an Obama bounce, thus pushing stocks back up, and giving everyone a false sense of euphoria... By late spring, this euphoria should all be fading, as people begin to realize that we're just mortgaging the future with stimulus package after stimulus package... And all that "horded up cash" that investors have been holding on to, will begin to get spent... Then we'll have a problem Houston, as the Corporations that have slowed production down during the recession, can't produce enough to meet demand, and inflation begins to soar!

The dollar basks in the sun during the first part of the Obama bounce... But, when the bloom is off the rose, we should see a return to the fundamentals...

OK... This week, we've got some hefty data in the U.S. and of course the ECB rate meeting on Thursday. Here in the U.S. we'll see this week... The Trade Deficit for November, Retail Sales for December, The TIC Flows, the stupid CPI and PPI reports will also print. Sprinkle in the Philly Fed (manufacturing), Business Inventories, and the Initial Jobless Claims, and we've got a data cupboard that chock-full-o-numbers!

None of these should be good for the economy, save for the stupid CPI report, which they will try to push off on us a report that inflation fell -.2% in December, and now stands year-on-year at 1.8%... HOGWASH! The boys and girls that print this report think that just because the price of Oil has collapsed, they can mark inflation down to the bone... That's right, there's no other inflation going on, not medical, not tuitions, not insurance, not food, not ball game tickets! HOGWASH!

After all that, there is no data scheduled for printing today! I hear that Big Ben Bernanke is going to speak on "The Crisis and the Policy Response" at the London School of Economics tomorrow. Oh boy! NOT!

OK, before I head to the Big Finish... I wanted to give you a piece of my friend, Bill Bonner's, Daily Reckoning (www.dailyreckoning.com) from Friday, as he discussed the massive amounts of stimulus that have been put in place and the massive amounts yet to be put in place... Here's Bill...

"When America's economy was young and competitive it survived slumps and crashes without medical intervention. Now, every passing cold requires feeding tubes. And this latest bout of influenza has the doctors in a panic. They are casting aside warnings and giving the patient masses doses of the old quack treatments. They'll increase the dosage - until they run out of supplies - and then switch to those new, experimental medicines that have recently been used in field trials by Dr. Gono in Zimbabwe.

Since they cannot leave well enough alone - the public won't stand for it - they will keep giving bigger and bigger doses, of more and more dangerous medicines, until the patient dies."

Currencies today 1/12/09: A$ .6845, kiwi .5790, C$ .8340, euro 1.34, sterling 1.4955, Swiss .8940, rand 10.02, krone 7.0550, SEK 8.0450, forint 208.20, zloty 3.02, koruna 19.83, yen 89.80, sing 1.49, HKD 7.7540, INR 48.84, China 6.8370, pesos 13.69, BRL 2.2940, dollar index 82.93, Oil $38.70 (Oil is collapsing once again!), Silver $11.11, and Gold... $844.50

That's it for today... A great big Happy Birthday, to my son, Andrew, who turns 27 today. Andrew teaches high school social studies, history and law. He teaches at his Alma Mater, and coaches the swimming and water polo teams. I always told him to "give back" to the sport he loved, and that's what he's doing, as he ended his swimming and water polo careers highly decorated. OK... Did you all see I.O.U.S.A. on CNN yesterday? Sorry, I didn't tell you Friday, I didn't know about it until later in the day! Every time I watch I.O.U.S.A. I get chills down my spine, and want to get my pitchfork and march to Washington D.C.! And then to top off the day yesterday, my fave TV show is back after a 1 year hiatus... 24... It was great to see Jack back! And we get another 2 hours of 24 tonight! YAHOO! And how about those Arizona Cardinals (once our football team here in St. Louis), and the ex-Rams quarterback, Kurt Warner? The Cardinals lost me as a fan when they moved to Arizona, but I just can't help but root for Kurt Warner! OK... I know it's early, but I'm going to hit the send button, and get working on today's trades... I hope your Monday is Marvelous!

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

A New Year’s Jobs Jamboree Friday...

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

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

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

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

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

In This Issue..

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

And Now... Today's Pfennig!

A Jobs Jamboree Friday...

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Trillion Dollar Deficits For Years To Come...

Chuck Butler — Thu, 08 Jan 2009 15:08:48 GMT

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

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

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

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

In This Issue..

* CBO forecasts $1.2 Trillion Budget deficit!
* And we can expect more!
* ADP shows job losses mounting big time!
* Brazil's real reverses course...

And Now... Today's Pfennig!

Trillion Dollar Deficits For Years To Come...

Good day... And a Tub Thumpin' Thursday to you! I had not realized it was Thursday until I began writing this morning! I had been buying breakfast sandwiches for the trading desk on Thursdays, and I'm sure a few people will be wondering what happened when there are no sandwiches this morning... I simply lost track of the days! UGH!

Well... There are two major things on the docket for the front and center piece today, both tell us a lot, but I think I'm going to go with the announcement of the Congressional Budget Office (CBO) yesterday afternoon as the lead story, and the ADP jobs report as the second story... So, let's go to the tape!

The CBO announced yesterday that they are forecasting a $1.2 Trillion Budget Deficit for 2009! Uh-oh! This is scary folks, and there's plenty more where that came from! This "forecast" doesn't even consider the stimulus package that the President-elect is about to put into place once he's sworn in... And it doesn't consider the auto bail out, and it doesn't consider any of the next sectors that haven't come to Washington with their hats and cups out asking for their bailout!

And here's the thing that scares me even more... Obama said Tuesday he anticipates "trillion-dollar deficits for years to come." Some one slap me! Am I having a nightmare? I thought President was the answer to all these deficits... OK, I'm not going to get into a discussion about all that, what I'm really scared of is the fact that it will be "business as usual" on the deficits, and by the end of the 4 years we'll be looking at a National Debt of around $14 Trillion!

I received some notes from the Big Boss, Frank Trotter, last night regarding this announcement, and any time I get notes from Frank, they get front page billing in the Pfennig... So, let's see what Frank thought about this announcement by the CBO yesterday... "I must have been on phone calls when the announcement came today about the projection for a $1.2 Trillion deficit for the government fiscal year 2009. That's for things on the books right now. That's before the rest of TARP is distributed. That's before any stimulus program is enacted by the new congress or the new administration. If I had seen it come up I would have run through the office yelling for everyone to take cover. And I thought that a deficit of 5% of GDP was earth shattering - now the debt-dollars are going up and GDP is going down. Yikes."

Frank went on to say that he heard a commentator say, "in today's environment there are still a lot of people and institutions that think they need a bailout and there will be more to come. I was reminded of the trend to award trophies to everyone on the team - after all everyone contributed equally and should share equally right? Kurt Vonnegut's Harrison Bergeron come to life. Here's a reminder to the new administration now caught between the proverbial rock and a populous hard place - tax fairness is not leaving a debt disaster to the following generations."

