Daily Pfennig : New Zealand

Carry Trade reversals rally dollar / yen

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

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In This Issue..

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

And Now... Today's Pfennig!

Carry Trade reversals rally dollar / yen

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Risk Aversion Creeps Back Into The Currencies...

Chuck Butler — Thu, 12 Nov 2009 15:32:59 GMT

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* 4 BRIC currencies: Brazilian real, Russian ruble, Indian rupee, Chinese renminbi
* High upside potential
* No market risk to deposited principal
* Low $1,500 minimum deposit

Don't miss this unique opportunity. Deadline to buy the BRIC MarketSafe CD is Dec. 3rd, 2009. Apply today or learn more at http://www.everbank.com/001CertificatesMSBRIC.aspx?referId=11808
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In This Issue..

* Comments spook currency traders...
* A$ hits 15-month high, this time going up!
* Geithner as the "joker"?
* China changes statement about the renminbi...

And Now... Today's Pfennig!

Risk Aversion Creeps Back Into The Currencies...

Good day... And a Tub Thumpin' Thursday to you! It's a Thursday, and it's not raining here! YAHOO! After a week of Indian Summer weather, we're slowly creeping back to the colder weather, but still, better than most Novembers of the past, so far!

That was a strange feeling yesterday, having a holiday in the middle of the week, but the day was nice, and I got to spend the day with my granddaughter, Delaney Grace, who sang me songs all day long!

So... Last night, I'm doing some writing, and before I put the laptop to bed for the night, I checked the currencies, and while they had drifted in the early Asian session, the Big Dog, euro was still trading above 1.50, and the Aussie dollar (A$) had set a 15 month high of .9368... But when I turned the currency screens on this morning after arriving to a pitch black office, which is the way I like it this early in the morning, the euro had given back about 1/2 cent, and so had the A$... So, it was my mission to find out what caused this slippage...

The only thing I could find was a comment by the Chinese Premier, Wen Jiabao, who said that "the world faces an uneven recovery"... This made traders think twice about leaving me behind, no wait... I mean they thought twice about the green light they thought they were under to have carte blanche with the dollar...

The dollar also received a bit of love from the comments by U.S. Treasury Sec. Geithner, a.k.a. the Cheater... Geithner was doing his best Robert Rubin, circa 1995, saying that he believes strongly in the need to maintain a strong dollar and said the United States was determined to get its budget deficit down. HAHAHAHAHAHAHAHAHAHA! That's a joke, right? OH! He wasn't joking? Are you sure? Because for a minute there, I really thought he was joking, for what, in the past, has he or this administration done to back up those words? But he wasn't joking... Hmmm... And I was all ready to give him a new nickname... The Joker...

Geithner did say that the U.S. was well aware it must work to keep investors' confidence in U.S. economic policymaking... Yeah, and that's exactly what you've done, right? NOT! Hey Timothy, you might want to check the scorecard on your performance so far... The dollar index has fallen 7.6% this year, and hit a 15-month low of 74.89 yesterday...

OK... I've got to go on to something else, otherwise I'll say something that will cause people to fill my email box with nasty emails! But... It sure looks like Risk Aversion has crept back into the currencies after all these statements... We seem to run into these Risk Aversion stints about every week... They come, they take away gains, and they go away, thus allowing the gains to be reinstated...

How about that 15-month high for the A$ yesterday of .9368? At least this time the currency is on the way up when it hit that 15-month figure... 15 months ago, it was on the way down! So, here's the skinny on this move by the A$... Australian employers added jobs in October... This was unexpected... But... Caused the immediate response of speculating that the Reserve Bank of Australia (RBA) would indeedly do, raise rates at their next meeting on Dec. 1st...

There was another "push" to the A$ yesterday... And it came from Gold! The shiny metal pushed to yet another new all-time high record level of $1,117 during the day... I might remind you here that Gold is Australia's third most-valuable raw material export... Oh! By the way, Australia's unemployment rate is now 6.5%, which is still too high, but falling... And doesn't that have a nice ring to it, versus saying an unemployment rate is rising past 10%?

The A$ pulled its kissin' cousin from across the Tasman, New Zealand dollar / kiwi along for the rally yesterday... Kiwi continues to be haunted by the ghost of deficits past... But, hiding in Australia's shadow suits kiwi just fine... And New Zealand Retail Sales just posted a nice, surprise, uptick... There are all kinds of reports going around that say the New Zealand 3rd QTR GDP will be strong... I'm from Missouri, so they'll have to show me!

There was further news out of China yesterday, from the People's Bank of China (PBOC)... The PBOC stated that "the exchange rate will be guided in a proactive, controlled and gradual manner and based on international capital flows and movements in major currencies." What's the news of this you might be asking? Ahhh grasshopper, sit... Here is the news... That statement is completely different toward the Chinese currency than previous statements that said that the PBOC would keep the currency "basically stable"...

This is Central Bank parlance folks, to say that the PBOC will continue to "gradually" move the renminbi... As previously they basically said they would keep it at current levels... The foreign newspapers are all over this statement like a cheap suit, folks... But I think they're going in the wrong direction... The foreign newspapers are thinking that the PBOC has given the "high sign" that they are ready to allow the renminbi to float... Buzzzzzzzzzz! I'm sorry, that's the wrong answer... We hate to see you leave, but Johnny, tell our contestant what they've won!

I just don't see it as that... The Chinese like to play these games with words, to get everyone all lathered up... And then pull the rug out from under them... No rug pulling from under me!

The Wall Street Journal (WSJ) is reporting this morning that Central Banks around the world, like the Russian Central Bank, are buying dollars to underpin the currency from a free fall... The WSJ also said the Asian Central Banks have all been buying dollars to keep their currencies from getting too strong... Hmmm... I wonder how that's been working out for them? Oh... Here's the skinny on that... "Quite clearly, all Asian central banks have found it necessary to intervene, and it's costing us," said Korn Chatikavanij, Thailand's finance minister.

So, it's kind of nice to see other Central Banks around the world throwing good money at bad money, like the Fed Reserve has done for 15 months now... At least they're not throwing money down the toilet, nononononononono! YES THEY ARE! They're buying dollars! What dolts!

OK... While I was browsing through the WSJ, I saw another story that caught my attention... Here was the headline... "Fannie Mae, Freddie Mac say more losses are possible"... According to the WSJ, the U.S. Treasury has already injected $112 Billion into Fannie Mae and Freddie Mac since the government took them over last year... And now, more losses are possible?

Let's see... The Government took them over, and more losses are possible? Sounds like the Post Office... Sounds like Amtrak... What else has the Government taken over, and the bleeding continues? I know, and you know where I'm going with this, so I'll stop there!

What some more depressing data? October saw 332,292 U.S. homes seized by lenders or listed in default or auction documents according to RealtyTrac... October was the 8th consecutive month of 300,000 or more.... There was a 3% decline in October from September, but I wouldn't get too lathered up about that, given the chart I saw and shared with the desk the other day regarding residential loan resets that are coming due in the next two years, with peaks in Sept of 2010, and Sept 2011...

Looking at this chart tells me that the cartel, I mean the Fed will have no other choice but to keep rates low, and to keep buying Treasuries to keep the yield from getting too high... Haven't we learned anything the past 10-years? You have to learn from previous mistakes or you'll make them all over again... And that, is what, I, believe, the Fed is doing! The tried like heck to keep the Tech Bubble from bursting, by keeping rates artificially low, and credit loose as a goose... What were the unintended consequences of those actions? And what will be the unintended consequences of these actions by the Fed? I don't have an answer to that, but I don't see how this works out nice for the U.S. economy and taxpayers...

Before I go on... A reader sent me a note that made me laugh... He said, "Hey Chuck, since you can't decide on whether or not call the Fed the Fed or the cartel... Why don't you just put them together and call them the Fartel"? HAHAHA HAHAHAHAHAHA!

The data cupboard finally gets restocked today, and we'll see the usual Thursday fare of Initial Weekly Jobless Claims, which remains above 500,000 every week, and something that Tim Geithner might want to pay attention to... The U.S. Monthly Budget Statement, which will be somewhere around $160 Billion for October... Annualized, that's almost a $2 Trillion deficit in the Budget! OUCH! Say it ain't so, Joe!

To recap... The non-dollar currencies rallied all day yesterday, but have given back those gains in the overnight sessions. Most of the slippage has been from words, not actions. The Chinese premier, and the U.S. Treasury Sec. So... Don't look for this to be any reversal of the weak dollar trend... The Aussie dollar hit a 15-month high last night on a strong employment data report, which has traders thinking another rate hike on Dec. 1st is coming, and the Asian countries have been buying dollars to keep their currencies weak, and according to them they are "paying the cost"!

Currencies today 11/12/09: American Style: A$ .9315, kiwi .7370, C$ .9315, euro 1.4950, sterling 1.6580, Swiss .99, European Style: rand 7.4380, krone 5.6050, SEK 6.8550, forint 180.50, zloty 2.7645, koruna 17.0490, RUB 28.79, yen 89.80, sing 1.3870, HKD 7.75, INR 46.65, China 6.8267, pesos 13.17, BRL 1.7150, dollar index 75.25, Oil $78.67, 10-year 3.44%, Silver $17.57, and Gold... $1,116

That's it for today... Isn't that something, the Gold move? My good friend, David Galland, said that Gold is "blowing a raspberry"! HA! Well... Now that my blood has been thinned out, and had the consistency of water, the swelling in my left leg has backed off just a bit... At least I don't have to continue with the shots! Next week I go back to the cancer doctor that has been treating my left eye that was taken over by cancer... I really don't know why I have to go back, he told me last time there "was nothing else he could do"... All these things, and still life goes on, right? Yep! Little Delaney Grace was really cute the other day, trying to pawn off her carrots to me, she kept telling us that the carrots were mine to eat, not hers! Well... I'm locked down in St. Louis until late January... But my annual Christmas vacation will break things up... I know, it's a month away, but I can't help starting to get geeked about it! OK... A little long here with the Big Finish, I had better get going on this Tub Thumpin Thursday!

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

Silence Is Golden...

Chuck Butler — Mon, 09 Nov 2009 15:27:51 GMT

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

* 4 BRIC currencies: Brazilian real, Russian ruble, Indian rupee, Chinese renminbi
* High upside potential
* No market risk to deposited principal
* Low $1,500 minimum deposit

Don't miss this unique opportunity. Deadline to buy the BRIC MarketSafe CD is Dec. 3rd, 2009. Apply today or learn more at http://www.everbank.com/001CertificatesMSBRIC.aspx?referId=11808
.

In This Issue..

* A HUGE dollar sell off overnight...
* BLS admits the Birth/Death model was wrong...
* The 20th anniversary of the fall of the Berlin Wall...
* Kiwi is best performer overnight...

And Now... Today's Pfennig!

Silence Is Golden...

Good day... And a Marvelous Monday to you! A Spectacular weekend, weather wise, here in the Midwest... And Indian Summer, is what my dad would have called it. The news from the Sports teams wasn't so spectacular, but we had the weather going for us!

