Daily Pfennig : Mexico

Dollar falls as US consumer confidence increases...

Chuck Butler — Wed, 29 Apr 2009 14:08:07 GMT

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•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

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In This Issue..

* Dollar falls as US consumers become more positive...
* GDP to be reported this morning...
* European confidence increases...
* Mexican peso recovers...

And Now... Today's Pfennig!

Dollar falls as US consumer confidence increases...

Good day... Hopefully this will reach everyone today. We have been having some computer problems causing some major delays in the delivery of your Pfennig. As Chuck always says, if you need your Pfennig, just go to www.dailypfennig.com where it is posted each morning as soon as I hit the send button. For those of you who feel the need, the website also has an archive, so you can all read what I had to say yesterday. But enough about our email problems, you all want to know what is happening in the markets.

The dollar began the day trading in a fairly tight range, but a fairly large jump in US consumer confidence sent the US$ tumbling. Yes, the old 'opposite' trading pattern has begun again. When we have good news regarding the US and global economies, the US$ gets sold. But when the data is bad, the dollar is purchased as a safe haven. Yesterday both pieces of data released in the US were more positive than most economists expected, so the dollar gave back some of its recent 'safe haven' gains.

The currencies ended up with their best day in a week vs. the US$, as the commodity currencies of New Zealand, Australia, Norway, South Africa, and Canada led the way higher. Even the Mexican peso, which has been beat down as of late was able to claw back a 1% gain vs. the US$. Only the Japanese yen moved lower, (I wrote a few paragraphs on the my feeling regarding the yen in yesterday's Pfennig which most of you probably missed).

A positive consumer confidence number has convinced traders that the US consumer is becoming optimistic again. It is believed that these higher confidence numbers will carry over to increased retail sales and a bottoming of the global recession. Yesterday's consumer confidence numbers surprised even the most optimistic economists, coming in at a five month high of 39.2. The report paralleled figures from public opinion polls which have been indicating US consumers are feeling better about the economy, and the prospect of new jobs. A drop in mortgage rates and the bounce in equity markets during the month of March certainly helped to boost consumers feelings. But many (including myself) think the equity market bounce is probably a 'suckers rally', and unemployment is nowhere near bottoming in the US. Not that I want to throw water on the US consumers new found confidence, but I think we will likely see reality set back in and confidence move back down in mid summer.

The other piece of data released yesterday showed housing prices declined at a slower rate in February than in the first month of 2009. The decline slowed to 18.63% from an adjusted 19% in January. The headlines mostly reported that the decline in home price slowed in February for the first time since 2007. Yes, we did see slowdown in the decline, but should we really be celebrating an 18.63% drop in housing prices? I think the optimists are being a bit too optimistic, as unemployment will continue to climb, keeping buyers from qualifying for new home loans. Unlike many in the popular media, I don't see where we have hit a bottom in the housing market yet, and don't expect us to find that bottom until late this year. Until then, the US economy will continue to struggle.

Kristin Kuchem, who made my day by bringing me a latte yesterday morning (THANKS KRISTIN!!), sent me the following quote regarding the housing data: "The number of vacant homes -- including foreclosures, properties for sale and vacation properties -- jumped to a record 19.1 million in the first quarter as the recession sapped demand for real estate, the U.S. Census Bureau said in a report Monday. The number of homes that stood unoccupied rose from 18.6 million a year earlier. The U.S. financial crisis and falling prices have shattered the confidence of homebuyers. The percentage of people who said they plan to buy a home in the next six months dropped to a 26-year low in March, according to the Conference Board in New York, Bloomberg reported." Hardly a sign that the housing market has bottomed!

Data released later today will give us a picture of how the US economy did over the first quarter. 1st quarter US GDP is scheduled to be released later this morning, and is expected to show the economy plunged close to 5%. This would be better than the 6.3% contraction in the last three months of 2008, so I expect the media to spin it just like they did with the housing data yesterday. We will hear all about how the US economic slowdown is turning, and we will undoubtedly hear several predictions of a rebound by the end of 2009. But with another negative GDP number in the 1st quarter, the recession which began in December 2007 will be the longest since the Great Depression. And not to sound overly negative (which I seem today) but the employment data scheduled for release tomorrow morning will likely show further deterioration in the US job market - not a good sign for the near term future of the US economy.

One piece of data which would lend support to these predictions of a rebound is the personal consumption figure which will also be released this morning. Consumption is predicted to show a slight rebound during the first quarter, after dropping at an average of 4.1% in the last half of 2008. Consumption probably ticked up as mortgage rates and gasoline prices fell. US consumers were obviously in a positive mood during the first quarter, but will their optimism continue?

Later today the FOMC will be releasing their rate decision. Economists expect the US central bank to announce a move down of just .125% in the benchmark rate. But the Fed will have to walk a fine line with the accompanying announcement. They will want to try and relay confidence in the rebound of the US economy, but if they sound too positive, they could push up longer term inflation expectations. Bond traders are still nervous (as they should be) about all of the money supply the Fed has pushed out into the markets. If the Fed makes a case that the economy is starting to recover, bond yields will likely jump up as investors increase inflation expectations. This increase in rates is exactly what the FOMC wants to avoid, as they have been buying US Treasuries in an attempt to keep rates down.

The Fed surprised the markets in March by stating that it would buy longer-term Treasuries as part of their 'quantitative easing'. The Fed's purchase of mortgage backed securities has been credited with helping to manufacture another mortgage refinance boom, and hopefully beginning a rebound in the US housing market. But I don't expect the Fed to drop any additional bombshells with today's announcement. In fact, they will likely be happy to just have their announcement be a non event, as the markets seem to be moving in their desired direction.

The Euro bounced up a full 2 cents vs the US$ overnight, benefitting from the general sell off of the US$ and a bounce in European confidence. The stimulus spending by European governments, along with slowing inflation, have boosted the mood of Europeans. An index of executive and consumer sentiment rose for the first time in nearly a year, the EC reported this morning. Another report showed European retail sales declined the least in 11 months in April. European consumer spending has been resilient in the first quarter and is definitely being helped by government stimulus.

Finally, a report released by the German Economy Ministry predicted the German economy will return to growth in 2010, helped by fiscal stimulus spending. The report also predicted the German economy would contract by 6% this year, much more than the previous estimates. The Ministry is predicting a global recovery beginning at the end of 2009, which they say will help propel the Eurozone back out of recession in 2010.

The Mexican Peso gained slightly as the concerns over a global swine flu pandemic eased. Many now believe the swine flu will be contained in the next few weeks as governments across the globes have aggressively moved to stop the spread. But health officials in the US say the swine flu is likely to rear its head again this fall/winter which is the traditional flu season. Tourism to Mexico isn't likely to recover quickly, as many vacationers have canceled plans and aren't likely to change them again. I wouldn't look for a sustained rally for the Mexican pesos, and wouldn't suggest speculation in this currency.

As I stated in the opening section, both the Australian and New Zealand dollars rose overnight, ending two days of losses. Both currencies have moved back up fairly close to the levels they were trading at prior to the swine flu scare. While I would expect the Aussie dollar to hold on to these recent gains, the New Zealand dollar could be subject to additional selling pressures. New Zealand central bank Governor Alan Bollard will probably decide to cut rates by 50 basis points on Thursday, narrowing the interest rate differential of the kiwi vs. the US$ and euro.

Gold has moved back up along with all of the currencies, approaching the $900 level again. As I stated yesterday, these moves lower by the precious metals are, in my opinion, nothing more than excellent buying opportunities. Once the global recovery begins, inflation will spike and the price of these metals will likely spike up with it.