Folks... Don't let this just pass you by, you need to do react to this, no, there's nothing you can do about the deficit, except write your congressman or woman, and tell them to stop spending or you'll gather up your friends with their rakes and pitchforks and come to Washington D.C.! But, think about this... It may not happen this year, and maybe not next year, and it could happen next month, but when it comes down to the cheese that binds, the debt issuance in this country is going to be off the charts! And too much of one thing is not a good thing, right? And when everyone runs to the exit door at the same time, somebody's going to get hurt... Make sure that's not you!

One thing that will get hurt no matter what when this mass exit takes place is the dollar, as people sell their treasuries and move to higher yielding assets abroad, the dollar will get sold too. So... As one of my all time fave music groups, Gypsy, used to sing... This is a warning... You better beware...

OK... Not that I want to cut this discussion short, but there is something else knocking on the door for front page notice, and that's the ADP jobs report that printed yesterday... Up until this repot printed, the stock jockeys were feeling pretty cocky, and the risk takers were back in the drivers seat, as evidenced by the Aussie dollar rising to .7270! But then this ADP report printed and caused the DOW to sell off all it's 2009 gains, and that reeled in the risk takers and this morning, the Aussie dollar is barely holding on to 70-cents!

I bet by now you'd like for me to tell you what the ADP report showed, eh? Well, good things come to those who wait, and for your patience you will now be rewarded with the results of the ADP jobs report! HA! According to ADP, private payrolls collapsed during December by 693K, far exceeding the expectations for a very poor report (-495K forecast). This report is NOT the Jobs Jamboree by the Bureau of Labor Statistics (BLS), that report prints tomorrow... But this report supposedly changed their methodology to mirror the BLS... So, if that's true, we're in for trouble tomorrow morning!

Roughly 2.5 million jobs were lost in 2008... Most likely the worst year for jobs since 1945...

We'll have to wait-n-see tomorrow, but this isn't a good indication of what to expect, eh?

So... The currencies rallied at first yesterday when the CBO made their announcement about the Budget Deficit, but then gave up their gains when the ADP Report caused the risk takers to take their bat and ball and go home, leaving the currencies to back off. Of course, in an opposite action of most currencies, the Japanese yen rallied yesterday and last night. Nothing new here, either the risk takers are in the market, causing yen to weaken, or they are not in the market causing yen to gain... Very simple...

This morning, the Eurozone is receiving some weak data and that's putting some pressure on the euro... German Factory Orders took the Nestea plunge in November... You know, I'm always amazed at how the markets react to such old news / data... Oh well, things in Germany aren't bright and sassy as they were a year ago, but that doesn't mean the euro falters... For new readers... I've explained this many times in the past, but here we go again... You see... The euro is the offset currency to the dollar... In 2002 and 2003, things were pretty dark in Germany and the rest of the Eurozone, but that didn't stop the euro from gaining 18 and 20% respectively those years... Why? Because things in the U.S. were worse, the Current Account Deficit was rising to eventually reach 6% of GDP, and so on... So people sold the dollar, and by way of the euro being the offset to the dollar it went up!

Well... I was driving down the wrong road the other day when I said that the European Central Bank (ECB) would meet this week... They don't meet until next week... Those holidays still have me confused on schedules! The Bank of England (BOE) DOES meet today, so I wasn't going down the wrong road there. The BOE cut rates 100 BPS a month ago bringing their internal rate to 2% I expect the BOE to cut rates at least another 75 BPS, and they could be like Bullwinkle and have another 100 BPS rate cut surprise up their sleeve!

If the mentality in the markets to reward currency debasers remains in place, then the pound sterling should look to rally on any large rate cut news... But, these are all short term moves by the pound... Be careful there...

The "great year" Brazilian reals were having in 2009, got placed in the rear view mirror yesterday... The risk takers went away, and took their profits in real with them! This currency has become quite volatile in recent months, which wasn't the case for the last couple of years. Before that, yes, reals were volatile, but had seemed as though they had "matured", "grown up" and left those wild days of volatile swings behind... Apparently not! One final soirée'? Let's hope so... I really like what's going on in Brazil, and would like to see this currency be stable...

Before I head to the Big Finish I have to point out that Oil is on the rise again... I'm sure all the fighting in Gaza is causing this, well, no wait, our friends (NOT!) at OPEC are cutting production. So add these together and the price of Oil is back to $43 this morning... That's all we need (NOT!) here in the U.S. given our current economic condition, is rising gas prices...

Currencies today 1/8/09: A$ .7025, kiwi .5880, C$ .8315, euro 1.3565, sterling 1.5050, Swiss .9075, rand 9.60, krone 6.9950, SEK 7.90, forint 199.45, zloty 2.9680, koruna 19.32, yen 91.60, sing 1.4825, HKD 7.7540, INR 48.40, China 6.8345, pesos 13.48, BRL 2.26, dollar index 82.39, Oil $43.15, Silver $10.95, and Gold... $839.80

That's it for today... A big shout out to our new accounts guru, Mary Vance, who celebrates a birthday today! We have a few birthdays in January here in World Markets so I had better be on my toes to remember them! (now that's not a pretty sight, me on my toes!) Well, tonight is the Big Game! The college National Championship football game between Florida and Oklahoma... My beloved Missouri Tigers play in the Big 12 with Oklahoma, so my rooting will be reserved for the Crimson and Cream... Besides I lived in Oklahoma for a brief period of my adult life, when I played in the band, and always root for OU, except when they play my Tigers! My good friend, Jay, who played rugby at OU, and lives and dies with them has got to be in hog heaven, but probably worrying about the game... Of course, I'll be in bed sleeping when the game comes to an end, just too late for yours truly on a school night! This just in... The BOE cut rates 50 BPS this morning... I don't think that will help pound sterling, but you never know what the mental giants have in their minds to do! OK... Enough! Time to get this Tub Thumpin' Thursday on the road! Have a great day!

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

The Obama Bounce Begins...

Chuck Butler — Mon, 05 Jan 2009 20:36:54 GMT

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

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

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

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

In This Issue..

* The dollar bounces!
* ISM was simply awful!
* Oil rallies...
* Jobs Jamboree this Friday...

And Now... Today's Pfennig!

The Obama Bounce Begins...

Good day... And a Marvelous Monday to you! A weekend of football! And there's more this week with the College National Championship Game on Thursday, and then more playoff games next weekend. Crazy time of year for the sport, for sure! So... The Christmas Tree decorations came off yesterday, along with some of the house decorations. My beautiful bride doesn't like to leave that stuff up for long, but for me, I would leave it up all year long!

Well... Although, technically, it's still the Christmas season (it doesn't end until Jan. 11), the Santa rally that pushed the euro to 1.45, has gone away, and we're on to the next phase, which I drew out for you over a week ago... And that is... The Obama bounce... This is something we'll have to deal with for the next few months. It all began with a huge stock rally on Friday, and that won't be the last one during the Obama bounce.

The dollar is kicking up its heels once again, and this is to be expected during this Obama bounce... You see, the markets are swayed by the smooth talking President-elect's call for $300 Billion in Tax-cuts, a job creation program, and $1 Trillion economic stimulus package... And believe me, if this is what it takes, then I'm all for it... But, here's the spanner in the works, I believe... All these things cost money, lots of money, and money we don't have, unless... We just go and print more. This is why I believe that once all the euphoria of the Obama presidency has run its course, the markets will do a V-8 slap to the forehead and realize we've just dug ourselves a deeper hole!