Welcome to Monday's edition of A Pfennig For Your Thoughts... I'll start off today with a note about the currencies, then do a recap of Friday, and then a look ahead to the rest of the week... So... Strap yourself in, and make sure to keep your arms and legs inside at all times during the ride!

I checked the currencies last night, as is my tradition of taking a peek at the Japanese open... And the dollar was getting sold... I thought to myself, self... I bet G-20 got things going here! And then this morning, when I turned on the currency screens, I saw that the dollar really got sold overnight, and in the morning session of Europe. The Big Dog, euro is flirting with 1.50 again, the Aussie dollar (A$) is flirting with 93-cents, and the Swiss franc is not only flirting, but holding hands with parity against the dollar!

So, what's behind this big move in the currencies VS the dollar? Well... The move has been fueled by G-20... And it's not anything that the G-20 members said... In fact, G-20 said nothing, nada, zero, zilch, a great big goose egg, on the currencies... Traders are taking this to mean that the G-20 member nations don't have a problem with the weak dollar, and that's akin to giving them the green light to sell the dollar further... Proving once again that Silence is Golden... (to non-dollar currency and precious metals holders!)

I had said in one of my recent videos that I do for the Sovereign Society and my "paid for" Newsletter, The Currency Capitalist, that I truly believed that the weak dollar and the rise of the non-dollar currencies would be a "hot topic" at the next G-20 meeting... So, I was wrong with that thought... So, since G-20 was given the reins of the currencies, they haven't said a word... I find this to be very significant folks... You know, it's not like if G-20 said the dollar's fall was too deep, they could do anything significant about it... But the fear of something would be enough to wrap a tourniquet around the dollar's bleeding. But... They didn't! And so we go on with the dollar selling, which in reality is what the U.S. Gov't really wants anyway! A general slow depreciation of the dollar is the way the Gov't would like to see the trading go...

So... There we have it! A non-dollar currencies rally, that's wrapped around G-20's silence on the weakness of the dollar.

Friday... We saw the Jobs Jamboree, really surprised on the "good side" of the job losses which according to the BLS (Bureau of Labor Statistics) was "only" 190,000 for October... Now, that's quite the fall from the +500K job loss months we saw 6 months ago... The Unemployment Rate, however, spiked to 10.2% in October... The first time the Unemployment Rate has been above 10% since the recession of the early 80's...

And then there was this, regarding Job losses... Chris Manning of the BLS stated last month that payrolls were overestimated in the twelve months ending March by 824,000. The source of this error was the birth/death model. BLS used "plug" numbers for the number of births and deaths. These "plug" numbers were wrong. They led to estimated positive contributions to employment that were too high. Most of the error (675,000 out of a total 824,000 jobs) occurred in the first quarter of this year. The birth/death model was adding significantly to payrolls when all other payrolls were falling. In reality the contribution from net births and deaths was in fact negative.

How long... has this been going on? (A great old song!) But, haven't I ripped this Birth/Death model for years now? And here you go! Even a BLS employee says they were wrong to add these jobs!

So... The question is when do this job losses get posted? Well... I don't think you'll see that folks... It's just the way the Gov't does things... Hides them, cheats you, and then says, "we made a mistake" and goes on about their business of hiding and cheating you!

Oh... And one more thing here regarding the Jobs Jamboree... According to BLS, payrolls fell at a 188,000 a month rate over the last three months. But their own household survey says employment fell at a 589,000 a month rate.

I shake my head in disgust... But, shoot Rudy, we all know how "the game is played" so, we just adjust our numbers and go on...

So... I guess you heard that the House passed the Health-Care Overhaul Bill this past weekend... I'm not going to go into this for this would be a "hot button" for a lot of people... I just want to know what this is going to cost, and don't believe anyone in the Washington D.C. that tells you that it won't cost anything! Their track record on that stuff is horrendous! Which also means that if they tell you it's going to cost $1 Trillion, it's going "really cost" double or triple that!

So, we just keep adding on to our deficit, folks... The people in D.C. are so worried that they need to spend more, instead of reducing spending... I really think that anyone that voted for this new spending program, needs to get "fired" the next time their term is up...

OK... Enough of that! The Data Cupboard is empty today, and doesn't really get re-stocked with Tier 1 data until Thursday... So... The data isn't going to help the dollar out the front-end of this week.

The IMF issued a report this past weekend that isn't helping the dollar... The IMF said that there are "indications that the U.S. dollar is now serving as the funding currency for Carry Trades" was one of the things that hurt the dollar... The other thing was that the IMF felt that the dollar was still "overvalued"... Which in anybody's book means it can fall further!

The IMF also said that the euro had "experienced the most appreciation among major advance economy currencies and that it remains on the strong side of its equilibrium."

Hmmm... So... First it was the silence by G-20, and then the slap in the face by the IMF that has the dollar on the run this morning... I wonder what direction this will go once the New York traders arrive at their desks, and see what the overnight markets have done to the dollar... My guess is they will first take some profits, and then add on to the dollar's woes... But that's just a guess, who knows what those "fickle" traders will do!

So, like I said above, the euro, A$, Swiss are all moving higher VS the dollar... But the "winner" for best performing currency overnight is the New Zealand dollar / kiwi! At one point overnight, kiwi traded at 74-cents... It has since given back some ground, but the move overnight was impressive! Kiwi got a nice bump when Dairy Giant Fonterra raised their forecast dairy payout... With farmers' incomes representing .7% of the GDP, this was good news for the economy, and thus the thoughts begin to switch to a rate hike by the Reserve Bank of New Zealand (RBNZ), which just last week was downplaying any such rate hike... This might change their mind...

Today is the 20th anniversary of the fall of the Berlin Wall... That was HUGE in our lifetime wasn't it? I'm reminded of President Ronald Reagan telling the Communists 2 years earlier to "tear down this wall"...

And... Chris Gaffney left me this note from Friday...

"The government extended the first time homebuyers $8,000 tax credit on Thursday. While this tax credit was intended to help alleviate the glut of housing left by the credit crunch and resulting downturn, housing analysts have found the tax credit did little for home sales. Between 80 percent and 90 percent of the people who have bought homes using the credit would have purchased those homes without it. Sounds a lot like the cash for clunkers program; Taxpayer money wasted in order to try and make the data look good in the short term.

But not only did they extend the first time homebuyer's credit, they also approved what I think is a really stupid addition. The expanded program introduces a $6,500 tax credit for people who already own homes but want to buy new ones. Unlike the cash for clunkers program, the old homes which these buyers now occupy will not be destroyed; they will be placed onto the market. So what does congress think this $6,500 credit is going to accomplish?? It isn't going to decrease the number of homes on the market. It will help the banks, title companies, and mortgage lenders, who make money on the transaction. But it won't help the homeowners who are facing foreclosure, or the taxpayers who don't take advantage of."

Yes, Chris... That's what's going on here... And again, people are still wondering why China has such a problem with the direction of the U.S. and our deficit?

And Gold... The shiny metal reached $1,100 on Friday... And with the dollar weakness overnight, Gold has moved even higher... I know it sure seems to be that Gold has moved really quickly through the $1,000 level, and it did! I'm still waiting for the "correction" to buy some more... But, right now, it looks like that correction might not every materialize!

Speaking of this... I'm also still waiting for a decoupling of the risk assets... Getting back to the fundamentals... It could be happening right now, folks... We can only hope!

And then there was this... I received an email the other day from a reader, who said to me that he thought I enjoyed seeing these things happen in the U.S.... WHAT? I do not revel in these things I talk about... I merely point out what I think will happen given a tax cut, or more deficit spending, or protectionism, etc. It doesn't take a rocket scientist to figure these things out! And... Besides... I live here, my kids live here, my granddaughter lives here... I think in some way that as long as I point these things out, and ways for people to profit from them, that I'll make things better for them...

Ok... That was good to get out of the way this morning... Let's go to the recap and then the Big Finish, eh?

To recap... G-20 was silent about the currencies and weak dollar, which has given traders the green light to sell the dollar further. The IMF didn't help the dollar either, saying that the dollar was still "overvalued". The BLS admitted the Birth/deal model had made HUGE errors in the past years, and

Currencies today 11/9/09: American Style: A$ .9280, kiwi .7380, C$ .9280, euro 1.4990, sterling 1.68, Swiss .9395, European Style: rand 7.43, krone 5.62, SEK 6.87, forint 181.75, zloty 2.8140, koruna 17.0975, RUB 28.7525, yen 89.90, sing 1.3850, HKD 7.75, INR 46.4475, China 6.8263, pesos 13.34, BRL 1.7045, dollar index 75.10, Oil $78.44, 10-year 3.51%, Silver $17.71, and Gold... $1,108.40

That's it for today... A tough weekend for our football teams... My beloved Missouri Tigers lost again, while the undefeated high school Flyers and the 8th grade Flyers became undefeated no more... UGH! Oh well, on to wrestling for my little buddy, Alex! I took my beautiful bride to see an old band mate of mine Saturday night! Old buddy, Preston, was still quite the showman on stage, with his drums! The band sounded great! My spring training buddies, made tentative plans for our annual trip to Jupiter on Friday... 16 weeks till pitchers and catchers report folks... And with that... It's time to see what's on my desk from Friday, and get going on today's trading! I hope you have a Marvelous Monday!

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

Rates To Remain Near Zero...

Chuck Butler — Thu, 05 Nov 2009 15:19:00 GMT

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In This Issue..

* Dollar reverses sell-off...
* BOE & ECB meet today...
* New Zealand is not Australia...
* Funny accounting...

And Now... Today's Pfennig!

Rates To Remain Near Zero...

Good day... And a Tub Thumpin' Thursday to you! It's Tub Thumpin' because it's a Thursday and it's not raining! Yay for us! Well... Not only was I wrong, but the Bloomberg Economic Calendar was wrong too... The FOMC was not a 2-day meeting after all! Just one day, so no time to pull out the board games and cards...

I nailed that FOMC statement yesterday... WOW! You might begin to think that I have some inside info on the Fed Heads, the way I've been able to basically call every move they've made since the beginning of this whole meltdown in August of 2007! But that's not important here... The important thing is that the Fed said that "economic growth is not enough to hike rates, and therefore they will keep interest rates at near zero for an "extended period"...

Hmmm... Where have I heard that before? Any way, I thought that by continuing to use the words "extended period" that the dollar would get pummeled... And momentarily, it looked as though it might, as the offset currency to the dollar, the Big Dog, euro, raced to trade above 1.49... But a funny thing happened on the way to the forum, and the invisible hand reached down and reversed this move in a NY Minute! The work of the PPT? Probably... The Plunge Protection Team, probably stepped in to keep the dollar from a free-fall... That's my take on it any way!

Any way... With interest rates remaining at near zero levels here in the U.S. I thought it to be appropriate to pull out this new nickname for Big Ben... "Zimbabwe Ben"... (Thank's Ty!)