Running a bit long today, so I'll end it there.

Currencies today 4/29/09: A$ .7196, kiwi .5703, C$ .8308, euro 1.3263, sterling 1.4751, Swiss .8798, rand 8.5424, krone 6.5851, SEK 8.1015, forint 218.14, zloty 3.3336, koruna 20.14, yen 96.88, sing 1.4856, HKD 7.7504, INR 50.09, China 6.8245, pesos 13.71, BRL 2.1846, dollar index 84.528, Oil $50.74, Silver $12.62, and Gold... $899.22

That's it for today... the summerlike weather we have enjoyed the last few days was replaced with spring like showers and fog this morning. Thunderstorms are apparently on the way for this afternoon. Our email problems seem to be fixed, but it is still early and there is still plenty of time for the gremlins to show up! Hopefully all of you will be able to read this before dinner! Hope everyone has a wonderful Wednesday!!

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

US$ benefits from the swine flu...

Chuck Butler — Mon, 27 Apr 2009 15:00:05 GMT

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

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

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

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

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

In This Issue..

* Swine flu causes rush to US$...
* The US$ wins no matter what??
* US Treasury starts a busy week...
* Chinese Renminbi moves back up..

And Now... Today's Pfennig!

US$ benefits from the swine flu...

Good day... And welcome to another week. Chuck headed off to Bermuda on Saturday, so you are all stuck with me for the whole week. Both he and Frank will be giving presentations at the Sovereign Society's Total Wealth Symposium; Frank representing EverBank and Chuck representing his paid newsletter, Currency Capitalist (www.worldcurrencywatch.com). Frank and Chuck probably log more miles than anyone else in the company, and while it may sound like fun to travel to all of the exotic locals, travel is tough. And with the big news over the weekend, airplanes and airports are the last place I would want to be right now.

The story which is dominating the trading screens this morning is the outbreak of swine flu in Mexico, and the fear of it spreading into a pandemic. The flu has jumped off of the North American Continent and is now a global concern, with cases being reported as far away as New Zealand. President Obama's administration has declared a public health emergency, with cases now being reported in several US states. Hopefully health officials will be able to keep the virus somewhat contained, and this won't become as predominate as the SARS outbreak.

As most would predict, the Mexican Peso has dropped significantly moving down almost 3% vs. the US$ overnight. Fears of a global pandemic have driven investors out of the high yielding currencies of New Zealand, Australia, and Brazil. Risk aversion seems to be back in vogue, with investors moving funds back into US Treasuries and the Japanese yen. I read a story over the weekend which suggested the US$ will continue to strengthen no matter what happens in the global economy. The story suggested that the US$ would increase if the administration's efforts to stimulate our economy work, and we lead the rest of the globe into the recovery phase. On the other hand, the US$ will also strengthen if the global economy continues to weaken, as investors will purchase US treasuries as a safe haven.

While that is what has been happening lately, I don't agree that the US$ will win no matter what happens. China and Europe both seem to be on the path toward recovery, with China leading the way. Countries, such as the UK and US, which have participated in 'quantitative easing' have thrown an incredible amount of money supply into the markets in an attempt to stimulate their economies. Eventually, this flood of money will be inflationary, as these administrations will not be able to pull all of this new money back out of the markets. As inflation increases, the value of the US$, Japanese yen, and UK pound will fall. On the other hand, those countries which are able to pull through the global slowdown with limited generation of money supply will be able to return to growth without an inflationary spike.

The Euro has been able to hold onto the $1.31 level over the weekend, as German consumer confidence held steady. The reports out of Germany gave us the first indications that the European economy was beginning to pull out of the recession. ECB ministers are split over the need to follow the UK, US, and Japan down the 'quantitative easing' path, and the leveling off of consumer confidence may keep the ECB from heading down this dangerous path. I think the ECB will probably cut interest rates one more time in May, but hopefully they will be able to avoid monetizing their debt as we have seen the US and UK do recently. If they can avoid 'quantitative easing', the Euro should be able to hold above $1.30 and perhaps start a move back up toward $1.40.

I had been prepared to talk about the tremendous amount of US Treasury issuance this week, and what impact it would have on the dollar. It was going to be interesting to see if all of the new supply would finally outstrip demand. But the outbreak of the swine flu has probably saved the US Treasury for now. Investor demand for the US $ has increased with the pandemic fears, and the timing of this increase couldn't be better for the US. It will still be interesting to see what the new supply does to interest rates, but the US has probably dodged a bullet for now.

It will be a light day of data here in the US today, with only the Dallas Fed Manufacturing activity scheduled for release. Tomorrow we will see a couple measures of consumer confidence, along with the S&P/CaseShiller Home price index. Wednesday will be the big day with the release of 1st quarter GDP and personal consumption along with the FOMC rate decision. Thursday will be another big day of reports with Personal income and spending for March along with the weekly jobless claims and the Chicago Purchasing Manager report. Finally, we will close out the week on Friday with data which will give us a better picture of the state of US manufacturing, with the release of March Factory orders, ISM manufacturing index, and the vehicle sales numbers.

None of the data scheduled to be released this week is expected to show much improvement for the US. Wednesday will be the interesting one, as GDP will probably show a 4.7% drop for the first quarter of 2009. This is bit of an improvement from the 6.3% drop in the 4th quarter of 2008, but still equates to a dramatic slowdown in the US economy. Following the release of the GDP figure, the FOMC will make their rate announcement. They obviously can't cut rates, so the markets will concentrate on the accompanying statement, looking for information on additional 'quantitative easing' which is being planned.

The Chinese Renminbi moved back up to trade near its 2009 high amid signs of a recovery in the Chinese economy. Vice Premier Wang Qishan said the Chinese economy is performing 'better-than-expected'. The news came as China is readying to release a second wave of stimulus funds aimed at infrastructure improvements. This news should bolster the price of raw materials, and help offset some of the recent selling of the commodity currencies.

Currencies today 4/27/09: A$ .7143, kiwi .5655, C$ .8223, euro 1.3140, sterling 1.4558, Swiss .8721, rand 8.8275, krone 6.6758, SEK 8.167, forint 225.29, zloty 3.4781, koruna 20.285, yen 96.58, sing 1.4966, HKD 7.75, INR 50.24, China 6.8272, pesos 13.74, BRL 2.1838, dollar index 85.206, Oil $48.86, Silver $13.02, and Gold... $912.90

That's it for today... Had an absolutely beautiful weekend here in St. Louis, albeit a bit warmer than some would like. It seemed we skipped right through spring and moved on to summer, with temperatures reaching near 90 degrees. The Cards took two out of three from the Cubbys this weekend, with Albert Pujols hitting a monster grand slam on Saturday which nearly left the ballpark. I wasn't able to make it down to any of the Cards games, as Brendan's hockey team had two games and a practice this weekend. Having some computer/phone problems this morning, with a few of the folks on the desk not able to log into the phones (not a good way to start the week). I had better get this out so I can log in and help out! Hope everyone has a Marvelous Monday!!

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

It's Not My Fault, It Must Be Yours!

Chuck Butler — Thu, 12 Feb 2009 14:40:46 GMT

In This Issue..

* What's $78 Billion among friends?
* Currencies fade with bias to buy Gold...
* Could the Carry Trade Unwind be done?
* U.S. soccer beats Mexico...

And Now... Today's Pfennig!

It's Not My Fault, It Must Be Yours!