I'll tell you one thing about the Obama bounce that we should see, and that is Risk Taking come back in a large way. And that, will underpin currencies like Brazilian real, Aussie dollars, and kiwi. We could even see South African rand strength. But like I tell people all the time, I don't trust rand, I don't trust the Gov't of South Africa, and I don't trust the Central Bank, therefore, I always say that I wouldn't touch rand with YOUR ten-foot pole... But, I do realize that investors in rand have made bundles of cash over the years... But unless they timed it good, they saw those bundles dissipate quickly. The swings in rand are so violent... So... Keep that in mind.

But, back to what I was talking about before I went off the "rand" road... This Risk Taking could bring back the Carry Trades, and that won't be good for Japanese yen, which has already given back 3 whole figures from last week's trading levels of 90, to trade this morning at 93. And Commodity prices are seeing some love for the first time in a month of Sundays! I know that doesn't sound like right, with the dollar rallying and Commodities also rallying... But, it's happening, right here, right now!

One Commodity that has really taken off, is Oil... I know this isn't something that everyone wants to see happen, but, when you have our friends (NOT!) at OPEC cutting production, and a return of risk taking, that's what you get with Oil... A quick look at last Monday's price shows that Oil was trading at $39 and change, and today it is trading at $47 and change! That's a HUGE jump in just a week...

The Obama bounce received some support from San Francisco Fed Head, Janet Yellen, this weekend. Let's listen in to Yellen... "It is increasingly likely that inflation will fall to undesirably low levels," Yellen said at the meeting in San Francisco.

She said the Fed would likely expand its raft of unconventional monetary policy measures now that its cycle of interest rate cuts has hit rock-bottom.

She also urged an aggressive spending program by the administration of President-elect Barack Obama, as she gave a dismal assessment of the economy."

Notice, she said that "the Fed would likely expand its raft of unconventional monetary policy measures now that its cycle of interest rate cuts has hit rock-bottom." So... If I were reading that, and I did, I would be asking "what unconventional monetary policy measures"? Ahhh Grasshopper... Have you ever heard of "Quantitative Easing"? It's a trick that the Japanese used in the 90's, oh, here we go again with the comparisons to what we're doing and what the Japanese did... But it's sooooooooo true!

Anyway... Quantitative Easing is, a way to flood the banking system with large amounts of money. It's a way to mimic below-zero rates and provide support to the economy. The process often involves buying up large quantities of assets from banks, such as the Fed's latest programs to buy mortgage-backed securities. So... Once again, should the Fed go down this road, and I don't see how they can resist going down it, they will be taking on more bad collateral...

One more thing that Ms Yellen said that hit a nerve with me, was that, "the Fed must have a "timely" plan for ending lending programs. The Fed must have an "exit strategy" to wind down the facilities when they are no longer needed."

Hmmm... Well, since she said that, and she's a Fed Head, we are left with the understanding that the Fed doesn't have a clue what to do with all these programs they've instituted... Now, that gives me a warm and fuzzy... NOT! I'm going to go yell at the walls for a minute, don't go away, I'll be right back!

OK, I'm back, see that didn't take long! HA! Well... The data cupboard gets restocked this week, with the Big Kahuna coming on Friday, with the Jobs Jamboree. Right now the early forecasts have December losing 500K more jobs... The thing to look for this Friday though is the previous month's revision... You may recall me going spastic on these revisions last month, when the previous two months numbers were revised, and not by small numbers, but by large, market moving type numbers.

Here's what I said on December 8th... "OK... Did you see the rot on labor's vine Friday? The Jobs Jamboree was very unkind to many, with a 533K jobs lost in November. That number was the worst figure since 1974! The tally of 1.9 million jobs lost this year surpasses the losses of the past two recessions, and according to the Wall Street Journal, signals that the current downturn could be the worst since the years immediately following World War II.

Now... The thing that really ticks me off folks, is the fact that the October figure saw a major revision. You might recall that the September figure which was bad enough, was revised up by over 100K... Then last month we saw a negative -240K figure, which was bad enough, but one month later the figure is revised up to -320K... So, in my mind, the -533K figure reported this month for November, will probably be revised upward to the -600K figure... UGH!"

So, it will be interesting to see the revision this Friday... But the scary thing that the markets seem to be forgetting about is the 500K in job losses... If that would happen the two month losses would be greater than 1 million! That's not good! In fact it's not even close to good! I told the crowed in Marco Island that the unemployment rate would reach 7.5% before this was over. And that was before the 533K job losses were printed! I'll have to redo that call... That's too bad too... That's a call I don't like making one iota! But... I have to do it, because the boys and girls on TV won't do it!

On Friday, just passed, we saw the color of the latest ISM (manufacturing) Index, which I reported to you as already bad... Well, my friend, John Mauldin, wrote about ISM this past week in his wonderful weekly letter. So... I thought I would just let him explain the report, as he does it better than I would!

"We got the US ISM numbers today, and they were just awful. The overall index is down to 32.4, down over 25% in the last three months. This is the lowest level since 1980, in what was a severe recession. The ISM survey points to one of the deepest contractions in industrial output in the post-World War II era, this quarter. The forward-looking details were weak and point toward further declines in the ISM manufacturing index. Businesses are cutting orders, inventories, and workers because of tight credit conditions, declining final demand, and shattered confidence. Manufacturers reported in December that their customers' inventories were too high, a bad omen for future production.

But when you look at the components, it gets even more sobering. New Orders are down over 50% from six months ago, to 22.7. This is the lowest number since they began keeping records in 1949. Production is down to 25.5. New Export Orders were way down (35.5), as was Order Backlog (23).

"Another standout in the December report was the decline in the prices-paid index [down to 18! -JM] which fell to its lowest level since 1949. The abrupt decline in energy and other commodity prices is driving the index lower. Lower input costs may entice manufacturers to pass on the savings via reducing their prices. If businesses broadly across industries cut prices to preserve some sales, it will heighten the threat of deflation." (www.economy.com)

This is all suggestive of an economy in serious decline. The GDP for the 4th quarter should be down somewhere between 4-5%. It is likely we are going to see even more earnings downgrades in the next few months, and as I outline below, we have probably not yet hit bottom. As long as the ISM numbers look like the ones we just analyzed, things are likely to be getting more difficult. And that goes for the world in general, not just the US economy."

Well... That's sobering news, eh?

OK... We'll also see Factory Orders tomorrow, ADP Employment on Wednesday, Weekly initial jobless claims on Thursday, and the big Jobs Jamboree on Friday. There are other second tier data reports printing, but for this discussion we'll keep it with the Big Kahunas...

None of these will give anyone a warm and fuzzy, folks, and if the dollar continues to rally through all of them, we can figure that the Trading Theme of rewarding the dollar for the deepest, darkest, dangerous economy will be back on the burner... But in any case, the Obama bounce looks to be ready to go...