The rate hike decision ball gets thrown over to the "pond" to the Bank of England (BOE) and the European Central Bank (ECB) this morning for their versions of: Leave rates at present levels, but try to sound upbeat... I think you'll have the "tale of two Central Banks" here this morning. While both will keep rates unchanged, I think you'll see the BOE opt for more bond purchases in an attempt to shore up Britain's banking system... The ECB will NOT be making any such announcement.

In fact, I believe we'll hear ECB President, Trichet, announce that the ECB is moving closer to withdrawing stimulus from the economy! So, those of you who have the ability to go long euros VS sterling, this would seem to me to be the "trade o' the day"... What do I know, I'm not a short term "cross trader"!

So... With the FOMC finished... And the two European Central Banks on the docket today, somehow the Risk Aversion has crept back into the markets...

I received an email from a reader the other day, asking me why I prefer Australia to New Zealand, as the kiwi had outperformed its kissin cousin across the Tasman from 2002 to 2008.... Well... New Zealand enjoyed a wider yield differential than Australia during that time period, as it posted the highest interest rates in the industrialized world... Now that's saying something right there, and a good reason kiwi outperformed the A$...

But times have changed... And a very timely talk by Reserve Bank of New Zealand Gov. Bollard yesterday, helps explain why A$'s now over kiwi... Here's Gov. Bollard...

"Both countries have survived the crisis well, due to a mix of strong institutions and stimulative policies. However, their immediate prospects are different. Australia has avoided negative growth, and its prospects are driven by strong terms of trade, vast mineral deposits, the Chinese market, and rapid population growth.

New Zealand has had a recession, and the pick-up is slower and more vulnerable - a difference financial markets do not appear to appreciate.

Australia is a lucky country, but we could be a lucky neighbor.

Australia is entering a new minerals boom, investing heavily and encouraged by new finds, re-opening markets, bottlenecks and strong prices. Strong investment and export growth would mean big challenges for Australian policy. This all means an economy that looks less like New Zealand.

However, Australia's potential raised the prospects for New Zealand's manufacturers and services, which have a bigger share of exports than the same sectors in Australia."

OK... Back to me... So... Australia is a "lucky country" but New Zealand could be the "lucky neighbor"... Makes sense to me!

The Brazilian real rally took a walk on the wild side yesterday, gaining 2.5% VS the dollar in one day! But, that's relatively tame for some of the wild moves we've seen in recent times with the real... As long as you are not watching the currency like a hawk, and sweating out each pip move, this is no biggie... Keep your eyes on the horizon...

I find it somewhat humorous that the Brazilian Gov't officials have tried and tried to throw down road blocks for the real, and the investors just keep coming in droves... The 2% tax on Capital inflows did nothing to slow down the real's move VS the dollar, except for the day it was announced... After that, it was Wayne and Garth playing street hockey once more... "Game On!"

OK... I had a few callers and emails yesterday telling me that I was wrong about the Gold sales to the Reserve Bank of India (RBI), saying that it was done in SDR's... I think the confusion exits in the fact that the Gold sale kept getting reported as $6.7 Billion worth of Gold... But to put these questions to rest... Here is a report from the Economic Times of India (leading financial newspaper)
http://economictimes.indiatimes.com/markets/bullion/RBI-buys-200-mt-gold-from-IMF-to-pump-up-reserves-value/articleshow/5194492.cms
The purchase was in SDR 4.8 Billion worth.

Today in the U.S. we'll see the Weekly Initial Jobless Claims data, which will remain above 500,000 per week... And the ICSC Chain Store sales figures, which if consumer spending has gone back to pre Cash for Clunkers levels, would mean these figures would be soft... But I don't think this data gets much playing time with traders, so we'll just carry on...

And then there was this... OK... So... Some people chastised me yesterday for saying that the Gov't can't prove the 650,000 jobs they claim they "saved"... Well... Here's a ditty for you! Did you know that the Gov't is claiming that by giving a person that already has a job, a raise, it constitutes as "saving" that job? Want more funny accounting? Stay tuned, same bat time, same bat channel!

To recap... The FOMC left rates unchanged and said they would remain there for an "extended period of time" this sent the dollar to the woodshed, but reversed on a dime... PPT at work? The BOE and ECB meet this morning to discuss monetary policy. Expect the BOE to announce more bond purchases, and expect the ECB to announce a move to withdraw stimulus.. We learned that New Zealand is not Australia, but lucky to be Australia's neighbor! And try as they might to keep the real from gaining VS the dollar, the Brazilian Gov't's moves have not worked...

Currencies today 11/5/09: American Style: A$ .9085, kiwi .7190, C$ .94, euro 1.4850, Sterling 1.6530, Swiss .9825, European Style: rand 7.6360, krone 5.6975, SEK 7.0540, forint 186.37, zloty 2.8745, koruna 17.55, RUB 29.15, yen 90.32, sing 1.3955, HKD 7.75, INR 47.02, China 6.8276, pesos 13.28, BRL 1.7255, dollar index 75.81, Oil $79.91, 10-year 3.62%, Silver $17.40, and Gold... $1,088.80

That's it for today... Writing from home again, as I have yet, another appointment with a doctor this morning. When you have a blood clot, they monitor the thinness of your blood, and it has to be checked every 3 days... So, I have that going for me! I'm taking tomorrow off, so Chris will have the conn on the Pfennig tomorrow... So, as our little Christine would say... This is my Friday! YAY FOR ME! So with that on my mind... Good luck to my beloved Missouri Tigers as they take on Baylor this weekend, and my little Buddy Alex has his last game on Saturday. Congratulations to the Yankees on their World Series Championship... So... I'm off to see the Wizard... Talk to you again next Monday, and try to have a Tub Thumpin Thursday!

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

Jobless recovery?? Not going to happen....

Chuck Butler — Fri, 23 Oct 2009 14:56:00 GMT

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* Leading indicators up, but employment down...
* 11 million new jobs in China...
* Pound sterling gets pounded...
* A Great Day for EverBank...

And Now... Today's Pfennig!

Jobless recovery?? Not going to happen....

Good day...and happy Friday! It has been a fairly busy week here at EverBank, with the issuance of another big BRIC MarketSafe CD, the maturity of another MarketSafe, and a big acquisition (more on that later). While things were a bit crazy at EverBank, the currency markets were fairly uneventful. The dollar started the day off with a move up after a positive report on US leading indicators, but it gave back most of the gains as the trading day wore on. At the end of the day, only one currency moved more than 1% vs. the greenback, with the pound sterling dropping almost 1.5%.

As just mentioned, the leading indicators for the US rose in September for a sixth straight month, giving confidence to those calling for continued expansion in 2010. The gauge which attempts to predict the economic outlook for the next 3 to 6 months climbed 1%, beating most economists forecasts. But much of the good news on the US economy is due to the government stimulus programs, and two other reports indicated future growth for the US is still a question mark.

Offsetting this positive report was the weekly jobless claims which rose, and a report which showed home prices fell. So apparently the leading indicators are predicting a recovery without jobs, and without a strong housing market. You can see why Chuck and I question reports of a 2010 recovery. The US economy will not be able to post strong growth with near double digit unemployment and with both residential and commercial real estate in the dumps.

One of the Fed heads agrees. Federal Reserve Bank of Boston President Eric Rosengren said the US economy is at risk of relapsing into recession after expanding in the second half of 2009. "It's certainly a risk," Rosengren said in an interview with CNBC. "That is why we don't want to take away the stimulus too quickly." I don't look for the Fed to move interest rates higher anytime soon; the leaders of our Fed realize a full US recovery is still a ways off.

Here is a question which needs to be asked: Can the world grow without a robust US consumer? I believe the answer is yes! Growth in Asia and Europe can propel the world out of the global recession without the help of the US consumer; and I think that there is a very good chance that is what is going to happen. Chuck has compared the current state of the US to what happened in Japan after its stock and real estate markets crashed in 1990. Japan plunged into a 10 year period of stagnant growth while the rest of the global economy prospered. Many will question how the global economy can grow without the help of its largest contributor, but Japan was the second largest economy during the 90's, and the rest of the world barely skipped a beat during their malaise.

With the emergence of the consumer in both China and India, the global economy can and will continue to grow even if the US is stagnant. I read a report this morning which stated China will create over 11 million jobs this year, 2 million more than the government had earlier predicted. These new jobs will continue to increase the standard of living in China, and create 11 million 'new' consumers.

While the current administration may talk about reversing the stimulus and government spending as the rest of the world starts to recover, their actions won't match their talk. I believe we will see interest rates stay low in the US for an extended period of time. We will also probably see additional stimulus proposals as US unemployment continues to rise and US consumers continue to tighten their purse strings.

As the rest of the world continues to recover, and central banks begin to increase rates in order to fight rising inflation; the US dollar will continue its slide. A strong dollar just isn't in the interest of the US if we have any plan to try and pay down the tremendous debts and stimulate growth through increased exports. The dollar will fall victim to policies which will be designed to try and push the US economy up to keep pace with the global recovery occurring in Asia and Europe. Despite all of the rhetoric about a 'strong dollar policy', the administration is willing to sacrifice the dollar in order to keep the US from slipping further into recession.

I don't think this is the right course to take for the US, but I firmly believe this is what is going to happen. The future is too far off for politicians to worry about; they focus on the short two year election cycle. They will continue to leverage the future of America with borrow and spend policies designed to keep the US economy on life support until it magically recovers. Their policies will cause a dramatic fall in the value of the US$ which will eventually make our exports competitive and finally spur growth in the manufacturing sector. This drop in the value of the US$ will also enable us to pay down our debts to foreign holders with cheaper US dollars.

I am not suggesting that the US will slip into a 'great depression', but I believe we will see an extended period of stagnant growth. Certain well run companies (like EverBank) will still be able to make a good profit, and the falling dollar will create opportunities for companies with a strong international presence. As an investor, you should look to hedge your portfolio against the inevitable fall in the value of the US$ by investing in non-dollar assets such as our WorldCurrency and MetalSelect accounts.

One major problem the sliding dollar causes for the rest of the world is that the price of oil is inversely related to the value of the dollar. As the dollar has steadily declined this year, the price of oil which is price in $, has risen. In fact, a study released yesterday showed oil is relatively cheap at $80 per barrel. The study showed the price of oil should be $88 per barrel with the euro trading at $1.50. As the dollar continues to slide, there will be further calls for oil to be priced and traded in some other currency besides the dollar, as countries try to de-link it to the falling greenback. If this would occur, it would be a major blow to the reserve status of the US$.

And the folks at PIMCO, the global bond giant based in California seem to agree. Richard Clarida, a strategic adviser at Pimco wrote a note to clients yesterday pointing to "an orderly dollar decline" as the "most likely scenario". He added "a disorderly decline, while unlikely, cannot be ruled out." In the note, he states that a collapse in the value of the dollar would jeopardize its status as the world's reserve currency. Not a rosy picture for the greenback.