Good day... And a Thunderin' Thursday to you! Well... Front and center this morning, I'm going to tell you something that will surprise a few and make a few happy. I've had my say on the Bailouts, TARP, Stimulus, and spending. I've beaten them to a pulp, and some readers have expressed their contempt with me carrying on with this beating. So... Unless something cracks, I'll just leave it all as it stands, and go on with life. This all has been too much for my blood pressure to take! I'll report the facts on this stuff, and leave the commentary for people that think they "know better"...

For instance, it was reported the other day that the Treasury Dept. has overpaid for stock received from TARP recipients by $78 Billion. You see, for every $100 given in TARP, the Treasury was to receive $100 in stock / assets, but when all the beans are counted, the Treasury is $78 Billion short on stock /assets... But, what the heck, what's $78 Billion among friends?

I was totally amused at the lawmakers grilling of Bank CEO's yesterday. In going along with the general practice that exists today... "It's always someone else's fault for it can't be my own fault" The lawmakers pointed fingers and blasted these CEO's for "earning a living"... This is dangerous ground folks, as it speaks of doing away with the way businesses have been run for eons, and shakes the very foundation of Capitalism... If the lawmakers had stopped and thought about their TARP money before they began to hand it out with no accountability, and lending requirements, maybe things would be moving in the right direction by now... And I know... This is getting to opinionated and I'm not going there anymore.

Oh! And one more thing... Please no more emails blasting me for taking the new administration to the woodshed so early in their rein... It's NOT A POLITICAL THING! For any reader that was around in 2001 when the then new administration had just taken over, and their first order of business was to place tariffs on Steel imports, I came out with both guns a blazin' that this was protectionism and had no place in free markets and Capitalism... I ranted and railed on this new president for this move. Funny, I don't recall receiving the nasty emails I get now for doing the same thing to this new president back then.. Hmmm...

OK... The dollar was in the driver's seat yesterday, as the risk takers have all gone home... A heading on Bloomberg this morning tells it all... "Stocks fall worldwide on concern stimulus plans may fail" The Stimulus they are talking about is the "new and improved" Stimulus package that the Senate approved yesterday, which came in lower than the previous package. This version's total comes in at $789 Billion.

Yesterday's potential market moving data didn't materialize, as the Trade Deficit did not narrow as much as forecast, and last month's number was revised upward. For the record and for those of you keeping score at home, the Trade Deficit for December printed at $39.9 Billion, and November's Deficit was revised from $40.4 Billion to $41.6 Billion. Exports have fallen off the cliff as 1. Global demand is waning, and 2. the dollar is overvalued and too strong to allow U.S. exports to be competitive.

Today, we'll see Retail Sales for January. The BHI (Butler Household Index) tells me that we should look for a very disappointing number from January. We'll also see the Weekly Initial Jobless Claims that continue to show more rot on labor's vine. Last week, the Initial Claims showed a record of 626K filed. This week, the "experts" are looking for 610K... I'll go out on the limb and say it will be even more disappointing. UGH!

Well... As I told the interviewer the other day... I believe what we're seeing right now is a general increased concern regarding fiat currencies, which has Gold on the rally tracks once again. Yesterday, Gold soared upward and onward by $23... And it has already added $3 since the London Morning Fixing earlier... As my friend, the Mogambo Guru, tells his readers... Everyone should own Gold... "see how easy this investing stuff is? Whee!" And let me repeat something I said before. My friend, Bill Bonner of the Daily Reckoning, www.dailyreckoning.com coined this saying for his "trade of the decade" at the turn of the century... "The trade of the decade is to sell the DOW and buy Gold on the dips"... WOW...

And now that Central Banks all over the world are having a race to zero... Deposit rates no longer hold the hammer over Gold's non interest bearing status. So... When Gold is on one scale, and cash (like dollars!) is on the other side of the scale... Guess what happens! I was surprised that I didn't get any comments yesterday from the media or readers about what I said Gold was... "An Uncertainty Hedge"... Are you uncertain as to what all this that's going on is going to bring us?

An ECB minister, Papademos, was speaking overnight about how "a further easing of the Eurozone monetary policy may be appropriate as risks to growth and inflation are to the downside." Then another ECB minister, Liikanen, said that "at the next meeting it is possible we could move." No dookie Sherlock! Your leader, Mr. Trichet, has all but told us to look for lower rates at the March 5 meeting...

Lower interest rates in the Eurozone won't necessarily hurt the euro, as they sure haven't hurt the dollar! There's a whole trading pattern that deals with a currency not losing value even after a debasing rate cut... I'll put that all together, and bring it to you probably next week, as we've got time before March 5 comes around any way!

Instead, the market movers for euros this morning has been 1. risk aversion in play 2. more flight to the safety of Treasuries, and 3. recession type data, like this morning's December print of Industrial Production for the Eurozone, which fell -2.6% for the month, and moved the annual year-o-year figure at -12% OUCH! Now, that's recession type data! And something that really brings that thought I've made a few times now, about the move to Gold...

Pound sterling has gone back on the slippery slide downward, after a brief rally last week. I was getting a little hot under the collar with the sterling strength last week, but, as with all things, patience is a virtue... Sterling is showing its true colors again, and the folks over at BNP Paribas say that the "downside risks for pound sterling VS dollars have increased"... Hmmm... That's big time research dept there... I could of, and in fact I already did all by my lonesome, tell you that!

The Aussie dollar (A$) just won't go away quietly... Yes, I fully understand that it has fallen from the lofty level 98-cents to present day levels of around 65-cents... But since it got to this mid-65 cent range, it has held steady Eddie. Now, of course I realize that I just gave it the kiss of death, but really this is worth pointing out. And with yen now stalled out around 90, it kind of makes you wonder if the Carry Trade unwind is over... Makes you stop to think doesn't it? Australia keeps cutting interest rates, and it remains in the mid-65 cent range... Yen has had every opportunity under the sun to go further to 85, and can't seem to find any terra firma below 90... Therefore, I'm pronouncing the unwinding of the Carry Trade as a done deal... This is where the munchkin coroner comes out and proclaims the Carry Trade as truly dead... As Coroner , I thoroughly examined her And she's not only merely dead She's really most sincerely dead...

Well... At least we can hope so! This would be a good indication that risk aversion is dying out... Although I'm truly aware that this risk aversion has a ways to go, we have to get to this place before we can begin to make plans to send risk aversion to a state run home...

On a sidebar here... Whenever I used to sit around late into the night with my friends, they would invariably get me to do my imitation of the Lollipop Guild... HAHAHAHAHA! Of course this is when they also would have me play my guitar, which I now haven't picked up in some time...

OK... Enough of that silliness! Your Pfennig writer has really gone out on a limb this morning with the Carry Trade thingy, eh?

I'm out of ideas for today, so with no further ado...

Currencies today 2/12/09: A$ .65, kiwi .5195, C$ .8045, euro 1.2855, sterling 1.4230, Swiss .8610, rand 10.0950, krone 6.8735, SEK 8.4050, forint 232, zloty 3.58, koruna 22.29, yen 90, sing 1.51, HKD 7.7515, INR 48.84, China 6.8340, pesos 14.59, BRL 2.2870, dollar index 86.14, Oil $35.53 (the price of oil just keeps falling!), Silver $13.45, and Gold... $944.44

That's it for today... What a nice win, in awful conditions, for the U.S. men's soccer team VS Mexico last night. My little buddy, Alex, and I watched the game together. Soccer was never "his" sport, but when I was a youngster, growing up in South St. Louis, where everyone and their brother was Catholic, German, Irish, Italian, French, and any other European background, soccer was played all the time, well, when we weren't playing baseball, basketball, football, and hockey! We have two, count'em... Two, soccer greats, and members of the St. Louis Soccer Hall of Fame on this trading desk... Don Ries, and Ty Keough... Both grew up on the South side of St. Louis, where so many athletes came from. Today, would have been my oldest sister Brenda's birthday. We lost her to cancer 20 years ago, she would have been 58 today... OK... It's also Charles Darwin's 200th birthday! Suzy Q just arrived... I need to get this sent, so... I hope you have a Thunderin' Thursday!