Currencies today 1/5/09: A$ .71, kiwi .5835, C$ .8215, euro 1.3650, sterling 1.4520, Swiss .9055, rand 9.4550, krone 6.93, SEK 7.8575, forint 195.70, zloty 3.0250, koruna 19.59, yen 93.20, sing 1.4720, HKD 7.7540, INR 48.56, China 6.8310, pesos 13.71, BRL 2.32, dollar index 82.80, Oil $47, Silver $11.05, and Gold... $856.15

That's it for today... OK, on Friday, I reported that the Czech Republic would adopt the euro on Nov. 1st... Not so fast, Tim! The Czech Republic will begin discussing adopting the euro on Nov. 1st... My bad! Back to school today for my kids... Alex as a student and Dawn and Andrew as teachers. They had a nice long winter break for sure! Still no improvement in my left eye, I'm beginning to get frustrated with it, but not yet... I will be having my next round of scans this month, so that always raises the blood pressure until I get the results. And I go back to the eye doctor this month too, so a month chock-full-o-fun for yours truly! But once the month is over, I'll be heading to Florida for the Orlando Money Show... This ought to be an interesting Show this year, as we'll be in the middle of the Obama bounce, and the stock jockeys will be bouncing off the walls with forecasts of riches... Me? I'll just be there to remind everyone that they need to diversify their investment portfolios... OK, time to go... I hope you have a Marvelous Monday!

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

A New Year!

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

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

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

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

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

In This Issue..

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

And Now... Today's Pfennig!

A New Year!

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Dollar bounces back up...

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

.........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..

* Dollar bounces back up...

* Paulson heads back to congress...

* BOJ cuts rates to below the US...

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

And Now... Today's Pfennig!

Dollar bounces back up...

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

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

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

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

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

"As reported by the Wall Street Journal...

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

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

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

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

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

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

Chris Gaffney, CFA

Vice President

EverBank World Markets

1-800-926-4922

1-314-647-3837

The Worst Jobs Report Since 1974!

Chuck Butler — Mon, 08 Dec 2008 15:10:41 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: http://www.amazon.com/dp/0470222778?tag=dailyreckonin-20&camp=14573&creative=327641&linkCode=as1&creativeASIN=0470222778&adid=03WYRVDX49DN6K6GRQ4G&

....

In This Issue..

* Will -533K turn to -600K?

* A glimmer of light brings back risk takers...

* Another week of data...

* Fedspeak today...

And Now... Today's Pfennig!

The Worst Jobs Report Since 1974!

Good day... And a Marvelous Monday to you! What a Whirlwind Weekend for your truly, as it came and went, I did a ton of stuff, but no rest, and this morning, I was reminded that I had not gotten any rest! UGH! But! It was all fun! A great time in Jacksonville at the Headquarters' version of a Holiday Party... It was great to see the folks there that I know.

OK... Did you see the rot on labor's vine Friday? The Jobs Jamboree was very unkind to many, with a 533K jobs lost in November. That number was the worst figure since 1974! The tally of 1.9 million jobs lost this year surpasses the losses of the past two recessions, and according to the Wall Street Journal, signals that the current downturn could be the worst since the years immediately following World War II.

The unemployment rate ticked up to 6.7% from 6.5%, a separate Labor Department survey showed, the highest rate in 15 years. But the jobless rate -- which is based on figures of people looking for work -- was contained by the ranks of discouraged job-seekers giving up their searches. A broader government measure of unemployment, which includes those who want to work but are no longer actively seeking positions, jumped to 12.5% in November from 11.8% a month earlier.

So... All that rot, and the currencies hardly noticed! The trading range for the day was very tight, with a bias to sell dollars. In the overnight markets, the bias to sell dollars has really caught some wind in its sails. I'll tell you this, so hear me now and listen to me later... But the markets are really becoming predictable. You see, any time it appears there could very well be a light at the end of the tunnel, the fundamentals come back into focus (somewhat, because if they really came into focus, we would see dollars selling like funnel cakes at a State Fair), and the dollar gets sold.

The markets think they see a glimmering light this morning, as it appears the Big 3 will get some cash from the Gov't... Probably not as much ($40 Billion) that they wanted, but more than they originally asked for ($25 Billion)... I heard that they were bickering over whether they would accept having an "Auto-Czar" named by the Gov't, placed over them and to allocate the money... They should simply take the funds and be happy they got them!

This glimmering light always bring with it a chance for the high yielders to rebound, as risk takers stick their toes back into the chilled waters of Carry Trades. And that's exactly what we saw overnight, with the Aussie, kiwi, real, and rand all with strong rebounds VS the dollar. The glimmering light also lets Gold shine. So, the Commodities and the Commodity currencies all look better this morning. But, while I was typing the above, I had to laugh at my reference of Aussie and kiwi as "high yielders"... The way their Central Banks have been slashing rates, it amazing they can still hold up the "high yield banner"... But with the Big 3 of U.S., U.K., and Japan all with either zero rates and rates falling to zero, 3&4% yields look pretty lofty, eh?

And speaking of the risk takers coming back into the markets... It is really illustrated with the Japanese yen falling from 91 to 93 since Friday morning... I've explained all this before, so I won't bore every day readers with that again... If you want more info on this, you might want to check out the Pfennig's web site: www.dailypfennig.com where you can find today's letter, along with 6 months worth of archives... You'll probably find lots of Pfennigs that have full disclosure of what's going on here...

I saw this story on Reuters that really caught my attention... "One of the top managers of China Investment Corp, (CIC) the country's $200 billion sovereign wealth fund, reckons current dollar strength is temporary and he would like to bet that the U.S. currency is headed lower.

CIC President Gao Xiqing said in an interview with monthly U.S. magazine The Atlantic that," Everyone is saying, Oh, look, the dollar is getting stronger! I say, that's really temporary. It's simply because a lot of people need to cash in, they need U.S. dollars in order to pay back their creditors. But after a short while, the dollar may be going down again. I'd like to bet on that!"

Sounds like Mr. Gao and I would be good drinking buddies, as we think the same way! I wonder if he would like to take on the Cardinals as his baseball team?....

Speaking of drinking buddies... Here's another one that would probably fall into that category... Here's another story on Reuters... "Foundations for the dollar's recent rally have not been solid. The result of repatriation, deleveraging, quantitative easing and a major scarcity of dollars," said Bob Sinche, head of global FX and rate strategy at The Bank of America in New York. "But now we are bound for a correction."

Now, if you ask me (and I know you didn't, but you probably would if you ran into me, and I said, Hey! Would you like to ask me a question? HA!) but if you ask me, it sure seems as though these two guys could be Pfennig readers! But it would be better if they are not... For if they are not, then that means they're seeing things the same as I do, and not just using the Pfennig for their fame and fortune! HAHAHAHA HAHAHAHAHAHAHAHAHAHA!