Both the central bank of Sweden and South Africa announced they would be keeping rates unchanged yesterday, but the announcements have very different effects on the values of their currencies. The Riksbank of Sweden stated that they would keep their benchmark interest rates at .25% and said that level would be maintained until 'autumn' of next year. The Swedish krona slid against the dollar after the announcement. But later the

South Africa also left their rate unchanged at 7%, but the rand rallied as some had expected a 50 basis point cut. South Africa's central bank leaders said rising energy costs had added to inflationary pressures, and therefore rates would have to be maintained at their relatively high levels. The rand rallied after the announcement.

As mentioned earlier, the big loser overnight was the pound sterling, which fell over 1.5% vs. the dollar. A report this morning showed UK gross domestic product unexpectedly dropped in the third quarter, falling .4% from the previous three months. The British economy has now shrunk over six consecutive quarters, the most since records began in 1955. The report confirms the BOE will continue to keep the 'quantitative easing' policies of low interest rates and government purchases of debt in place. Both Chuck and I have railed against these policies, as they largely untested, and will likely lead to a spike in inflation down the road. Unfortunately the US has been following the UK in their attempts to borrow and spend their way out of recession. I don't think the future is too bright for either the pound sterling or the dollar.

Before leaving work yesterday, Chuck wrote me the following to add to today's Pfennig:

OK... I sure stirred up a bee's nest with my rant yesterday... It's always interesting when I do that, for the people that agree with me will far outweigh those that don't. But that's not the point... The point is that I got people to think about what's going on in the U.S. whether they agree or not!

So, with that, I'm going to talk about... GOTCHA! No opinions just facts...

Canada posted a stronger than expected Retail Sales in August printing at +.8% (forecast at +.4%)... Then that report was followed by the Bank of Canada's (BOC) Monetary Policy Report for this month, in which the BOC admitted that "Canada's economy is recovery due to monetary and fiscal stimulus, increased household wealth, improving financial conditions, higher commodity prices, and stronger business and consumer confidence."

Hmmm... Seems to be the same exact things I've been saying about Canada!

There is an important point in on the items the BOC talked about... And that is the stimulus... Once in a while I get notes from people telling my I bang on the U.S. for stimulus when every other country in the world did the same thing... Well, not quite... While every other country might have implemented stimulus... They were in a fiscal position of strength to do so, while we merely raised the national debt to levels that now place more than $38,000 of debt on each civilian in this country! So... There was a difference, folks... And that leads me to the point I've tried to make for years now, and that is why it is so important for a country to be a Surplus Country!

Colleague Aaron Stevenson brought this to my attention yesterday regarding the price of Gold... The charts show that the price of Gold basically traded back and forth for a flat result for 6 months prior to August 25, 2009...

From August 25th of 2009, Gold has gained 12%! So... Guess what was announced on August 25th that probably has a ton to do with this gain in Gold? Give up? August 25th was the day that the President announced that Ben Bernanke would be reappointed Fed Chairman...

Coinquidink? I don't think so!

I really appreciate it when Chuck gives me these notes to get me going when I am pfilling in for him. It gets the juices flowing instead of staring at a blank sheet of paper!

Both the high flying Australian and New Zealand dollars fell a bit vs. the US$ yesterday as investors worried about China pulling back there stimulus. The currencies, which were trading near their 14 month highs, were ripe for profit takers after China announced accelerated growth in the third quarter. With China clearly back on the growth path, some investors feared they would reverse some of the stimulus programs put into place over the past year. China will certainly start to pull back some of their expansionary policies, but I think this was just a good opportunity for 'traders' to book some nice profits. The Chinese economy will continue to grow, and their demand for raw materials will keep the exporters of Australia and New Zealand busy. As Chuck stated the other day, this isn't a crying opportunity but is rather a buying opportunity! We still feel the Aussie dollar is a solid currency to own.

Before moving on to the currency wrap-up, we had some great news from headquarters yesterday. It was announced that we reached an agreement to purchase Tygris Commercial Finance Group, Inc. Tygris is a private company that specializes in providing lease financing to small and mid-sized companies in specific industries such as healthcare and technology. In addition to diversifying our assets and earnings stream, the acquisition will provide more than $500 million of growth capital. You can read all of the details in the press release at http://www.tygriscf.com/press-releases.aspx#ctrlDeailsDiv It truly is another Great Day at EverBank!!

Currencies today 10/23/09: A$ .9252, kiwi .7555, C$ .9509, euro 1.5022, sterling 1.6386, Swiss .9929, rand 7.4514, krone 5.5395, SEK 6.81, forint 177.05, zloty 2.7790, koruna 17.2425, RUB 28.9797, yen 91.94, sing 1.3928, INR 46.52, China 6.8285, pesos 12.8944, BRL 1.7156, dollar index 75.323, Oil $81.12, 10-year 3.47%, Silver $17.70, and Gold... $1,060.95

That's it for today, by now Chuck is at the doctors for a full day of poking and prodding. I'm not sure how he keeps so calm going to the doctor for his checkups after all he has been through; and then to have to wait a few days before finding out the results! I'm sure he would appreciate all of your prayers for another round of good results! I spent the evening last night celebrating my father's 72nd birthday. He is in the advanced stages of Parkinson's, so we brought cake and ice cream to the nursing home and enjoyed a night with all of his 'housemates'. While he has probably already forgotten the celebration, he flashed us all a huge smile when we showed up with his presents. 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

The dollar drifts lower in thin trading..

Chuck Butler — Tue, 13 Oct 2009 14:39:00 GMT

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In This Issue..

* US$ drifts lower in light trading...
* Euro/Yen benefit from reserve diversification...
* Pound sterling continues to drop...
* New Zealand retail sales pick up.....


And Now... Today's Pfennig!

The dollar drifts lower in thin trading...

Good day... and happy Tuesday morning to everyone. As Chuck told everyone yesterday, he is heading down south to a corporate meeting, so you will be stuck with me for the remainder of the week. Yesterday was an official 'bank holiday' but apparently most of the WorldMarkets customers were unaware, as our phones were surprisingly busy. Trading in the currency markets was substantially lighter than usual, and with no data releases in the US, the dollar drifted sideways throughout the day. The European currencies were slightly higher vs. the US$, the Asian currencies were lower vs. the US$, and the commodity based currencies were mixed.

European currencies were helped by good news over the weekend as Poland ratified the draft EU constitution (referred to as the Lisbon treaty). But one big hurdle still remains; Czech President Klaus is refusing to sign the treaty, even though the Czech government has approved it. The Czech President, who is against the EU, is hoping to stall until after the British election which must be held by June of next year. David Cameron, the Conservative leader, has pledged to hold a referendum on the treaty if his party is elected. This would throw the EU constitution back into question, so EU leaders are putting major pressure on the Czech President. While the pursuit of this last signature makes for good drama, I believe the EU constitution will be ratified, and the European Union is no in any immediate danger of falling apart.

In fact, the euro has quickly become one of the preferred investments for central banks who are looking to diversify out of US dollars. As Chuck wrote in yesterday's Pfennig, the latest data shows central banks placed 63 percent of new reserves into euros and yen in April, May, and June. Foreign currency reserves were increased by $413 billion during the last quarter, the most since 2003. In the past, a majority of these reserves would have been invested into US$, but central banks are now shying away from the greenback.

Recently, the role of the dollar and the euro/yen has been reversed. Previously 63% of new reserves were placed into US$, but lately that number has fallen to just 37%. As Chuck and I have written in recent Pfennigs, the current administration has no interest in supporting the US$, and global central banks seem to be fearing this lack of support. According to the data reported by Bloomberg, the dollar will likely remain under selling pressure for some time to come. Despite last quarter's move away from the greenback, central banks still hold over 62% of their foreign currency reserves in US$, leaving plenty for future sales.

Some of the largest pools of reserves are being held by China, Japan, Russia, and India. Both China and Russia have repeatedly called for the creation of a 'new' reserve currency, so their moves out of US$ come as no surprise. China, which controls $2.1 trillion in foreign reserves is the largest holder of US debt with over $800 billion invested in US treasuries. Investors would be wise to take notice of where these countries are moving their reserves. Pulling reserves away from the dollar will continue to rally the alternative currencies of the euro and yen; and will also put upward pressure on the price of gold which is another attractive alternative for reserves.

As I mentioned above, leaders in the UK will be forced to call an election by June of next year. Prime Minister Gordon Brown has been trailing Conservative leader David Cameron in opinion polls and the sagging British economy isn't helping his position. Mr. Cameron has been calling for an end to the 'quantitative easing' and a focus on the ballooning deficits. The Treasury expects its deficit to touch 175 billion pounds this year, about 12 percent of national income and the most in the Group of 20 nations. Brown wants to sell assets including the government's stake in the Channel Tunnel and increase taxes in order to halve the budget deficit in the next four years. I have to side with the conservatives and Mr. Cameron on this one. I just don't see how increasing taxes and selling off assets in order to continue to pump money back into the economy is a positive long term strategy.

What scares me is that Prime Minister Brown's plan has the stamp of approval by economists at Goldman Sachs. Readers know the influence the folks over at Goldman Sachs have on our administration. The US followed the Bank of England down the path of 'quantitative easing', and we will pay the price for these inflationary policies in the not to distant future. Why jeopardize the long term health of your economy for short term growth? But politics leads to some poor decisions, and Brown can't risk falling back into a 'double dip' with elections coming up around the corner. The same can be said of the US administration, with mid-term elections looming in 2010.

The pound sterling fell to its lowest level in several months vs. both the US$ and euro yesterday as speculation of an increase in the 'quantitative easing' programs ran through the markets. The UK inflation rate dropped in September by more than forecast, to the lowest level in five years. With inflation continuing to run below the radar, pressure will continue for the BOE to pump more newly created money into the markets through asset purchases.

Questions over Brown's economic policies and the uncertainty of the upcoming election will certainly keep up the selling pressure on the pound. I read a research report over the weekend which predicted the pound sterling would continue to drop, bottoming out as low as $1.45 if Brown's Labor party were able to hold on in the upcoming election. On the other hand, the report predicted the pound would rise to $1.85 by the end of 2010 under a Conservative Party win.

The Asian currencies were worst performers yesterday, selling off on speculation central banks would take advantage of the light markets to intervene. This is a perfect example of how 'jawboning' can work. Asian central banks have been expressing concern on the recent strength of their currencies as compared to both the US$ and Chinese Renminbi. Since the Chinese have decided to 'peg' their currency to the falling dollar, other Asian nations with free floating currencies have been put at a competitive disadvantage. With many traders in the US gone for the holiday, it was a perfect time for some verbal intervention by Asian central banks. The South Korean government said it would intervene to stop excessive volatility, and Taiwan said it would introduce measures to deter speculators. This verbal intervention had the desired effect, and temporarily reversed the ascent of the Asian currencies vs. the US$.

But overnight, these currencies surged back as the region continues to be the first to recover. Reports released show growth in Malaysia, South Korea, and Indonesia will be higher than previously predicted. Verbal intervention just can't compete with strong economic reports. The data doesn't lie, and it shows Asia will continue to take the lead in this global recovery.