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

Comfortably Numb...

Chuck Butler — Fri, 17 Oct 2008 14:10:38 GMT

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In This Issue..

* Comfortably numb...

* Data confirms the US slowdown...

* NZD and AUD end the week with gains...

* Hungarian forint stabilizes...

And Now... Today's Pfennig!

Comfortably numb...

Good day...These dramatic swings in the markets are becoming so common place that a move of 400 pts by the Dow doesn't really garner much notice. After all, in the past five days, the Dow Jones average has had a trading range of almost 2,000 points, but after five dramatic days the stock market is trading almost exactly where it was a week ago. And the volatility in the equity markets has carried over to the currency markets, where we continued the roller coaster ride which began a few weeks ago.

Yesterday, the dollar began the day with a strong move up in early European trading. But a plethora of bad data released here in the US caused the greenback to reverse course, and it wiped out all of its earlier gains. But the bargain hunting rally in the stock market during the afternoon pulled the dollar along with it, and we ended the day with a dollar index which was slightly higher than the day before. Today is shaping up to be a similar trading pattern, as Europe has begun the day buying dollars vs. most of the major currencies.

The numbers which forced the dollar lower yesterday included US industrial output which fell 6 percent in the third quarter, the largest fall in output since 1991. The September Industrial Production number was expected to fall .8%, but shocked the markets with a drop of 2.8%. Capacity Utilization, one of Chuck's favorite gauges of the health of the US industry, fell over 2% from last months number and sits at just 76.4%. This is an important piece of data, as it shows companies are pulling back production, and output here in the US is currently nowhere near our full capacity. The collapse of US manufacturing was further illustrated by a factory index for the Philadelphia region which hit an 18-year low this month. The slowdown in the manufacturing sector has been well documented in the past few years, but what many thought was a bottom apparently was just a pause in a further move down.

The only bright spot in the data released yesterday was consumer prices, which rose less than expected on the back of falling oil prices. The government reported that annual CPI Ex Food & Energy climbed just 2.5% during the month of September. The faltering economy seems to be keeping a cap on inflation for now. But with the government printing presses working overtime to flood the markets with US$, expect inflation to take a dramatic jump up sometime in the not so distant future.

Initial jobless claims for the past week were actually slightly less than projected with 'only' 461,000 filing first time claims instead of 470,000. But continuing claims jumped to over 3.7 million, nearly surpassing the previous peak back in May 2003. The job market continues to slide, which will continue to dampen any hope of a quick turnaround for the US economy. Today's data isn't expected to do anything to alleviate fears of a prolonged recession here in the US, as housing starts are expected to be at a 17 year low and consumer confidence will likely show another drop.

The increase in volatility in the equity markets caused the Japanese yen to advance against both the dollar and the euro yesterday. The yen gained against 15 of the 16 most-active currencies yesterday as investors took a more defensive position following the poor US data releases. Investors have again started to reverse their 'carry trades', causing the yen to drop below 100 before moving back up. The Swiss franc also benefited from the carry trade reversal. This pattern of buying and selling Japanese yen and Swiss francs according to the perceived risk in the markets will likely continue, taking currency investors along for the ride.

The high yielding currencies sold off a bit yesterday, but will end the week as the best performers. Brazilian real is up 8.41% in the past five days, and the Australian dollar is up 5.25%. Now we just need about 4 more weeks like this one to gain back the losses which have occurred over the past 3 months. But I question if we will see the past week's gains continue, as most of them occurred as bargain hunters snatched up these currencies after dramatic drops. The performance of these two currencies in particular is going to depend on global demand for commodities. If the global recession deepens, the demand for raw materials could fall further, dragging these currencies down. But the Asian economies should at be at least partially insulated from the global slowdown, and their demand for raw materials should at least put a floor under these currencies.

Yesterday I informed readers about events in Hungary which had caused a dramatic fall in the forint. As I reported, the ECB stepped in yesterday and said it would support Hungary's money-market operations with a loan of as much as 5 billion euros. This, along with other emergency measures enacted by the National Bank of Hungary over the past few days have apparently assuaged the foreign exchange market. The Hungarian forint ended the NY trading day flat vs. the US$, indicating the worst may be over. Hungary has a 'near zero' chance of defaulting on its debt, central bank President Andras Simor said on state television yesterday. But the ratings agencies are still downgrading the currency. Fitch today cut its outlook on the nations debt rating to negative from stable.

Mexico's central bank will probably leave its benchmark interest rate unchanged today on concerns that a reduction to help a sagging economy would further depreciate the currency and fuel inflation. While a rate cut would help the economy resist a worldwide slowdown and credit crunch, it would work against the bank's efforts to prop up the weakening peso. The Mexican central bank has sold $11.2 billion worth of US$ since last week and purchased pesos in a bid to stem a rout in the currency. The peso tumbled to a record low last week and the central bank is scrambling to stop the slide. Both Mexico and Canada are exposed to the US recession, and each country is trying to shield their economies from further slowdowns in the US. The tumble in oil from its record highs in July have also impacted the Peso and Canadian dollar. The effects are more pronounced for Mexico, where oil accounts for more than a third of fiscal revenue.

Currencies today 10/17/08: A$ .6783, kiwi .6127, C$ .8385, euro 1.3407, sterling 1.7290, Swiss .8805, ISK 260.0, rand 10.4099, krone 6.6635, SEK 7.5087, forint 202.10, zloty 2.6878, koruna 18.824, yen 100.83, baht 34.26, sing 1.4821, HKD 7.7576, INR 48.89, China 6.8332, pesos 13.0449, BRL 2.1335, dollar index 82.59, Oil $71.03, Silver $9.66, and Gold... $794.28

That's it for today...I took my son along with a few others on the desk to a fantastic Blues game last night. The Blues won 6-1, and my son, Brendan, ended up getting a game puck which dropped right into our seats after flying over the boards. This could be the Blues season, as the youngsters which they recently added to the roster seem to have sparked some life into the old veterans. It is finally starting to feel like fall here in St. Louis, we could actually have a light frost overnight. Hopefully the market volatility will cool down a bit too! Hope everyone has a Fantastic Friday, and a wonderful weekend.

Chris Gaffney, CFA

Vice President

EverBank World Markets

1-800-926-4922

1-314-647-3837

A New Trading Theme...

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

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

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

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In This Issue..

* Coordinated rate cuts...

* Did the Fed reignite soaring inflation?

* More pain in Iceland...

* Revisiting the 90's in Japan...

And Now... Today's Pfennig!

A New Trading Theme...

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837

It Was Central Bank Intervention!

Chuck Butler — Thu, 28 Aug 2008 14:13:04 GMT

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

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

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

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

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

EverBank is a Member FDIC and Equal Housing Lender.

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

In This Issue..

* Currencies add to their gains...

* Industrial Production soars!

* 2nd QTR GDP to be a one and done!

* The Aden Sisters on Gold!

And Now... Today's Pfennig!

It Was Central Bank Intervention!

Good day... And a Tub Thumpin' Thursday to you! While I'm not out of the woods, I'm feeling more human this morning, and that's a good thing, considering where I've been earlier this week! So, I'm going to go out on a limb, and proclaim this will be a Tub Thumpin' Thursday! I've got my banana, and bottle of Gatorade at my side, so.... Let's get to the Pfennig!