So, after all the rate cuts last week, the Fed still gets their turn at the rate cut table next week, and I don't expect the Fed Heads to disappoint the rate cut campers in any sense of the imagination! And this could be the one that really brings the fact that yield differentials "SHOULD" be in play, and that the dollar "SHOULD" be in trouble... I'm really thinking that we could see a Santa rally for the currencies from here to the end of the month... Now... That's just me thinking out loud... I did NOT tell anyone, nor give advice to anyone to go out and buy euros today because I said there was going to be a rally! Of course, I could give you the wink and nod, but then you wouldn't see it because I can't physically wink and nod here in the Pfennig!

OK, I carry on, but it just gets me to no end... Advice... Yeah... Well the only advice I do give people is to love their families and friends, for in the end, that's all you've got! That, and the fact that investors should diversify their investment portfolios, so that not all of their investments are dollar denominated. Just like real estate's key word is "location"... Investing's key word is "diversification"...

In the "sign of the times" that I've been detailing lately... The Wall Street Journal reported that Merrill Lynch's CEO, John Thain, has suggested to directors that he get a 2008 bonus of as much as $10 million, but the battered securities firm's compensation committee is resisting his request.

And... The Tribune Company is preparing for a possible bankruptcy-protection filing as soon as this week. (I could say that I guess this isn't a good time to bring up all the millions they spent on Kerry Wood and Mark Prior... ) (and yes, I know, that wasn't playing nice with my Cubs friends)...

And... U.S. President-elect Barack Obama's pledged to create the largest infrastructure spending package since the 1950s to revive the economy.

The data cupboard will yield some interesting data this week for us to chew on... Like the Monthly Budget Statement (deficit), and the Trade Balance (deficit), and Retail Sales... The Retail Sales figure should remain pretty disappointing. A quick check of the BHI (Butler Household Index) tells me that! I tried to help the BHI, but that was last week, in December... So, in the end, there's more awful data to deal with, and by the time the Retail Sales figures are printed on Friday, this week, the glimmer of light provided by a deal with the Big 3, will have faded, and we could begin to feel pretty gloomy and doomy again.

But not me! I begin my Winter vacation on Friday... And I can guarantee you that I will not be checking on Retail Sales on Friday, as this is our "guys shopping day"... All the "guys" read the Pfennig, so I hope they are ready to go this Friday!

We get some "Fed Speak" today from Mssrs. Kroszner, Rosengren, and Kohn... They'll most likely be setting the table for the FOMC meeting next week...

Currencies today 12/8/08: A$ .6635, kiwi .5435, C$ .80, euro 1.2865, sterling 1.4865, Swiss .8250, ISK 261, rand 10.24, krone 7.08, SEK 8.12, forint 205.70, zloty 2.4450, koruna 20.02, yen 93.26, baht 35.54, sing 1.5090, HKD 7.7510, INR 49.59, China 6.8808, pesos 13.47, BRL 2.4410, dollar index 86.08, Oil $42.75, Silver $9.76, and Gold... $769.88

That's it for today... Well... My beloved Missouri Tigers got spanked by big bad Oklahoma on Saturday night. I saw the game with the score 10-7, and didn't see any more, only heard the final score. UGH! They're still going bowling though... Alamo Bowl, in San Antonio, TX... Not what they hoped for at the beginning of the season, but better than the football depression of the 90's! the folks in Jacksonville were all happy about their Gators... Got my first ever hug around the neck from little Delaney Grace last night. She gives them to Alex all the time, but this was the first one for me! She's so darn cute! I noticed the other day that the readership of the Pfennig had grown by about 3,000 readers in the past couple of months... So... Welcome... Well, Mike and Mary have arrived, Geez Louise, I'm getting later every day! YIKES! Oh well, I do my best... I hope you have a Marvelous Monday!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837

It's All About The Jobs Jamboree...

Chuck Butler — Fri, 05 Dec 2008 14:49:30 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 rally then fall back...

* Rate slashers!

* Following Japan? Let's hope not!

* Canada's woes mount...

And Now... Today's Pfennig!

It's All About The Jobs Jamboree...

Good day... And a Happy Friday to one and all! A Fantastico Friday! A Jobs Jamboree Friday! Anything else, Chuck? No, I don't think so, I'll stop there... It's all about the Jobs Jamboree today. It's all about finding out just how badly the rot on the labor vine has gotten... The Weekly Initial Jobless Claims, yesterday, remained above 500K per week, which doesn't bode well for next month's data... But first... November's Jobs Jamboree on the docket!

The "experts" have forecast a -335K drop in jobs for November... But, your old Pfennig writer believes that this forecast is low. I think it will be closer to -375K... The reason I say that is the employment piece of the ISM report that printed the other day... The employment index of that report showed some real serious rot on the labor vine... I read a report last night, where an economist was attempting to show how the report should read -750K... As bad as -375K is, I don't think the Bureau of Labor Statistics (BLS) would have anything to do with printing a -750K report!

The currencies rallied a bit yesterday, but settled down for a long winter's nap in a tight range overnight ahead of the Jobs Jamboree data. The euro saw the bright side of 1.28 yesterday, but as I said, the range became tight overnight... You see no one wants to take a position on either side of the ledger ahead of this crucial labor report this morning. And the fact that Factory Orders in Germany dropped last month, isn't helping the single unit this morning after yesterday's rally.

OK, enough on that! Yesterday, I left you with the Bank of England (BOE) and the European Central Bank (ECB) meeting and us waiting for their rate announcements, which came about 1/2 hour after I hit the send button. The BOE cut 100 BPS (1%) from their rates, while the ECB opted for 75 BPS (3/4%)... I really do feel as though the BOE has taken a page from the U.S. and Japan's book on how to deal with all this, and is on the road to zero percent rates. I don't feel the ECB will go there... While they may go lower in the Eurozone, I don't think ECB President Trichet, has any intention of following the "Japanese model"...

Trichet said something yesterday that made me believe that he won't become Trichet-san... Trichet said that, "we mustn't confuse Deflation with Dis-inflation" He went on to also say, "The ECB will NOT get trapped at rat levels too low"

So... We had Australia drop 100 BPS, New Zealand drop 150 BPS, Sweden drop 150 BPS, U.K. drop 100 BPS, and Eurozone drop 75 BPS all this week, and for the most part, none of these currencies got taken to the woodshed for debasing their currencies by such large margins... Normally, a 25 BPS rate cut can cause a currency some major problems... But nothing here... So... Why... Do... I... Think... This... Is... Happening...? Hmmmm... It's probably a case of unconventional measures are seen as not working, so conventional ones have little chance. And... If you really get to the root of the credit crisis problem... It alls circles around the fact that the availability of credit not the cost of credit is the issue.

But that doesn't stop these Central Bankers from slashing rates at an alarming pace, eh? I think these Central Bankers are quite aware of the fact that the markets' focus has become so myopic on the Credit Crisis, that they could do a handstand on their desk while sticking out their tongue while announcing a rate cut, and the markets wouldn't notice...