The Indian rupee moved higher after a report was released which showed a big jump in industrial production in India. Output at factories, utilities, and mines jumped 10.4% in August from a year earlier; the largest jump in almost 2 years. The larger than expected move will increase pressure on India's central bank to begin to raise rates. Central bank Governor Subbarao said last week that India may need to act ahead of advanced economies due to the 'incipient' inflation pressures.

While most have predicted a move up during the first part of next year, some now believe we could see a 50 basis point hike as early as the Oct. 27 monetary policy meeting. India has been overshadowed by the growth story in China, but India's growth is expected to keep pace with it's larger neighbor. India also enjoys a more established economic system, a more educated workforce, and a higher standard of living than China. The central bank has reduced taxes on consumer products and imports, and cut interest rates to provide a stimulus worth more than 12% of India's GDP. If the Reserve Bank does boost rates later this month, the rupee could enjoy a continued rally vs. the US$.

One of the currencies with the biggest gains vs. the US$ overnight was the kiwi. Chuck noticed the currency rallying late last night and sent me this from home: New Zealand's retail sales rose in August at more than twice the pace expected by economists, adding to signs the economy's recovery from recession is gathering pace in the second half of this year. Sales increased 1.1 percent from July, seasonally adjusted, Statistics New Zealand said in Wellington today. Core retail sales, which exclude car yards, fuel outlets and workshops, rose 1.2 percent.

I think this just may move RBNZ Gov Bollard to move rates earlier than he had wanted to... but like I said last week in my rant and memo to Bollard, who is known as a central Banker that likes to talk down his currency.... "Don't want your currency to move higher VS the dollar? Then don't raise interest rates!... but, unfortunately for Mr. Bollard, he's trying to paddle against the current right now... So, unless he wants to face the music that comes from soaring inflation in the future, he'll have to raise rates, and... suffer through a rising kiwi!

I'll let Chuck have the last word and move on to the currency roundup:

Currencies today 10/14/09: A$ .9090, kiwi .7376, C$ .9706, euro 1.4825, sterling 1.5794, Swiss .9779, rand 7.3377, krone 5.6152, SEK 6.99, forint 181.16, zloty 2.85, koruna 17.458, RUB 29.56, yen 89.58, sing 1.3959, HKD 7.75, INR 46.495, China 6.8266, pesos 13.22, BRL 1.744, dollar index 75.96, Oil $74.05, 10-year 3.34%, Silver $17.98, and Gold... $1,067.13

That's it for today... Congratulations to all of the finishers of this years Chicago Marathon. Our own Christine Peplow ran a personal record as did John McLean who is married to our metals/currency trader Jennifer. It is an amazing accomplishment and I know both worked hard to make sure they were in great shape to make it all 26.2 miles. I think I'll get this out the door and head over to Starbucks to get the desk some latte's to celebrate Christine's return. Hope everyone has a Terrific Tuesday!!

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

Gold Soars To Another All-Time High!

Chuck Butler — Thu, 08 Oct 2009 14:39:07 GMT

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

* 4 BRIC currencies: Brazilian real, Russian ruble, Indian rupee, Chinese renminbi
* High upside potential
* No market risk to deposited principal
* Low $1,500 minimum deposit

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

In This Issue..

* $1,055 for Gold!
* Global recovery prospects fuel run on the dollar...
* Trichet to defend the dollar today?
* Central Banks are diversifying...

And Now... Today's Pfennig!

Gold Soars To Another All-Time High!

Good day... And a Thunderin' Thursday to you! It's raining here in St. Louis, so, it must be Thursday! It's a big night for yours truly, but I'll talk about that at the end... We've got some big moves going on in the currencies and metals, so we had better get to it, and save the chit-chat for later, eh? But first, today is the funding deadline on our latest BRIC MarketSafe CD... We'll have one more in November and then that's it!

OK, front and center this morning, Gold has soared to another all-time high! When I turned on the screen this morning, Gold was flashing a great big $1,055 figure... WOW! But wait! OK, now that sounded like an infomercial... But wait! If you act now, you can get double the Ginsu knives! HA! OK, getting back to the original, but wait... Gold and Silver for that matter, aren't the only risk assets moving higher this morning... All 16 of the countries that are deemed to be the biggest U.S. trading partners, have currencies that are taking liberties VS the dollar this morning...

Basically, it's like this folks... We keep seeing signs that a global recovery is taking place, I mean, the Reserve Bank of Australia (RBA) even hiked rates this week for crying out loud! And... With those signs of recovery, come the feelings that global rates will be rising, as witnessed by the RBA this week, and with global rates rising, the yield differential to the dollar becomes even greater in favor of the non-dollar currencies.

This is quite evident, when you look out on the currency landscape and see that Aussie dollars (A$) are trading with a 90-cent handle... Brazilian reals are trading 36% higher VS the dollar since March 1st!

Why did I highlight those two currencies? Well, as has been well documented, the RBA already hiked rates and increased their rate differential to the dollar this week, with the thought that they would come back again in November for another rate hike... And Brazil? Yesterday, I saw a story flash across the screen that the Brazilian Central Bank Gov. is mentioning at least 200 BPS of rate hikes before he leaves office next year! Talk about increasing the rate / yield differential!

Yesterday, I talked to you about the euro, and explained why it had not participated with the other currencies' assault on the dollar... Well, the Big Dog /euro got off the porch to stretch its legs and chase the dollar down the street a bit last night... The euro is trading with an eye toward 1.48...

I'm waiting for some data to print from Germany this morning before I go on... So let's wait a bit... OK, I'm back now... Well, keeping with the theme that a global recovery is taking place, German Industrial Production rose in August 1.7% from a decline in July. As reported here about a month ago, Germany exited their recession in the 2nd QTR, posting a positive, albeit negligible, GDP... I expect their 3rd QTR to be a bit stronger, as they build on this nascent recovery.

The European Central Bank (ECB) meets this morning, in fact, they're meeting as I write... I don't expect the ECB to move rates, announce any quantitative easing, or anything like that... What I'm half expecting though is for ECB President, Trichet, to attempt to put a tourniquet around the dollar, to stop the bleeding... Hey! Nobody in the U.S. is fighting to keep the dollar strong, so somebody has to!

OK... I've explained this many times before, but for the new readers, it's really something that needs to be understood... Look, the ECB and Trichet, know all too well that the U.S. has painted itself into a corner, and the dollar is getting punished for their actions... And, they understand that all they would have to do is talk glowingly about the euro and it would deep six the dollar in a heartbeat! But what good would that do? It's far better to just keep the lips zipped shut, and watch a general, slow, depreciation of the dollar... So... The euro's run to the high 1.47 handle this morning, could be at risk to what Trichet has to say... But remember folks, he's just wrapping a tourniquet around the dollar, it's not like he's in love with the dollar and the fundamentals behind it!

Last night, I was doing some reading / research and came across a story that really piqued my interest... Here's a snippet from the Bloomberg...

"Central banks are diversifying away from the dollar "more aggressively," according to Barclays Plc, the world's third-largest currency trader.

The dollar accounted for 37 percent of the $115 billion foreign reserves central banks amassed in the second quarter, after adjustment for exchange-rate changes during the period, compared with 52 percent in the euro, according to a Barclays analysis of data that the International Monetary Fund released on Sept. 30. That was the first time that the dollar's share fell below 40 percent in the new accumulated foreign reserves of $100 billion or more since the euro's 1999 debut."

Remember, about a week or so ago, when I told you that the IMF's currency report basically showed a move away from the dollar too...

HEY! IF CENTRAL BANKS ARE DIVERSIFYING, SHOULDN'T YOU BE DOING IT TOO?

OH! And there was this quote from Canada's Finance Minister, Flaherty said..."We are all concerned about the U.S. dollar"...

And then there was this... Haven't you heard about the guy, known as the Cheater? It seems every day now, you hear people say now, Look out for the cheater, make way for the fool-hearted clown, look out for the cheater, he's gonna build you up just to let you down... Come on... We all know who I'm talking about, you know him, you love him... It's U.S. Treasury Sec. Tim Geithner!

Yes, the man that was in charge the NY Fed, and oversaw the banks in that region, of which, most of them needed TARP money didn't they? Any way... The thing I want to talk about is his latest statement about the dollar... Here's Timmy! "officials recognize that the dollar's important role in the system conveys special burdens and responsibilities on us, and we are going to do everything necessary to make sure we sustain confidence."

Yeah, sure you are... How many Treasuries have you auctioned off this year? Something like $1.6 Trillion? Now, that will give everyone in the world a warm and fuzzy about the dollar's future won't it? NOT!

OK, I had better go on to something else before I get too wound up!

The Bank of England (BOE) is also meeting this morning... And after an awful set of economic reports in the past month, the BOE members are scratching their heads and wondering what to do next... They cut rates to the bone... They've bought toxic assets from financial institutions... They've nationalized a few companies that were about to go under... They spent money on stimulus packages... And they've implemented Quantitative Easing...

Sounds like the U.S. doesn't it? I'll tell you who else it sounds like... It sounds like Japan in the last decade... I hate to be the one to half to tell these dolts that none of this works! It just makes a laughing stock out of your Central Bank, and puts your currency on the slippery slope downward...

Oh, but not to worry, Tim Geithner is maintaining the confidence in the dollar... ( I guess no one told Canada's Finance Minister, eh?)

Again, Chuck, go on to something else, and quit coming back to this!

Well... Earlier in the Pfennig this morning, I told you about the rise in the A$... I didn't tell you that it was trading at a 14-month high, as it was reported that Australian employment surged 40,600 in September! With a print like this, I think that's it's almost a given now that the RBA comes back in November and hikes rates again!

Another currency at a 14-month high is the New Zealand dollar / kiwi... Remember how I've told you about the Reserve Bank of New Zealand (RBNZ) Gov. Bollard, and his penchant for jawboning kiwi lower? I despise him for these things, as a Central Banker, your job is to protect the value of your currency, not diss it!

Well, now Bollard has company... New Zealand Finance Minister, Bill English, has this to say... "We're uncomfortable with it (kiwi) at this stage in the economic cycle." You see, Mr. English is concerned that the economic recovery will be stamped out with a strong kiwi... Well, I've got a cure for you Mr. English... Tell Bollard and the boys over at the RBNZ not to raise interest rates, and that will do the trick! It'll stop the speculation in its tracks! However, if the RBNZ does raise rates next month, then you have no one to blame but yourselves!

OK... Let's get back to Gold, before we head to the recap and the Big Finish!

I did a video yesterday on Gold... And I talked about how you can go about your life without an inflation hedge in your back pocket and suffer the consequences of not only having your purchasing power reduced by the falling dollar, but having what dollars you have left eaten away by inflation... OR... you can get that inflation hedge... and put it away for a rainy day... or pull out to play it like a "Get Out of Jail Free Card" when inflation hits...