Front and Center this morning I have to talk about the blip that we're going to see that happened in the 2nd QTR due to the stimulus checks. It all goes back to the stimulus checks and the first sign of this came (besides Retail Sales) yesterday in the form of Industrial Production. Remember yesterday when I told you that Industrial Production is a second tier piece of data that gets ignored by the markets, but I think it's important so I talk about it? Well... Just like last week, when I described the bratty spoiled child throwing a tantrum on the floor of the grocery store as being something you can't avoid paying attention to... The growth in Industrial Production was the same...

Industrial Production for July came in strong, and rose 1.3% in the month and compared to expectations of a no change. The June increase was revised up to 1.3% from an initially estimated gain of 0.8%. And... The good news about this data is that the growth was led by non-defense spending! WOW! When was the last time that happened? Anyway.... The stimulus checks have their fingerprints all over this report...

And so too will they have their fingerprints all over the 2nd QTR print of GDP today. I told you Monday that to expect a blip up in GDP, which will stir the interest rate hike pot once again, and probably give the dollar some love. One thing to think about here, because the dolts in the media won't even think about it, they'll just drool all over the size of the GDP growth, is that I expect exports to have contributed to the 2nd QTR GDP by a sizeable margin, for what was happening to the dollar in the 2nd QTR? It was getting sold like funnel cakes at a State Fair, and getting weaker, and weaker, which just made exports look cheaper and cheaper, thus giving them a huge boost.

But what's happened since the end of the 2nd QTR? The dollar has rallied, so don't look for that boost to GDP in the 3rd QTR... And don't look for the boost to GDP in the 3rd QTR from the stimulus checks... Those have already been spent! So... The 2nd QTR is going to end up being a blip on the recession chart when the historians look back on this period of time. But... That means, dollar strength, folks... Because, even though the markets normally are "forward looking" they will get so caught up in this 2nd QTR GDP growth that they will lose their focus.

OK... When the dollar made huge strides at the end of July and beginning of August, my colleague, and long time friend, Chris Gaffney, Pfilled in for me with the Pfennig, and wrote that he believed the dollar's reversal to be Central Bank Intervention... We received a few emails from people asking us to follow up on that thought, but we couldn't... Until now!

The Bloomie is reporting this morning that "finance officials form the U.S., Japan and Europe, in mid-march drew up plans to strengthen the dollar following troubles at Bear Stearns." The story which originally appeared in Nikkei English News went on to report that: "the intervention designed by the U.S. Treasury Dept. Japan's Finance Ministry and the European Central Bank, called for the central banks to purchase dollars and sell euros and yen, with Japan providing the yen needed for the currency swap if the greenback's value dropped significantly.

The three groups, which considered making an emergency statement through G-7, did not stipulate a specific exchange rate for the potential intervention, nor did they detail the amount of money to be used.

So... Now we know! There was no way the dollar turned on a dime like that without something like this happening... The fundamentals are so anti-dollar strength, and yet the dollar was gaining strength... Well, we know that the Bank of Japan has a treasure chest of yen that they have collected over the years... And they have an even bigger treasure chest of dollars (most of it held in dollar denominated Treasuries), but now they have even more dollars! I bet they are just happy as pigs in slop to own all these dollars!

OK... What's going on today with the currencies? Oh! That is, what this is all about, eh? The currencies, led by the euro, have rebounded nicely the past two days, with only a brief sell off yesterday morning after the Industrial Production number printed. I think the markets got that out of the system and went back to the speech by ECB member, Weber, yesterday. Recall, that Weber said that there was "no scope for interest rate cuts"... Keeping that in mind, the distinct interest rate differential between the euro and the dollar came back into play, and thus a euro rally began, and continued overnight and through the early part of the European session.

You know... There have been 3 currencies that have done quite well holding up and in a couple of cases have actually gained VS the dollar, during this dollar strength... The Mexican peso, the Canadian dollar / loonie, and the Brazilian real... The real has lost ground, but not the degree of the losses in the South Pacific and Europe. The Loonie is the one that makes me scratch my balding head. But then, as I stated last week, it looks like the Bank of Canada is finished with rate cuts, and the recent data there certainly points to a potential rate hike...

During the last strong dollar trend, the Mexican pesos was one of the best performing currencies, but remember... At that time the peso enjoyed interest rates above 10%! While interest rates are grinding higher in Mexico, they still have a ways to go to reach that lofty rate again. I've long said that the peso needed a "risk premium" to attract investment, given their sketchy history with foreign investments in their country. When the "risk premium" went away, as Mexico cut rates down to 5%, the attraction went away... But they are rising again, up to 8% internally, once you can get something higher than that on a retail basis, then you'll be talking about something... Not until then though, not in my opinion!

Gold enjoyed a good day yesterday gaining about $8... And Oil is gaining in price once again, trading at $119.00 this morning... My good friends, the Aden Sisters (Pam and Mary Anne) sent out their weekly update to their readers, and since Pam gave me the green light to put their stuff in my Pfennig, I'm going to grab a piece on Gold that was in their latest update... So, with no further adieu, here are the Aden Sisters!

"As each day passes, the markets continue to consolidate and it looks like an intermediate bottom is forming in gold and silver, as well as their shares, the base metals and the euro.

Gold is at an extreme. Since reaching a low on August 15, it's bounced back above its 65 week moving average and gold (basis December) is now firm above it at $824. Once gold rises and stays above $845, the D low will be over and an A rise will begin. Keep in mind, A rises tend to be moderate. Gold, for example, could have a good sized rise from here but not necessarily surpass the July 15 high near $989.

So... If they're right, and I see no reason to believe otherwise, Gold has the potential to get back on the rally tracks... And if that happens, that means the dollar will be getting weaker... It's one great big circle folks... Which reminds me of Billy Preston's Will it go round in circles... Will it fly high like a bird up in the sky...

A reader sent me a note about a new "risk event" and that is the proposed bail out of the Big Three automakers... Geez Louise, let's hope that's not in the plans... 2008, is going to be known as the "year of the bail out"... That is of course unless this all continues to go sour, and it carries over into 2009, by then the bail outs could be coming fast and furious!

So, it's Thursday, which means we will see the Weekly Initial Jobless Claims today, which continue to be above 400K each week. We'll also see the aforementioned 2nd QTR GDP (first print). That's it! Those two pieces of data. But, as I said, I fully expect the GDP report to prop up the dollar today... Do you smell what I'm cooking? A Potential buying opportunity... I'll have that, along with the lyonaise potatoes, some broccoli and some fresh berries for dessert!

Currencies today 8/28/08: A$ .8665, kiwi .7045, C$ .9565, euro 1.4775, sterling 1.8360, Swiss .9150, ISK 82.45, rand 7.7160, krone 5.3650, SEK 6.3880, forint 161.08, zloty 2.2625, koruna 16.69, yen 109.30, baht 34.08, sing 1.4150, HKD 7.8070, INR 43.77, China 6.8285, pesos 10.14, BRL 1.6215, dollar index 76.79, Oil $119, Silver $13.80, and Gold... $838.40

That's it for today... A great win for my beloved Cardinals last night... Maybe the Brewers and all their macho chest pounding woke up a sleeping giant! I'm old school with baseball, and I don't like staring at home runs, and I don't like fraternizing players, and I really don't like showing up the other team... Like my old coach used to say... "Act like you've been there before", and "stop walking around like a 20-game winner, you haven't won anything yet!" OK, so the Brewers had our number this year and beat us like a rented mule, that's no reason to show up the Cardinals. I'm being visited by one of my fave legal beagles today... Alicia will be here to slap my wrists, I'm sure... But then, if I didn't get my wrists slapped I wouldn't be pushing the envelope, right? And if I wasn't pushing the envelope with what I say, who would want to read this stuff? Anyway, that's what I tell her, sure hope she keeps buying it! HA! (she reads this each day, so I'm just having some fun here)... Well, my Gatorade is almost gone, so it must be time to hit the send button! I hope your Thursday is Tub Thumpin'!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837

Falling Short On Financing...