PIMCO (the world's largest bond dealer) issued a report on pound sterling yesterday, that's quite interesting... The writer, Myles Bradshaw, a money manager for PIMCO, said in a report yesterday, that, "if you were shorting the pound, now is the time to reduce those positions"... Hmmm... You see Mr. Bradshaw makes a strong / good point about how interest rates in the U.K. have been brought to levels not seen since Winston Churchill was around. And that may be enough to keep the U.K. economy from falling off a cliff...

Well, that goes against my earlier call that I believe the BOE will follow the Japanese model, and cut rates to near zero. I say this, because the U.K. has major problems folks, and I don't think having rates at 1951 levels, has anything to do with how bad things will get here...

The China- America talks ended yesterday, with an agreement between the two giant countries to provide $20 Billion to fund trade and agreed to deep financial ties... However, the two couldn't leave a meeting without needling the other... U.S. Treasury Sec. Paulson, urged China to continue to allow currency flexibility... And the Chinese told the U.S. to: "tackle your own problems, such as excessive consumption and debt" You can't believe how that made me chuckle... Our leaders won't talk about excessive consumption and debt, (I do, and have for years!) but the Chinese go right for the wound, that the U.S. tries to place a band-aid on... And they nailed it!

Did you see this news yesterday on the Fox news website... "Israel is reportedly drawing up plans to strike Iran's nuclear facilities and is preparing to do so without U.S. backing." Now... I'm not going to get into the what's and so ons here... I merely mention this to point out something... After the news story hit the website, Swiss francs rallied strongly, which told me that it still holds the "flight to safety" badge... Unfortunately, though, Gold did not rally... Hmmm... Very disappointing...

OK, now that there was some denials of the story, the Swiss franc has given back it's gains yesterday...

There was a story reported in the Wall Street Journal yesterday that certainly is a sign of the times, in my opinion... Here you go, and see if you get the same felling of this sign of the times that I did...

WSJ... "U.S. retailers reported some of the weakest sales figures in years for November, which included the Black Friday kickoff to the holiday shopping season.

Gap reported a 10% drop in same-store sales, while Macy's fell 13% and Nordstrom dropped 16%. Target reported a 10% drop, worse than expected, though Black Friday sales were stronger than the rest of the month. But Wal-Mart topped estimates on increased store traffic and purchase size."

I've had a lot of questions over the years about PPP... Well... PPP is Purchasing Power Parity, and is most well known in the Economist Magazine's Big Mac Index, where the monitor the price of a Big Mac all over the world, with the idea that if a Big Mac is more expensive in Europe than it is in the U.S. the European currency is overvalued by the percentage of the Big Mac price difference. Well... You know, this is all good on paper, but you have to look at what's going on in a country first... If for instance the wages of Europeans is on a whole higher than that of Americans, then their standard of life is "more expensive" and therefore the price increase in the Big Mac means nothing to me...

OK, so, now that I've gone through that exercise, it's still a good thing to check PPP just to make certain things don't get out of whack by too much of a margin... And in that light, my old Corp. FX guru, Ashish, sent me a note about PP yesterday, that showed the euro still overvalued VS the dollar, but by a far less amount than a few months ago. It showed the pound to be undervalued, along with the Swedish krone... Hmmm... Oh, well, none of these are too out of whack... And... As I told a crowd of people at one of the FX University Tours that I now use the Ipod index instead of the Big Mac index...

The lawmakers in Japan, have taken a page from the U.S. book and announced that they are looking at the possibility of allowing tax breaks on profits made overseas and brought back to Japan (repatriation)... You may recall that in 2005 the U.S. did this same thing, and really did a bang up job of propping up the dollar for that year... Should this law pass in Japan, it could very well spell a period of further yen strength. I'll keep an eye on this...

The news from Canada just seems to get worse all the time, which has led to a large drop in the loonie in the past month. This morning, it was their version of the Jobs Jamboree, which showed a much larger than expected drop in jobs... -70K VS the -25K forecast... Take the Commodity prices collapse, the low interest rates, the parliament suspension possibility, and now a hickey on the economy with job losses, and you can see why the loonie has dropped by almost 6% since 11/21... UGH!

Speaking of Commodity prices... Our friend, Jim Rogers, was speaking again yesterday and made some great points regarding Commodity Prices... Here are a couple of quips from Jim Rogers... "Commodities will be the place to be if and when we come out of the downturn. The only thing where fundamentals are unimpaired are commodities. Farmers can't get loans for fertilizer now. Nobody can get a loan for a zinc mine. So we are going to have some serious, serious supply problems before too much longer."

And more importantly for some folks to know... Jim Rogers said that he, "hasn't sold any commodities since the bull market began."

We had the TV on the automakers pleas to lawmakers yesterday for bailout money... At one point it was really sad, as one of the Big 3 CEO's, which by the way did NOT take private jets to D.C. this time as they did the last time, and really ticked some people off... This time they took hybrid cars) I think it was Ford's CEO, was pleading his case, and the look on his face was so sad, it looked like he was saying, "please dad, can I have my allowance early, I've got this important date and she expects me to take her someplace nice"... Please dad? It was sad...

Someone in the news said that while everyone is ranting about the bailouts, it certainly seems to be a better course of action than to allow 100's of thousands of autoworkers to lose their jobs... I guess he has a point there... But, who's fault is this? Mine? Did I make awful choices the past 30 years regarding cars and how they were built, and what to build? I was telling Ty Keough the other day that I have never owned a Big 3 made car that didn't have a major problem at one point... Transmission, engine, you name it I experience it, with all three! Maybe I was the exception, the black cloud if you will, but you can see how my view would be shaded here...

What? You didn't think I was going to go to the Big Finish without talking about something controversial did you? HA!

So... Which way will the currencies go with a nasty Jobs Jamboree figure? Well, in the days before the Trading Theme was put into place... It would have meant "curtains" for the dollar... But with the Trading Theme allowing dollar strength the deeper, darker, and more dangerous the data gets, one would think that we would see more dollar strength, with a nasty Jobs Jamboree figure today.. We'll have to go into the weekend on that note folks... A nasty Jobs Jamboree...

Currencies today 12/5/08: A$ .6420, kiwi .53, C$ .7755, euro 1.27, sterling 1.4685, Swiss .8250, ISK 261, rand 10.27, krone 7.2050, SEK 8.34, forint 209.90, zloty 3.06, koruna 20.3315, yen 92.10, baht 35.60, sing 1.5220, HKD 7.75, INR 49.60, China 6.8810, pesos 13.65, BRL 2.5380, dollar index 87.03, Oil $44.20, Silver $9.47, and Gold... $769.40

That's it for today... Lots of goings on this weekend... We've got St. Nick's Day tomorrow, the Big 12 Championship Game for my beloved Missouri Tigers, Sunday is Pearl Harbor Day, the first "day of infamy" , all this, and I'll be heading to Jacksonville for the weekend! I'll be back in the saddle again on Monday, no worries! I received some very sad news yesterday, my best friend, Mike, whom I've known since 2nd grade (that's 1962) called to let me know that his mom had passed away. Yes, she was old, but the thin that was sad was that she was diagnosed with cancer in the fall, and didn't make it to Christmas. Again, this hits me hard, because I've been lucky enough, and with the good grace of God, been able to live with this disease. OK... No need to stay down here, it is a Friday, which means the weekend is ahead! Mary Owens just walked in, so I must be late! Time to go, and hopefully have a Fantastico Friday... Hope yours is Fantastico too!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837

Misguided risk aversion...