To recap... Gold has soared to another all-time high of $1,055 overnight. And the non-dollar currencies are all gaining VS the dollar on the thoughts that a global recovery will result in wider yield differentials in those currencies VS the dollar. A$ and kiwi have both traded at 14-month highs overnight... And... We could see some downside risk to the euro if ECB President Trichet decides to defend the dollar today after the ECB meeting this morning.

Currencies today 10/8/09: A$ .9050, kiwi .7398, C$ .9475, euro 1.4770, sterling 1.6060, Swiss .9745, rand 7.3440, krone 5.6545, SEK 6.9890, forint 182.75, zloty 2.8655, koruna 17.4375, RUB 29.60, yen 88.30, sing 1.39, HKD 7.75, INR 46.36, China 6.8260, pesos 13.31, BRL 1.7480, dollar index 76.03, Oil $70.23, 10-year 3.19%, Silver $17.84, and Gold... $1,055.08

That's it for today... And for me this week, as Chris will have the conn on the Pfennig tomorrow. My beloved Cardinals took game one of the playoffs on the chin last night, leaving 14 runners on base... UGH! It's a BIG night tonight for us here as the Cardinals play game two... The Hockey Blues have their home opener, and my beloved Missouri Tigers take on Big Bad Nebraska! I'm heading down to the game with oldest son, Andrew, and friends. It looks like we're going to be soaked from the rain! UGH! I'll talk to you again on Monday, God willing... So, have a Thunderin' Thursday today, and a wonderful weekend ahead... Go Tigers!

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

Whiplash Wednesday!

Chuck Butler — Wed, 30 Sep 2009 14:24:25 GMT

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

* 4 BRIC currencies: Brazilian real, Russian ruble, Indian rupee, Chinese renminbi
* High upside potential
* No market risk to deposited principal
* Low $1,500 minimum deposit

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

In This Issue..

* Currencies rebound VS the dollar...
* Aussie and kiwi lead the currencies higher...
* Data and Central Bank speeches today...
* Gold rebounds back to $1,000!

And Now... Today's Pfennig!

Whiplash Wednesday!

Good day... And a Wonderful Wednesday to you... Instead of a "turn around Tuesday", we're seeing a whiplash Wednesday! And for once in a month of Sundays, the Big Dog, euro didn't lead the other little dogs (currencies) off the porch to chase the dollar down the street!

No... This time it was the currencies of Australia and New Zealand that led the charge VS the dollar... The euro has taken up the charge since opening the doors to a new day of trading in Europe, so... It looks like it's a "take the dollar to the woodshed day"...

OK... Let's start first with the goings on yesterday and then build to a big crescendo! Yeah, right, like I can do that! HA! Any way...

As a reminder, yesterday we had the Russian rate cut, and the Japanese Fin Min giving the dollar a boost... We then saw some data that at first glance seemed to be good, but a quick look under the hood told the markets otherwise... Home Prices fell in July VS June, but are still down 13.3% VS last year... And Consumer Confidence surprised everyone by falling this month. It was expected to gain. So... As the day went on, it just didn't look like the U.S. data would be strong enough to cause dollar selling...

But then, overnight, we had a strong Retail Sales report in Australia, and a strong Business Confidence report in New Zealand, and the "global recovery thoughts" were back on! Game on, as Wayne and Garth would say! Yesterday morning, the Russian rate cut said "step back on the thoughts for a global recovery"... And then overnight, the reports from Australia and New Zealand said, "step forward on the thoughts for a global recovery"!

And so it is... We end the month, and quarter with the dollar on the losing end VS many currencies... This marks the second consecutive quarter of dollar losses... Does that sound like a trend to anyone? To me, I do not consider this to be a "new trend", but instead, simply a return to the underlying weak dollar trend, that went dormant for 6 months while the world sorted out the financial meltdown.

This is where, when I go out on the road and speak to people, I say that trends are not One Way Streets... There can be volatility within the trend. And thus this explains the 6 months from August of 2008 trough Feb of 2009... For most people that got into diversification using currencies and precious metals, they saw it for what it was, and simply battened down the hatches, and looked for deep discounts to add to their diversification... For some people, who got in for all the wrong reasons, and never thought about diversification, then they panicked and sold out at losses... For those that battened down the hatches, they were rewarded with this latest 6-month move... And that's all I'm going to say about that!

The boys and girls over at the IMF are trying really hard to keep the currencies in check and not let this become another rout on the dollar. The IMF issued a statement saying that there are still risks in the global recovery... Unfortunately, for the IMF, nobody is listening to them, judging from the dollar selling I've seen since I came in this morning!

Hey! I don't give the French much credit for anything... But I did see last night that they are cutting taxes on business! WOW! What a novel idea! And one that I think would behoove the current U.S. administration to follow... This is really a great way to get real traction in the economy... Give Businesses more room to breathe, and they will hire people, expand capital purchases, etc. Good show!

Yesterday, I was interviewed by Reuters for a story on dollar / yen... I was then quoted in a story that ran later in the day. I had said when I hung up the phone, that it would have been easier if the writer had just read the Pfennig that day! All I did was tell them what I had already told you in the Pfennig much earlier in the day! But... It was great to see my name in a national story anyway, eh?

OK... Getting back to Aussie and Kiwi... The Aussie Retail Sales report for August climbed .9%, erasing the -.9% loss in July! This report plays well with the recovery story and the thoughts that the Reserve Bank of Australia (RBA) will raise rates before year-end...

New Zealand saw their Employment Confidence Index climb to 103 last quarter, from 96.1, the previous 3 months... The report showed that 32.2% of companies surveyed, expected sales and profits to rise over the next 12 months... I know that doesn't sound like a resounding vote of confidence, but the previous number was 26%... So that's quite a jump!

Of these two, I expect The RBA to lead with the rate hikes, while the Reserve Bank of New Zealand (RBNZ) will drag its feet... They don't need the kiwi to start rising aggressively, as exporters in New Zealand are having a tough time now, with kiwi as strong as it is now!

Whenever the Commodity Currencies of Australia and New Zealand have good performances VS the dollar, the other Commodity Currencies get to play along... So that means the performances VS the dollar of Canada, South Africa, Norway, and Brazil have been good.

There is some risk in the currency markets today though... First, we have some data due, and second we have Fed Vice Chairman Donald Kohn, and European Central Bank (ECB) President, Trichet, due to speak today... Could this be more Central Bank parlance for propping up the dollar, that is seen as being on the skids again this morning? I think it just might... Especially, if Kohn doesn't mention that the Fed is going to keep rates at near zero for some time to come. If we don't hear that... Then I think the "con" is on to prop up the dollar...

But don't let that bother you too much... These guys can only affect the currencies for short periods of time with their verbal jawboning... After that, they need to walk the walk with coordinated intervention, if they're going to talk the talk!

Speaking of the data... We'll see the color of the 2nd QTR GDP, and the wild and wacky ADP Employment Change reports... The Chicago PMI (manufacturing for that region) will also show its colors... All of these are expected to show improvement in the U.S. economy... And, if the trading pattern remains in place... Any signs of improvement in the U.S. economy normally results in more dollar weakness!

So... In the end, the data inducing dollar weakness, might be offset by the Central Bank jawboning... In which case, we'll spend the day in a tight trading range for sure! But what happens if Kohn and Trichet, don't support the dollar in their speeches? Then it will all be up to the data!

This morning, Canada will print their latest GDP report... The forecasts are for a very weak report... I'm going to go out on a limb, yes it will be a big fat one to support me, and say that I expect Canada's GDP to surprise on the up-side... If so, the loonie would look to add to gains it already has booked this morning VS the dollar.

With the Commodity Currencies on the rise this morning, Gold has returned to $1,000! Gold remained below $1,000 for about 5 days, in which there were ample opportunities to buy the dips below $1,000...

And... As we close out the month and quarter, the Russian rate cut is all but forgotten about, which is exactly how I told you it would play out... The global recovery theme is back with a vengeance!

OK... I'm going to step up on the soap box now, so if you do not care to listen to another Chuck soap box rant, then skip ahead two paragraphs!

You know... We wouldn't be having these discussions about dollar weakness every day, if the Budget Deficits weren't piling up on top of other deficits... Hey! Remember when I used to take the previous administration to the woodshed for piling up $450 Billion dollar Budget Deficits? Well, that certainly seems to be but a drop in the bucket of the nearly $2 Trillion Budget Deficit that will post this year, and the forecast for $9 Trillion more in the next 9 years...

That all leads me to this... We need to express to our representatives in Washington D.C. that is very important, and the they should focus their attention on this first and foremost! I doubt that we'll ever get there again, but, wouldn't that be nice for our grand kids? I just don't understand why we go around spending money on this that and the other things, and don't ever stop to think about the immoral things we are doing to our future generations... I guess I mean to say that the "we" I'm talking about is not you and me! It's the knuckleheads in D.C... That is, other than Ron Paul, who seems to be the only person in D.C. that understands all this deficit spending...

Ok, down from the soap box now... You're free to move about the Pfennig!

To recap... Aussie and kiwi lead the currencies higher VS the dollar overnight, after each respective country printed a strong economic report, thus putting the global recovery thoughts back on track. We have data, and Central Bank speeches to navigate through today. The non-dollar currencies close a second consecutive quarter of gains VS the dollar, and Gold has returned to $1,000....

Currencies today 9/30/09: A$ .8835, kiwi .7220, C$ .9330, euro 1.4665, sterling 1.61, Swiss .9725, rand 7.4240, krone 5.7675, SEK 6.96, forint 183.90, zloty 2.88, koruna 17.1570, RUB 30, yen 89.50, sing 1.41, HKD 7.75, INR 48.11, China 6.8264, pesos 13.48, BRL 1.7870, dollar index 76.56, Oil $67.78, 10-year 3.31%, Silver $16.48, and Gold... $1,003.45

That's it for today... I had to take my car in for service yesterday, and they gave me a Grand Marquis to drive... Because of my mini-handicap, I have a difficult time getting in and out of a car like that... But what was funny was when my little buddy Alex came home and told me that it looked like a car that is given to a 16 year old by their grandfather to drive... HA! Hey! It's transportation! My dad drove a Crown Victoria, that's much like this car... As soon as I climbed in the car, I thought about him, and that car... That Tsunami that hit American Samoa sure looked deadly... Our thoughts should be with those people today... OK... Memo to Cardinals... Just because you clinched your playoff spot early doesn't give you the right to forget how to play baseball! Get back to work! And with that, I bid you farewell for today... Be sure to make today a Wonderful Wednesday!

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

G-20 Heats Up...

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

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

* 4 BRIC currencies: Brazilian real, Russian ruble, Indian rupee, Chinese renminbi
* High upside potential
* No market risk to deposited principal
* Low $1,500 minimum deposit

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

In This Issue..

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

And Now... Today's Pfennig!

G-20 Heats Up...

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Catching Up With Richard Duncan...

Chuck Butler — Wed, 23 Sep 2009 14:35:09 GMT

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In This Issue..

* Non-dollar currencies give back very little...
* The Unemployed are remaining unemployed...
* FOMC puts away the board games today...
* China invokes a "Public Morals" defense...

And Now... Today's Pfennig!