Chuck Butler — Mon, 18 Aug 2008 13:22:11 GMT

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

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

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

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

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

In This Issue..

* Dollar wages war on euro!
* TICs comes up short...
* An Oil discussion...
* Mexico raises interest rates...

And Now... Today's Pfennig!

Falling Short On Financing...

Good day... And a Marvelous Monday to you! This week is shaping up to be much like a college fraternity pledge "hell week", as we will be as thin as a razor swim suit, with many people out... All I can ask of World Markets customers is that they be patient when calling this week, the wait could be long.

OK... Friday saw some ups and downs but all-in-all a range bound day for the currencies. I'm not going to stick my foot in my mouth again and say that it looks like the euro has applied a tourniquet to the bleeding, like I did last week! I'll simply say that it held 1.47, and has added to that in the overnight trading.

I've repeated several times now for radio, newspaper, customers, Pfennig readers, and last night in the Review & Focus, that the dollar may have gotten up from its death bed, but the soft economy (actually recessionary economy) will limit the recovery time. Friday, we saw some data that had mixed reviews. The TICs data showed once again that the U.S. is having a difficult time attracting enough foreign investment to finance the Current Account Deficit. The Net Security Purchases by foreigners in June totaled only $51 Billion... Shoot, that doesn't even cover the Trade Deficit, much less the foreign direct investment and interest that is added to get the Current Account!

On the good side of the U.S. ledger, we saw Industrial Production post a .2% gain in July, adding to June's .4% gain. This is a good sign for the economy, but one that gets overlooked by the markets. In addition, Capacity Utilization inched up to 79.9%... If you went by these two pieces of data alone, you would think the U.S. economy is doing well... Unfortunately, that's not true.

The NAHG Housing Market Index is the only piece of data we have printing today, but get ready for PPI, Housing Starts, and Building Permits tomorrow!

Oil has been beaten about the head and shoulders now for about a month... Does anyone else get the feeling that this is something the U.S. Gov't is spearheading to achieve an election time price that most voters feel is better "than it was"? I do... And hey! If the Gov't can bully the oil price down, I'm all for that! But, why couldn't that have been done before it got to this level, or to this time before the election? And doesn't it make you wonder if it wasn't an election year, would they have gone down this road? I don't think so! But, bully for them! Anything to alleviate the pain at the pump!

But, just when you thought it was safe to get back in the water... An article in the Wall Street Journal quoted Iran's OPEC governor as saying the oil cartel may decide to cut oil production at its September meeting. Great! Oh, we can always depend on our "friends" (NOT!) at OPEC to help us out, eh?

The falling Oil price has had a lot to do with the sell-off in Gold... So, you have to ask yourself "do I believe that the price of Oil has peaked, and we should see better times ahead?" I'm just as perplexed in this Oil price fall leading to a sell-off of Gold as everyone else is... But... I just can't get my arms around the idea that the price of Oil will continue to fall... Instead, it might continue to fall through the elections, but then watch out!

That means there could be more hard rows to hoe for Gold... But, again, I think that in the end, and all the dust settles, we could be experiencing some unbelievable buying opportunities in the shiny metal... Of course that's just my opinion on this, I could be wrong...

In the overnight trading, the euro actually rallied to the 1.48 handle, but then saw a quick sell-off after the latest Trade data printed. The Eurozone Trade balance has turned to a deficit, folks... We've seen this before, only to see it turn back to positive. The Eurozone Trade Balance printed at a negative - 3 Billion (euros) or $4.4 Billion in dollar terms. I'm not worried about this move into negative territory, as the slowdown of the Eurozone economy will dampen imports.

Speaking of the Eurozone slowdown... The Bundesbank (Germany's Central Bank), which in the old days, I used to call "Bubba"... Issued a statement this morning saying that Germany didn't need any economic stimulus packages, and that slower growth may not suffice to curb inflation. Which is Central Bank parlance for "interest rates are not going lower"... Now, anyone that doesn't believe that the Bundesbank doesn't hold a big stick over the European Central Bank (ECB) is not thinking correctly. The Bundesbank has the ECB's ear, BIG TIME!

The Eurozone will have some data to deal with this week too, as the German ZEW prints tomorrow, along with flash estimates of Eurozone manufacturing for this month.

Did you see where Mexico's Central Bank raised interest rates late last week? The peso has really responded well to the last two rate hikes by the Central Bank, and while I'm not a fan of pesos, they do have a track record of performing well, when their interest rates are at a level that provide a "risk premium" for investors. You see, investors have been burned in Mexico for years... It was just over 10 years ago that the Mexican Gov't chose to move the decimal in their currency price... So... When interest rates are high, they provide a "risk premium" for investors... Their internal rates are now over 8%, and I think one more rate hike here will finally get back to providing that risk premium.... The peso also has a track record of better performance when the dollar is rallying... So, something to think about... But again, I'm not a fan... So you won't see me running out to buy pesos, but for those that think the risk premium is there...

How about that story in the Wall Street Journal from Friday regarding the Fannie and Freddie bail outs? Here's the skinny... "Chances are better than even that government money will be used to prop up Fannie Mae and Freddie Mac, according to economists in the latest Wall Street Journal forecasting survey, and a nearly one-in-three said the institutions should be nationalized."

OK... I'm not for nationalizing... But thought it important to show what economists are thinking about what will happen with Fannie and Freddie... It's also important to read that "government money" is in reality "tax payers money"! Meanwhile back at the ranch... These economists went on to say more about the economy, so here's more of the WSJ... "Uncertainty continues to permeate the economists' forecasts, as they remain almost evenly split for the third month in a row on whether the U.S. is currently in a recession. They expect the economy to slow to a crawl in the second half of this year, registering just 0.6% growth at an annual rate in the fourth quarter. At the same time, the forecasts call for continued job losses and elevated inflation, with oil prices above $100 a barrel well into next year, though down from current levels."

Well... When I came in, about an hour ago, the euro was 1.4735, after trading higher overnight... But as I've typed away here, the single unit has edged down further to 1.4705... And not looking as though it will hold 1.47...

But, Hey! Everything here in the U.S. is just peachy keen, so buy dollars, right? Geez Louise, SERENITY NOW!

Currencies today 8/18/08: A$ .8725, kiwi .7125, C$ .9435, euro 1.4705, sterling 1.8660, Swiss .91, ISK 81.85, rand 7.7735, krone 5.4130, SEK 6.3615, forint 161, zloty 2.2725, koruna 16.68, yen 110.25, baht 33.87, sing 1.4130, HKD 7.8130, INR 43.48, China 6.8790, pesos 10.18, BRL 1.6380, dollar index 77.02, Oil $114.25, Silver $13.05, and Gold... $795.70

That's it for today... While in Vancouver last month, I was given a private screening of the movie that my friend Addison Wiggin spearheaded. "I.O.USA" And was blown away! It's a great documentary that will be premiering at a theatre near you this week! Here's some info on the movie that you might find helpful... http://www.agorafinancial.com/iousa/movietrailer.html

Speaking of Addison Wiggin... He's book "Demise of the Dollar" is still available... The foreword for that book was written by yours truly! And right there on the cover of the book is my name! WOW!