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

.........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.

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 data pushes investors into US treasuries...

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

* SNB surprises with a rate cut...

* Iceland gets their bailout...

And Now... Today's Pfennig!

Misguided risk aversion...

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Chris Gaffney, CFA

Vice President

EverBank World Markets

1-800-926-4922

1-314-647-3837

Data shows just how bad things are...

Chuck Butler — Fri, 14 Nov 2008 18:38:37 GMT

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

Gold and silver prices are down.

For a simple and inexpensive way to own gold or silver, consider the non-FDIC insured Pooled Metals Select Account from EverBank®. This economic alternative to buying actual bars or coins lets you "pool" your metal with other investors, saving you from costly storage or maintenance fees.

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

Apply online. Simply go to EverBank.com, mouse over "Products" then select "Precious Metals." For important disclosures visit: http://www.everbank.com/001MetalsTBLegal.aspx?TB_iframe=true&height=400&width=700

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

In This Issue..

* Data shows just how bad things are...

* Trade deficits narrow...

* EU confirms they are in a recession...

* RBA intervening again...

And Now... Today's Pfennig!

Data shows just how bad things are...

Good day... Chuck asked me to go ahead and write the Pfennig this morning, but I got a late start, so this one will be short. We finally had some data releases here in the US which look to steer the markets, so I'll just get right to it.

The dollar continued to strengthen yesterday after another round of bad weekly employment figures. Initial jobless claims increased to 516k during the first week of November, and last weeks numbers were revised up to 484k. The employment picture continues to darken here in the US, and it doesn't look like it will improve any time soon. This is just what the US consumers don't need right now. Not only are most consumers living paycheck to paycheck, but now many of those paychecks are being ripped out of their hands.

Personal bankruptcies are heading into record territory, and job losses will only make this worse. While the total size of the consumer credit market is dwarfed by the size of the mortgage market, with home loans there is an underlying asset providing some base from which banks can work. Credit card debt is different, the banks and investors who hold this debt have no underlying assets to fall back on. This fact has not been missed by the current administration, and Treasury Secretary Paulson is now looking to spend some of the bailout package to try and help out the consumer lenders. Unfortunately it looks like we will be taking another step into the deep dark area Chuck has continually talked about.

This morning we got the retail sales numbers here in the US which showed a further deterioration. Retail sales less autos were down 2.2% in October, almost double economist's expectations. This fall is the largest monthly drop ever, and is just one more sign the US economy is heading for a doozy of a recession!

We did get some good news yesterday morning as the trade deficit narrowed somewhat, a result of a stronger dollar and lower oil prices. But even after the narrowing, we are still running a deficit adding to our need to attract foreign investments. Chuck let me have a sneak preview of December's Review and Focus the other day before he sent it to the printer. In the latest issue, he talks about our need to finance the twin deficits which the US continues to amass. This financing need is one of the factors convinces me the US dollar will have to get weaker. The current dollar strength will not last, and once the 'flight to quality' buying of US Treasuries subsides, we will see the US currency return to its long term decline.

As I said earlier, the dollar continued to strengthen yesterday morning as the stock market fell. But both reversed course early in the afternoon after Paulson started talking. The Treasury Secretary said the big 3 auto makers should receive some government help, but he isn't willing to take any of the funds already approved by congress to help them. Instead, he urged congress to come up with additional funds to help the car makers. He also said he would look to try and spend some of the already approved rescue package on 'non-traditional' lenders who give loans directly to consumers. Looks like Paulson is finally realizing what we have been saying for a while now, that the next big crisis is the consumer credit crunch.

Anyway, just after the news came across the wire about Paulson's remarks, the stock market jumped 400 points and the euro bounced up over two cents in the matter of a few short minutes. The dollar has really become a contra indicator for the risk appetite in the market. The dollar index and the stock market have moved in opposite directions 88 percent of the time since the beginning of September. As investors feel more comfortable with risk, they sell the short term dollar holdings and invest them into other markets. The Europeans have started to take the dollar back up this morning, but it remains lower than at this time yesterday.

The Europeans are taking the euro down after it was confirmed that the European economy fell into its first recession in 15 years during the third quarter. Germany had already reported a third month of negative growth, and the European Union confirmed the GDP shrank .2% in the 15 euro nations during the third quarter. France, Europe's second largest economy, unexpectedly grew in the third quarter as consumer spending gained and exports rebounded. I am still convinced that while things are bad across the pond, Europe's economies are still in better shape than the US economy. And while some here in the US have given the ECB trouble about not lowering interest rates as quickly as the US; I believe they have done a better job navigating the current crisis, and Europe will be able to recover more quickly than the US.

And finally, the RBA was in the markets protecting the Australian dollar again. Lately, the RBA is intervening to hold the AUD$ up while there are rumors the Bank of Japan may start intervening to stop the appreciation of the yen. Officials at the Swiss National Bank have also been complaining about the rise of the Swiss franc. Both the Japanese yen and Swiss franc continue to strengthen as investors reverse carry trade positions. So we have a couple central banks intervening to hold their currencies down, and others who are intervening to try and keep theirs from falling further. Crazy Times!!

Currencies today 11/14/08: A$ .6585, kiwi .5595, C$ .8188, euro 1.2671, sterling 1.4738, Swiss .8409, ISK (No Quote), rand 10.152, krone 6.890, SEK 7.894, forint 213.42, zloty 2.9408, koruna 20.015, yen 96.39, baht 34.97, sing 1.5184, HKD 7.7501, INR 49.01, China 6.8250, pesos 12.97, BRL 2.30, dollar index 86.89, Oil $58.25, Silver $9.65, and Gold... $747.24

That's it for today... Rainy day here in St. Louis, tonight it is supposed to get a bit colder so this rain will likely turn into our first dusting of snow. My wife, Tina, took off to Colorado with her girlfriends last night, so I will spend the weekend playing chauffeur for our two kids. I hope all of you have a Fantastic Friday and a Wonderful Weekend!!

Chris Gaffney, CFA

Vice President

EverBank World Markets

1-800-926-4922

1-314-647-3837

U.S. Payrolls Plunge!

Chuck Butler — Mon, 10 Nov 2008 15:07:38 GMT

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

Gold and silver prices are down.

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

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

In This Issue..

* Job losses begin to accelerate...

* Currencies inch higher...

* News of the weird...

* China announces a stimulus plan!

And Now... Today's Pfennig!

U.S. Payrolls Plunge!

Good day... And a Marvelous Monday to you! The weekend was great, as I got to spend it with my kids at the Missouri Tigers football game on Saturday. It was a cold one, but a great game, and fun time all day and night.