Catching Up With Richard Duncan...

Good day... And a Wonderful Wednesday to you! Well, the Fed Head put away the board games today, and make an announcement this afternoon... Yawn... Norway's Norges Bank will also make an announcement with theirs coming this morning. I still contend that the Norges Bank will keep rates unchanged and give a hint as to when their rate hike cycle will begin. If that were to happen as I think, then it would be very bullish for the krone...

Well! The non-dollar currencies held ground gained yesterday, giving back, oh-so-little to the profit taking. The euro didn't hold 1.48, but it's so close it could spit in the 1.48's back yard! The negativity toward the dollar, and all that goes with it, like Huge Deficit Spending, low yields, economic depression, inflation fears, and more, just keeps mounting... All these pundits with their "discovery" that the dollar has bad fundamentals, just make me laugh. Welcome to my world! In this world, we don't wear rose colored glasses... We call dolts for what they are... And we fully understand the bad affects of building deficits...

HEY! One of the first books I ever read about the dollar, was written in 1972, by a guy named Gerald Krefetz, called, "The Dying Dollar"... But, the one that really pushed things to the forefront in 2003 was Richard Duncan's "The Dollar Crisis"... For the longest time, when someone would ask me what book they should read to get started, I would give them Richard Duncan's "The Dollar Crisis"...

The Dollar Crisis was followed by two books by Addison Wiggin and Bill Bonner, "Financial Reckoning Day" and "Empire of Debt"... Addison also wrote "The Demise of Dollar", and then Craig Karmin wrote, "The Biography of the Dollar", in which he writes one chapter around my story... All of these have done a wonderful job of explaining things to people that normally wouldn't understand all that's going on, financially...

The reason I brought this up is that Richard Duncan was in the news last night, as he gave an interview in Hong Kong yesterday... Let's listen in to Richard Duncan...

"The bad news is at the end of a 10-year period we're still not going to have fixed the problem. Eventually it will lead to high rates of inflation well down the line and really destabilize things to the point where they may be irreparable damage. A kind of "Fall of Rome" scenario."

Of course Mr. Duncan was talking about the U.S. Budget Deficits, which he feels will continue to pile up in the next decade, eventually reaching an unsustainable level that may result in an economic collapse...

I think it would behoove us to listen to Richard Duncan, for in his book, "The Dollar Crisis" published in 2003, he told us that persistent Current Account Deficits by the U.S. were creating an unsustainable boom in global credit that was destined to break down, resulting in a worldwide recession... Hmmm... Does he have everyone's attention now? Good!

Ok... Enough of the "book tours"! I was listening to the Evening News while icing my knee last night, and something that Brian Williams said struck me as strange... He said..."The poll of more than 1,000 adults, taken within the past week, shows growing optimism that the economy has begun to turn around." Hmmm... I guess they didn't ask one of the 7.4 Million people that have lost their jobs!

I've got two things to talk about here with this... 1. is that people would be listening to Big Ben Bernanke which is where I believe this "optimism on the economy" is coming from... I have a YouTube video at home, that you can find, I'm sure, that's titled "Bernanke" that has shot after shot of him saying something that was so completely wrong, that you have to wonder how the heck he kept his job! Any way... I can't get to it here at work, you know they would never want me "wasting my time looking videos of the Fed Chairman!"

And then 2. is the question that I have regarding those people surveyed... How could they have optimism when 7.4 million Americans have lost their jobs during this depression (what they call a recession)... But that wouldn't be bad if these 7.4 million Americans turned around and found jobs right away, eh? Well... Unfortunately... The average duration of unemployment at 25 weeks is now the longest since the Department of Labor started tracking the data in 1948. By the end of August, nearly five million people had been unemployed for longer than six months...

Whew! Now that was a depressing piece... Hmmm... What can I talk about that brings the smiles back on everyone's faces? I've got it! Gold!

I was telling Jen yesterday that the commercials for Gold on TV are really starting to add up... You've got Gordon Liddy, Jay Johnson, and others telling you how Gold is a store of wealth, and inflation fighter, and more dependable than fiat currencies... And of course you should buy Gold where "they buy their Gold"! I really think we should have our own Gold commercial, and say, "yes, you can buy it from those other guys, but why pay more for your Gold?"! HA! Now that would get 'em!

But seriously... There is a guy, well known guy, out there right now, writing about how the price of Gold is about to collapse... So... At least you know that I give you both sides of the story, eh? I don't agree with this side of the story, but there it is for you!

OK, now we're back on the "happy tracks"! So, let's head to the South Pacific! New Zealand pushed out of their recession in the 2nd QTR, after seeing its economy contract for five consecutive quarters... Now, don't get too lathered up over this initial news... The New Zealand GDP only increased slightly less than 0.1%. But! That technically ends the nation's worst economic downturn in three decades.

This was very bullish for kiwi, as now the markets are beginning to talk about a rate hike in New Zealand... I would say that's a little premature, wouldn't you? I mean, they have barely climbed out of the red, and the talk turns to a rate hike? Yes, definitely... That's premature... But! The talk has kiwi on the rise... Let's hope that traders don't get disappointed too quickly!

And then back in the Eurozone... Germany's Manufacturing PMI came in less than forecast, but! Hit a 13-month high of 49.6! Still not above 50, but the trend is Germany's friend right now in the manufacturing sector! Tomorrow, we'll see the think tank IFO's Business Climate, and I truly believe this will be strong, and these two together, strongly suggest that the euro is trading at a proper level!

I'm still waiting for news from the Norges Bank...

I read some real disheartening news last night regarding foreclosures in the U.S. It seems that they are really backlogged... As of July, mortgage companies had not begun the foreclosure process on 1.2 million loans, according to LPS Applied Analytics. Also, 1.5 million seriously delinquent loans were still caught up in the foreclosure process... Hmmm... You don't think the processing of these foreclosures are being held back by someone do you? I mean, what better way to get people "feeling good again" than to not have them hear "bad news"...

OK, that's just the conspiracy blood in me... Sorry...

Things have been quiet in Japan since the election... And the Japanese yen has range traded... Waiting for a direction from the new Gov't... What will they do? Will they promote growth? Will they continue to authorize intervention to keep the yen weak? Lots of questions here in Japan...

I had a reader send a note that made me chuckle... He asked if the Chinese were going to sell Treasuries to buy the IMF's Gold... He called it... "junk for Gold"... HAHAHAHAHAHA!

Speaking of China... Have you noticed that the renminbi has ever-so-slightly gotten stronger VS the dollar? This is micro-moves... But, "moves" nonetheless! And not weaker!

Further with China... Did you see where China was arguing their position in the World Trade Organization (WTO) regarding not allowing Hollywood Movies, and other Western media into their country? The Chinese invoked a defense of "Public Morals"... We'll have to keep an eye on that to see how that turns out!

I'll come back to North America, before I head to the recap and Big Finish...

Yesterday, I told you that Canadian Retail Sales was the only "real" data to print that day... Well, I might as well, tell you what printed, eh? Canadian Retail Sales backed off the consecutive gains of 1.1% in May and June, and posted a negative -.6% in July... This won't do anything to get the Bank of Canada off their duffs... However, one would have thought that data like this would hurt the currency, in this case the loonie... And it did... But only for a short time... The loonie is back on the rally tracks this morning!

OK... So... The FOMC ends today, we're still waiting for the Norges Bank's announcement, and the dollar is holding on for dear life! The negativity toward the dollar has returned, and Richard Duncan gives us his latest forecast...

Currencies today 9/23/09: A$ .8740, kiwi .7250, C$ .9365, euro 1.4780, sterling 1.6440, Swiss .9775, rand 6.8250, krone 5.8225, SEK 6.83, forint 183.50, zloty 2.8275, koruna 17, RUB 30, yen 91.30, sing 1.4125, HKD 7.7505, INR 48.02, China 6.8261, pesos 13.35, BRL 1.7925, dollar index 76.14, Oil $71.15, 10-year 3.47%, Silver $17.13, and Gold... $1,014.45

That's it for today... Cardinals' magic number is now 2... This will be their 7th trip to the playoffs in since the 2000 season... That is if they win 2 more games! That's a nice run! I forgot to mention above that Addison Wiggin also wrote an update to the Demise of the Dollar book, for which I wrote the foreword! One of these days, when I retire, maybe I'll sit down and write a book.... And then, maybe not! Probably not! We've had a visitor this week to the trading desk, Megan Davis, is here from our Islandia office... We've been on our best behavior for her too! Our little Christine surprised everyone yesterday, and brought in coffee drinks for the coffee drinkers... She brought me a decaf, as I really try to not partake in caffeine drinks any longer, except... When I'm camping! OK... Enough of that, let's get to work, and make this a Wonderful Wednesday!

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

The Euro Bounces...

Chuck Butler — Fri, 18 Sep 2009 14:19:00 GMT

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

* 4 BRIC currencies: Brazilian real, Russian ruble, Indian rupee, Chinese renminbi
* High upside potential
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Don't miss this unique opportunity. Deadline to buy the BRIC MarketSafe CD is Oct. 13, 2009. Apply today or learn more at http://www.everbank.com/001CertificatesMSBRIC.aspx?referId=11808

In This Issue..

* Profit taking brings currencies back..
* A Love/ Hate relationship with kiwi...
* Stimulus isn't the same everywhere!
* AA drops a bomb on us in St. Louis!

And Now... Today's Pfennig!

The Euro Bounces...

Good day... Ahoy Mates! And a Happy Friday to one and all! Tomorrow is "Talk Like a Pirate Day" officially... But, since we all like Pirates (not today's so-called Pirates), we decided that we would celebrate it today! Get your eye patches out! We're that kind of fun group, eh? So... If you want to play along, you can go to this website and get your Pirate name! http://www.piratename.net/

OK... Well, it is Friday, and with that comes the end of a very long week for yours truly, and one that I hope ends early today, so I can go home and get my feet up! Until then though, you have me here to swab the decks, and hoist the sails!

On our Tub Thumpin' Thursday, we saw the non-dollar currencies gain more ground VS the dollar during the day, as the euro bounced off of 1.47, and went to 1.4755 at one point in the day. Overnight, the dollar rebounded and when I turned on the screens this morning, the euro had just dipped below 1.47 to 1.4688... But again, it looks like 1.47 is a bouncing point, as now the single unit has pushed to 1.4710... I know that sounds like it's pretty ridiculous to talk about such small moves, but I wanted to point out what seems to be resistance in the 1.47 region...

Yesterday, I told you that I was going to do some additional research into the TIC's data that showed a Net Total TICs at -$97 Billion for July! OUCH! The only thing I could really find was some stuff by a "Mr. Obvious", that said that foreigners sold Treasuries in July...

OK... But that's important, because... The Fed knowing this happened, long before we did, saw yields climbing and that's when they stepped in and bought that 7-year auction piece that I told you all about a month or so ago... The Fed Heads bought the piece of Treasuries from the Primary Dealers to support the market, and accomplish two things... 1. to make the auction look good, and 2. to keep rates artificially low... The made their goals... But at what cost? We all know what the cartel, I mean the Fed is up to, and it kind of takes the shine off of them, eh?