The Olympic swimming events are finished, and we now turn to track and field, Basketball, and other things... What drama on Saturday night with Michael Phelps and that "wonder woman" Dara Torres! My beloved Cardinals just can't get on a roll and put together a long winning streak... It will be difficult to catch the teams in front of them if they don't go on a long winning streak! But hey! 12 games over .500 this year is pretty darn good for a team that was picked to finish last this year! OK... I'm feeling a little shaky again this morning, but better than last Friday! So, onward and upward as we head into this Marvelous Monday!

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

Don't be fooled by the US GDP...

Chuck Butler — Thu, 31 Jul 2008 14:08:34 GMT

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In This Issue..

* Don't be fooled by the US GDP...

* Canada, Mexico, and Brazil rally...

* Aussie dollar falls...

* Japanese to keep rates unchanged...

And Now... Today's Pfennig!

Don't be fooled by the US GDP...

Good day...And welcome to the last day of July. The dollar held its ground through most of the trading day but started to sell off as the day wound down. The currency markets seem to be stuck in a summer doldrums, with few dramatic moves. With many of the head traders enjoying a summer break (ours included), currency desks are reluctant to take on large positions. And who can blame them as the recent global economic data has left investors wondering where to turn.

As I have explained to several recent callers, the global economy is experiencing a slowdown as the high commodity prices and a slumping US economy has hurt growth. The economic releases have shown an overall slowdown in growth, and rising global inflation. But the overall slowdown will have differing effects on the currencies. Asia is slowing, but a slowdown from double digit growth in China and India is much different than a slowdown in the US where growth is around 2%. Also, the Asian countries have kept interest rates low to try and keep their currencies from appreciating too quickly. These countries are therefore in a much better position to combat inflation, and can allow currency appreciation to help combat rising prices.

Some economists have predicted a fall in commodity prices because of the global slowdown, but China and India will still have very healthy growth rates, albeit below 10%. The growth of a consuming middle class in China and the increase in disposable income in India will allow these new consumers to pick up some of the drop in consumption by the US and Europe. The world's economic engine will continue to be based in Asia and the countries which are positioned to feed this engine the raw materials it needs will continue to perform. Australia, Canada, Brazil, and the emerging countries in Africa should continue to benefit from a commodity bull market which I believe will continue.

But back to today's markets. The euro rose overnight moving back above the 1.56 handle, snapping two days of losses. Data showed inflation in Europe accelerated to the fastest pace in more than 16 years in July. This jump in inflation will put pressure on the ECB to continue to raise interest rates as inflation holds at a level which is double the target rate. In spite of dire predictions for economic growth in Europe, German unemployment continues to fall with the rate holding at a 16-year low. Higher interest rates in Europe, while negative for growth prospects, will keep the Euro well bid.

But data released this morning in the US could send the dollar back up again. Economists are expecting the 2nd quarter GDP numbers released in the US later this morning to show an increase of 2.3% compared to the first quarter growth of just 1%. This positive number is largely due to the one time effects of the fiscal stimulus package and about $78 billion in tax rebates which went out during the quarter. I believe this will be another one time positive number which the markets will likely run with. I'm sure we will have the stock jockeys coming out of the woodwork talking about how the 'worst is over' and the equity market and dollar will likely rally.

But don't get caught up in the suckers rally, as numbers released tomorrow will probably show a further decline in nonfarm payrolls for the month of July and an increase in the unemployment rate. The gains in economic growth will be in stark contrast to the recession signal sent by the loss of jobs. While the GDP number has benefited from the one time stimulus package and tax rebates, employment numbers show a more true picture of the current state of our economy. Bernanke himself is urging caution. There are "significant downside risks to the outlook for growth," and "upside risks to the inflation outlook have intensified," he told the Senate Banking Committee in Washington. I have to believe the FOMC will continue to be forced to sit on the sidelines, keeping interest rates unchanged through the end of the year. Not a good scenario for the US$.

While the Federal Reserve is unable to move interest rates, they continue to help their friends on Wall Street with govt. backed loans. The Fed extended its emergency lending programs to Wall Street firms through January after policy makers judged that markets are still too weak to operate without a backstop from the central bank. This move illustrates just how fragile the US banking system remains, as losses from mortgage backed securities and the credit crunch continue to shake Wall Street's balance sheets. As expected, the extension of the credit facilities had the desired effect, as stocks rallied on Wall Street.

A small rise in the price of oil helped rally the Canadian dollar for the first time in seven days. Recently the markets had started to predict a free fall in the price of oil, which put selling pressure on both the Norwegian krone and Canadian dollar. But the stabilization in the price of oil had a positive impact on the loonie. I read where Alberta holds the largest crude oil reserves outside the Middle East, so the Canadian dollar will certainly be influenced by energy prices. I don't expect the Canadian buck to rally much past parity though, as it is heavily reliant on the US economy which will continue to slow.

The Mexican Peso was another currency which advanced yesterday. Mexico's pesos advanced to near a six year high and is now the second best performing currency YTD, behind the Brazilian Real. The peso has benefited from two interest rate increases by the central bank since June, widening the gap between the Mexican and US benchmark lending rates to 6 percent, the most in almost three years. And with the central bank raising their inflation forecast through 2010, there is a good chance of another rate increase in August. With another rate increase, we will likely see the peso trade below 10 pesos/dollar.

As I mentioned above, the Brazilian real continues to be the best performing currency vs. the US$ this year. With untold riches of commodities, and a more stable political situation than in the past, Brazil continues to attract investors. But investors should continue to look at the Brazilian real as a speculative investment, it shouldn't be seen as a core currency holding. We offer a 3 month CD in real at an APY of 6.4%, with a $20,000 minimum investment. Also, due to the speculative nature of this currency, investors have to complete an emerging markets risk disclosure prior to investing.

Some bad news out of Australia caused the Aussie dollar to fall to a six week low. A government report showed retail sales dropped the most in six years, adding to signs the economy is slowing. The currency markets are now predicting the Reserve Bank of Australia may now cut rates this year instead of next. A housing recession similar to those in the US and UK is also putting pressure on the Aussie dollar. On the positive side, the Australian govt. said the trade balance turned to a surplus in June after coal and meat exports jumped. I continue to believe that commodity demand will pull the Australian economy through their housing slowdown, with the currency actually rallying by the end of the year.

Japanese investors also continue to support the Aussie $ and kiwi. The Japanese bought record amounts of Australian and New Zealand dollars on the Tokyo Financial Exchange yesterday, as gains in the yen made the higher-yielding currencies cheaper. So the carry trade lives on! The Bank of Japan is expected to keep rates on hold, as Japan's economy heads for a 'soft landing'. In its annual evaluation of the Japanese economy, the IMF forecast economic growth of 1.5% this year, a pace which is slightly below the economy's potential. The report said the Bank of Japan's 'wait and see' approach to monetary policy was appropriate. With the BOJ keeping rates down, the carry trade will continue.

Currencies today 7/31/08... A$ .9448, kiwi .7337, C$.9779, euro 1.5615, sterling 1.9817, Swiss .9546, ISK 79.30, rand 7.3835, krone 5.1356, SEK 6.055, forint 147.83, zloty 2.0518, koruna 15.35, yen 108.18, baht 33.51, sing 1.3663, HKD 7.8027, INR 42.55, China 6.8318, pesos 10.02, BRL 1.5620, dollar index 73.19, Oil $128.15, Silver $17.49, and Gold... $910.21

That's it for today... It is food day here today, as we celebrate the birthday of Ann Hopkins. Ann is one of the individuals who has taken it upon herself to bake a cake for each of us on our birthdays. In addition to being a terrific cook, Ann is just a great girl with a very quick wit. So today is our opportunity to pay back Ann for all of her late night baking endeavors. I think I actually smell someone cooking up pancakes for breakfast! Got to go see if I can grab a few. Hope everyone has a terrific Thursday, and Happy Birthday to Ann!