Well... We might as well get right into this... I'm sure you heard that the Jobs Jamboree was awful on Friday. UGH! Jobs are dropping like the temperatures outside, and there doesn't seem to be anything to stop them from dropping either! For the record... October's jobs losses were worse than expected (-200K) and came in at -240K... OUCH! But the real kicker, something the mass media might not have covered, was found in the September revision... Recall that September's Jobs data showed a negative -159K... Well, that number was revised to -284K! Double OUCH!

I would have to think, given the size of the Sept. revision, that October's -240K will be revised to near 300K... The job losses are beginning to accelerate folks, and that's a spiral that's difficult to come out of. And as far as these revisions are concerned... That's a fact of life in a slowing economy... You see, it's all based on Past Performance, and there's no way the models they use can adjust to this, and therefore they have to wait for the "hard evidence" to show up... Maybe they could use different models? Yeah, right... They might do that right after they get rid of their "inflation expectations" ...

So... With the Jobs Jamboree circling the bowl on Friday, the deep, dark, dangerous clouds hovered over the U.S. economy once again, and at first, the recent Trading theme began to trade the dollar higher... But apparently, someone with an ounce of brains on the trading floor, said, "Wait! This is crazy"! And the dollar began to sell off, which went into the afternoon market, which on a Friday, after London heads to the pubs, and it's already Saturday in Japan, there's not much volume or liquidity, and that can lead to boredom or wild crazy moves... This was more of the boredom Friday afternoon.

In the overnight markets last night, the euro has tacked on some minor gains VS the dollar, but once again the Trading Theme hangs over the currencies like the Sword of Damocles.

We used to have a local newspaper that would carry a weekly article called, "news of the weird", and as you can imagine the articles would be quite entertaining... Well... The reason I bring this up, is, I was reading an article on Friday, and it reminded me of "news of the weird"...

Here goes... Michael Alix, chief risk officer at Bear Stearns from 2006 until its demise in March, was named senior vice president in the Bank Supervision Group of the New York Fed on Oct. 31.

OK... I could just leave that one alone... Or... I could rip the Fed for hiring the guy who was the watchdog over risk at Bear Stearns... To do just that for the Fed! I mean come on! Shouldn't this guy have just slipped off quietly? But, to his credit, the Fed thought enough of his abilities to hire him... I just have to question, what the heck is going on at the Fed! We all know that the Fed's balance sheet is growing bigger all the time with "risky assets", and they need someone to manage that risk... And they picked the guy from Bear Stearns, the now defunct Bear Stearns...

Now, was that "news of the weird" or what?

OK, back to currencies, economies and anything else I can think of to write about! OH! AIG's bailout is swelling to $150 Billion, and the insurer posts another huge loss! I know the market participants have become "Comfortably Numb" with the "numbers" being thrown at these losses and bailouts these days... But come on! This is real money! President Reagan used to say, that's billion with a Capital B!

On Friday, I mentioned the possibility of a Russian ruble devaluation of 30% and how I was glad we didn't offer that currency... A few readers took exception with that and pointed out the losses in Aussie dollars... Well... The point I was simply trying to make is that with a devaluation it happens overnight... So, you wake up and your investment is 30% underwater, without you having a chance to "get out"... That's all...

Did you hear about China's big deal this weekend? Here's how the Wall Street Journal reported it... "China's government set plans for 4 trillion yuan, or $586 billion, in spending and stimulus measures through the end of 2010 aimed specifically to target people's livelihood in an effort to offset the impact of slowing global growth and unlock the spending power of its vast population."

Now, I can hear the "hey Chuck, how come you're not ripping China for their stimulus announcement?" Ahhh grasshopper, Spending money you have in your war chest is one thing, while spending money you don't have, and putting it on the taxpayers bill is another...

The currencies are all liking the China announcement, as it gives hope that the U.S. recession doesn't cut too deep for the rest of the world... I think the currencies also like the fact that there appears to be a new "sheriff" in town... A new "white knight" if you will... China... And why not, they've been packing away Billions each month in Trade Surpluses!

The Chinese announcement came at the G20 meeting of finance ministers that was held in Brazil over the weekend... The finance ministers agreed to take "all necessary measures" to get financial markets back to normal and counter the backlash of the credit crisis. OK... You know me... And I think these things are nothing but boondoggles... For instance... The Finance Ministers make that big announcement, but give us nothing, not even a bone, about how or what they will do to make that announcement come to fruition!

Today... The Treasury Dept will discuss TARP... This is the "Troubled Assets Relief Program" that's part of the bailout... This should be interesting...

The data cupboard is bare today, and tomorrow is a Holiday... Veteran's Day. Wednesday, when we come back, will be pretty bare too! So, we don't get any real data until Thursday, when the Trade Deficit for September is printed, along with the Monthly Budget Statement... Then on Friday, we get Retail Sales for October... The Butler Household Index (BHI) indicates that the Retail Sales figure for October will be very disappointing.

It's been a while since I talked about the BHI... This is a simple observation by yours truly as to how many shopping bags I see come into the house during a month... I call it the BHI... And it has been quite indicative of what we will see in the national Retail Sales data. I made it up folks... It's not real, except in my mind and in the Pfennig! ( I once had someone send me an email and tell me they tried to Goggle BHI, and didn't get anything! HA!)

In New Zealand, a new government took over this past weekend, and I'm sure they are real happy about that, given the problems going on globally, and in New Zealand... The change went off without a lot of fanfare, and hardly noticed by the markets...

So... As I get ready to go to the Big Finish, the euro has pushed past the 1.29 handle, and the currencies as a whole look better overall... But remember this move higher for the currencies can be erased in a NY Minute, if the Trading Theme is put back into place. The good news for currencies is that there isn't any real economic data for a few days this week, which means the deep, dark, dangerous clouds will lift temporarily...

Currencies today 11/10/08: A$ .6950, kiwi .6030, C$ .8540, euro 1.2920, sterling 1.58, Swiss .8525, ISK (no quote) rand 9.8850, krone 6.7350, SEK 7.7270, forint 205.20, zloty 2.8050, koruna 19.5350, yen 99.10, baht 34.90, sing 1.4875, HKD 7.75, INR 47.37, China 6.8260, pesos 12.66, BRL 2.1205, dollar index 85.13, Oil $64.40, Silver $10.34, and Gold... $752.90

That's it for today... Don't forget tomorrow is Veteran's Day! Banks will be closed, and no mail will be delivered. Our Trading Desk will not be live. So, if you forget and call, we won't be here... There will be some in to get caught up, etc. but phones will not be answered. It's a holiday! And what a holiday it is... I tell this story every year, but my darling daughter, Dawn, submits a picture of a dad (her grandfather) in his army uniform for their Veteran's Day celebration at her school (she's a kindergarten teacher) each year, and that make's me feel good... She said a couple of years ago, that she never realized how much the two of us look alike... I think of my dad a lot, but especially on Veteran's Day, Christmas, his birthday, and school picnic day... OK... Enough of that! Tigers move up to #12 in the country, inching their way back to the Top Ten... Welcome back from Washington D.C. to Chris Gaffney, I heard he was great! Let's get going on this Marvelous Monday, eh?

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837