Chris Gaffney, CFA

Vice President

EverBank World Markets

1-800-926-4922

1-314-647-3837

Taking On Risk Again!

Chuck Butler — Mon, 21 Jul 2008 14:27:00 GMT

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In This Issue..

* Mexico's rate goes higher!

* A 100 Billion dollar note?

* Euro rates to go higher?

* Oil's sell off might be short-lived...

And Now... Today's Pfennig!

Taking On Risk Again!

Good day... And a Marvelous Monday to you! All my bags are packed, I'm ready to go, the taxi's waiting, he's blowing his horn... Yes, I'm off to Vancouver this morning... This becomes a labor of love for me especially today, with Chris taking off the same week I'm in Vancouver, I'm writing the Pfennig on my way to the airport! Graham Nash wrote a song about that... But I won't go there after the intro! Oh, what the heck! Just a song before I go...

This will be short-n-sweet this morning, as I've got to get to the airport!

Friday, saw the currencies range bound once again, as the data cupboard was empty. And... We didn't have any major losses print, or we didn't have any news at all about all the rot on the U.S. economy's vine. The Biggest mover was... Drum roll please... The Mexican peso! Yes, the Mexican peso outperformed all other currencies last week, reaching a 5-year high VS the dollar after the Mexican Central Bank raised interest rates 1/4% (25 BPS) to 8%, pushing the peso to its highest level VS the dollar since 2003!

I've always said that the thing that was wrong with the peso was that it didn't pay an "insurance premium"... Look back to the turn of the century, and the peso was outperforming most currencies... Why? Because interest rates were greater than 10%, there was an "insurance premium" being paid on the peso! What did it need an insurance premium? Ahhh, grasshopper, recall in the mid 90's when the Mexicans just moved the decimal in the peso price? It's a banana republic folks, and if you are going to invest there, you need a higher interest rate (insurance premium) to help protect you from the volatility... I personally, don't think the interest rate is high enough in pesos, yet... But I see what investors are doing... They are buying at cheaper levels in anticipation of higher rates.

What this also indicates to me is a renewed interest by investors to take risks... That risk taking can also be seen in a stronger Brazilian real, and a weaker Japanese yen. You know my position on this risk taking... It's not warranted, not with all the "risk events" ready to break on the scene at a moment's notice! Of course, that's me...

The lack of regard by investors for "risk", has really helped the South African rand, which a couple of weeks ago, looked to be falling into a big black abyss... But, it's back now... Just like it has done for the past 6 years... More lives than a cat!

You know, inflation has been a big pain for me, and I write about it all the time... But get this! Inflation in Zimbabwe is so bad... (that's when you say, How bad is it?), it's so bad that they are going to introduce a new 100 Billion dollar note, that's only worth $125!

OK... Our inflation is bad, but not that darn bad!

The Reserve Bank of New Zealand (RBNZ) is going to meet this week, and I think, they just might go ahead a cut rates at this meeting. Uh-Oh! The underlying fundamentals that have been swept under the rug as long as interest rates were high, my soon come front and center! That won't be a good thing for kiwi... So be careful!

Things have changed, or least the perception that things have changed, in Canada, has really helped the Canadian dollar / loonie in the past 10 days. What's changed, you might ask? Ahhh... It now seems as though the Bank of Canada is talking up the economy! Alrighty then, it's about time!

Oil really sold off last week... That's a good thing! It had a lot to do with it's "overbought' position... And the fact that President Bush dropped the White House ban on offshore drilling... But that sell-off might be short-lived. Iran has turned down requests to halt its nuclear program. This has ratcheted up the diplomatic tensions... And thus Oil rebounds in price.

The Fed Reserve has raised their 2008 economic growth outlook... OK... If you read that and are wondering what they were smoking, then you're with me! Just where is that growth going to come from? Oh, don't get me started, I'll get into trouble again!

One of the first pieces of data to counter the Fed's revised economic outlook, is the Leading Indicators, which will probably remain weak... I've said this before, the markets ignore this data, when they shouldn't! The Leading Indicators tell us what's ahead... And months and months ago, if the markets had been paying attention or reading the Pfennig, they would have known that we would be in dire straights right now, because leading Indicators told us so!

OK... Did you see the story on Friday regarding the European Central Bank (ECB)? Here's the story that appeared in Market News International... "The European Central Bank is fiercely focused on fighting inflation despite a slowing Eurozone economy and is not excluding the option of another interest rate hike should price stability remain as elusive as in recent months, well-placed central banking sources have told Market News International."

So... One would think that would keep the fire lit for another rate hike from the ECB... That could keep the euro underpinned... The euro is a little stronger this morning on this type of talk, as it nears 1.59 once again. The euro gets traded on two sides you see... If the Eurozone does well that's good for the euro... And with it's position as the "offset currency to the dollar", if the dollar gets sold, that's good for the euro too! Today, it looks as though traders have a bias to sell dollars...

Down Under overnight, the Aussie dollar outperformed most currencies as it shrugged off a weaker than expected 2nd QTR PPI. Domestic PPI was up 1.4% for the quarter, 6% for the year. There were thoughts that the Reserve Bank of Australia (RBA) would comment on something like this, to keep the A$ from gaining... But with little in the way of comments (none actually), I think it highlights the fact that the RBA is of little concern with the A$'s strength... That gives traders a green light to push it higher!

And in the U.K. this morning, U.K. house prices had their biggest monthly drop since 2002! While that's not a good thing for any homeowner wanting to sell, it is a good thing for those wanting to buy! And of course, this is the scenario the Bank of England (BOE) wanted to see all along when they were raising interest rates...

The data cupboard here in the U.S. is pretty bare this week, with only Leading Indicators today, Existing Home Sales on Thursday, and Durable goods with New Home Sales on Friday... Slim pickin's there folks... Looks like the markets will take their direction from the earnings reports that keep coming in (Bank of America is today)... If stocks slide, look for more dollar weakness...

OK... Time to head to the Big Finish... I've got a plane to catch!

Currencies today 7/21/08: A$ .9765, kiwi .7626, C$ .9965, euro 1.5890, sterling 1.9970, Swiss .98, ISK 78.60, rand 7.5825, krone 5.0770, SEK 5.95, forint 144.50, zloty 2.0280, koruna 14.5950, yen 106.60, baht 33.33, sing 1.3510, HKD 7.7980, INR 42.72, China 6.83, pesos 10.18, BRL 1.5885, dollar index 72.03, Oil $130.60, Silver $18.43, and Gold... $966.60

That's it for today... 3 talks Wednesday, one Thursday and one Friday before I head back home on Saturday... As I said before, I'm on vacation when I return, until I head to San Francisco for the Money Show... Chris will be back and taking over the Pfennig. Good luck to my little buddy, Alex, today, as he swims in his conference prelims with hope to make it to finals. He'll do well, when it comes down to conference time, he takes it seriously! Went to a wedding reception Saturday night, saw some really old friends... Went to a bar-b-que yesterday saw newer friends! That little granddaughter of mine, Delaney Grace, sure is growing up fast. She's walking all over the place, and really getting a personality of her own. She'll turn 1 while I'm on vacation, so I'll wish her a Happy First Birthday in the Pfennig now! The Dog Days of summer are setting in, the heat is oppressive, as usual, so it will be good to head to Vancouver for the week! Time to go! Hope you have a Marvelous Monday!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837