I was reading some stuff on the internet last night, when my beautiful bride came home, and asked me what I was reading... I told her that if I were a first time investor, I would be so confused... I showed her one story that said "euro ready for correction VS dollar", and then one two stories below it that said, "dollar set to slide further"... I mean, that's confusing, right? And then letting me know that after all these years of hearing me, but not listening to me, she surprised me, and said... "But that's good right? Not everyone is on the same side of the trade" WOW! I was smiling like a Cheshire Cat!

This morning, there's not much difference in the stories on the screens VS last night... One says "Euro may strengthen to Sept 2008 high on Technicals"... And another says "Euro may be set for correction, per Bank of Tokyo"... Basically, I agree with both! The important thing here is that the second story says "Euro MAY be set for correction"... It doesn't say it WILL! And that's what I've been talking about lately... The feeling that risk assets, led by stocks, have gone too far too fast, and a correction could be forthcoming which would take an adverse affect on the currencies and Commodities. But... We've seen these things go like this before, right? It's just like everything else in life... Something goes too far one way, it corrects and goes too far the other way! Never, right in the middle, where everyone would be happy...

I did see the text of an interview with Black Rock's CEO, Fink... He said that "the dollar is a better long-term store of wealth"... Ahem... Hold on a second, I'm choking... Store of wealth? Wait, we're talking about the dollar, right, not Gold? The dollar which has lost 95% of it's purchasing power since the cartel took over in 1913? That dollar? Ok, if you say so! But I'm not buying it!

You know, New Zealand dollars, or kiwi, as traders call it, gets put into the "high deficit crowd corner" by me all the time... I love kiwi, and always have, but kiwi is sort of like that kid that keeps getting into trouble... You love 'em... But they keep trying your love! That's how kiwi is for me... I've always said I can't bang on the U.S. for having high deficits, and not bang on New Zealand... But, here we are with kiwi set to complete its longest set of weekly gains since 1999! And is the leader of the pack, when it comes to currencies in the industrialized countries, with their performance this year...

Here's my thought on what's going on here... Right now, investors all over the world are looking for yield, and they are not going to find it in the U.S., U.K., Eurozone, Japan, and so on... They can find it in New Zealand, Australia, Brazil, and South Africa... So... You then look at these and say "Brazil and South Africa are of the speculative nature", and then between Kiwi and Aussie, kiwi has the better yield... And fundamentals like deficits are thrown out the window... And once again, you're standing there, and the kiwi bus is heading right for you... What are you going to do, just stand in front of this bus?

British pound sterling took a blow to the mid-section after the Wall Street Journal printed a story entitled, "A New Carry-Trade Currency?" And then went on to describe why pound sterling would be a good funding currency for a revival of the Carry Trade... Hmmmm... Personally, I think the U.S. dollar would be even better, given the fact that there are so many dollars floating around, that it wouldn't be difficult to find dollars to borrow, when you sell them short!

Gold is finding it to be a tough row to hoe, getting past $1,018... We need to keep an eye on this today... The IMF Executive Board is meeting to discuss selling 1/8th of their Gold. Doesn't sound like much, eh? Well, think again... With the IMF holding the number 3 position of official largest holders of Gold, 1/8th of their holding would be equal to about 13 million ounces of Gold!

Hello, China? Are you ready to buy? Speaking of which, Aaron was telling me yesterday of a story he was reading, that described the Chinese Gov't's efforts to get the Chinese public to buy Gold... One comment to the writer was from a Chinese citizen that said something about that the U.S. keeps telling their people to buy stocks, and my country keeps telling us to buy Gold... No question as to who has the best interests of the citizens in mind...

Speaking of China... I keep reading stories about China telling lies about their economic growth... Hmmm... I mean it's Government stimulus growth, but it's there! I've said this before, but as a Communist country they were able to direct where the stimulus went, and how it was to be used... And the other most important difference between China's stimulus and ours is the fact that China has a war chest of reserves to spend... The U.S. didn't!

So... Anyway... Chinese growth, no matter how they get it, is good for the global economies, so don't look gift horses in the mouth... I think that's how it goes!

The Indian rupee has really been on a positive run in the past month... The rupee has gone from 49 and change to 48.10... In percentage terms it's not much, just 1.5%, but the trend looks good... My friend and former colleague, Ashish Advani, is very bullish on rupees...

On the data front... Yesterday, we saw Housing Starts print a modest rise of 1.5% in August... And the Philly Fed Index (manufacturing) hit a high that it hasn't seen since June of 2007! But before we throw our hats in the air, let's remember that this is all Government stimulus... As witnessed by the 6-month forecast component of the report, which actually fell! The reason the 6-month forecast component would fall, is that is about the time table for removal of the Government stimulus...

And before you get all huffy, and start to pound the keyboard writing a reply to me, asking me how the Chinese stimulus is different from the U.S. stimulus... Go back up a few paragraphs and re-read...

Today's data cupboard is empty... Which means... That the currencies will get their direction from stocks... That's been the trading pattern for several months now, and one that I don't agree with, but, as I said above with kiwi... Am I going to stand in front of that bus? NO! Asian stocks were sold overnight, while European stocks are stronger this morning, so there's no real direction that can be found there. So, we'll just have to wait-n-see, eh?

Before I go to the recap and Big Finish, I want to vent... We received a notice from American Airlines yesterday, announcing a long list of destinations from St. Louis, that they are going to drop next year... (the Gap Band did a song that fits here... You dropped a bomb on me...) This list is long! And will really put a damper on my ability to travel places to speak! But that's not the only reason this upsets me... The other reason, goes back to when American Airlines (AA) was trying to buy the hub Airline here in St. Louis, TWA... AA talked about keeping St. Louis a hub, blah, blah, blah... And now this... Oh well, in our new building, we'll have the ability to do live video feeds from our studio, so... I'll be able to speak but on a video screen! HA!

OK... It's Friday, with no data to look at, and the currencies are weaker than they were yesterday afternoon, but the euro seems to bounce off 1.47, at least for now that is!

Currencies today 9/18/09: A$ .8690, kiwi .7105, C$ .9330, euro 1.4710, sterling 1.6360, Swiss .9710, rand 7.44, krone 5.88, SEK 6.8875, forint 184.50, zloty 2.8150, koruna 17.06, RUB 30.27, yen 91.30, sing 1.4150, HKD 7.75, INR 48.12, China 6.8278, pesos 13.26, BRL 1.8050, dollar index 76.41, Oil $71.69, 10-year 3.40%, Silver $17.17, and Gold... $1,013.87

That's it for today... So, it's Talk Like a Pirate Day! My Pirate name is: King Lyan Hambrick... It's good to be King! HA! It's a Card and Cubs weekend here in St. Louis... I had tickets to tomorrow's game, but found out that game was the same time as my little buddy's football game! UGH! So, I put the tickets in a hat for a drawing here on the desk, and our little Christine won them! So... You had better bring home a winner tomorrow, Christine! My beloved Missouri Tigers play tomorrow too about the same time! Double UGH! But I'll record that game and watch it later... That is as long as they win! OK... Time to tie this up and put a bow on it for today and this week... Gotta go get my ice pack, and start work... I hope you have a Fantastico Friday, Talk Like A Pirate Day, and Wonderful Weekend!

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

Risk aversion disappears again...

Chuck Butler — Mon, 20 Jul 2009 16:08:10 GMT

...But First, A Word From Our Sponsor...
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* 4 BRIC currencies: Brazilian real, Russian ruble, Indian rupee, Chinese renminbi
* High upside potential
* No market risk to deposited principal
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Some experts believe these 4 countries may become economic powerhouses in coming years. Now could be the right time to add these currencies to your portfolio. And you can do so-safely-with the U.S. denominated MarketSafe BRIC CD.
Don't miss this unique opportunity. Deadline to buy the BRIC MarketSafe CD is August 18, 2009. Apply today or learn more at http://www.everbank.com/001CertificatesMSBRIC.aspx?referid=11808
.........
In This Issue..

* Risk aversion has left the building...
* CIT survives without Fed help...
* SNB tries to fight the markets...
* Light week for US data...

And Now... Today's Pfennig!

Risk aversion disappears again...

Good day... We had just an amazing weekend of weather here in St. Louis, and this morning is shaping up to be another beautiful day. Friday turned out to be a beautiful day for those who have taken our advice and diversified their holdings out of the dollar. Risk aversion was placed on the back burner again, and investors moved money back out of the dollar into higher yielding currencies. The dollar and yen got sold but all other currencies rallied, and investors also turned back toward gold pushing the metal above $950 for the first time in over a month.

So what caused all of this confidence? First, the housing data released Friday morning in the US showed a slight pick up in both building permits and housing starts. While the housing markets have a long way to go, the data have given investors an indication that construction may have found a bottom. Not to throw cold water on investors confidence in the building numbers, but while the residential market may be bottoming out, the commercial market continues to tumble. I spoke to a good friend over the weekend who is a commercial real estate developer down in Memphis. He told me that his development pipeline has completely dried up, and even the brokerage side of his business has slowed. The only part of his business which has picked up is the marketing of foreclosed properties. He has shifted his concentration to helping banks and lenders 'work out' of commercial projects which they have taken back onto their books. The economy has kept most companies from opening new stores, and many continue to shut down under performing ones. My good friend tells me most of the people he talks to don't believe the commercial real estate market will turn around until the end of next year. Not good news for the banks who are still reeling from the residential real estate bust.

But I digress. Investors weren't focused on the commercial real estate market on Friday, they were just happy to see a possible bottom in the residential sector. Their confidence was boosted further after rumors spread that CIT would likely be saved from bankruptcy. Sunday these rumors were confirmed as it was reported that the CIT Group board had reached an agreement with bondholders that should keep the struggling business lender out of bankruptcy court. According to the Wall Street Journal, the deal won't permanently fix the company, but it buys time for the lender to restructure itself.

We have blasted the administration in the past for the way they are handling the economy, so to be fair I will have to give them kudos for the way they handled the CIT meltdown. Instead of throwing good money after bad (the taxpayers have already given CIT $2.23 billion of TARP funds), Geitner and Bernanke passed on an AIG type bailout, and even stayed away from arranging a Merrill Lynch style 'shotgun wedding'. Instead, they did exactly what they should have done and let the markets rescue CIT. It is still yet to be seen if the restructuring will ultimately work, but it is good to see the private capital markets are being left to their own accord, without intervention by the Fed. (Yes, I know the Fed is still involved, but not AS involved as they could have been!!)

The Euro climbed on Friday on some good economic reports. It was reported early Friday that Europe posted a trade surplus for a second month in a row. May's trade surplus rose to 800 million euros as exports fell less than imports. The data add to evidence that commerce with the rest of the world will likely pull the Euro region out of the recession. Another report showed German producer prices fell at the fastest rate in more than 40 years last month as energy costs declined and demand weakened. The June decline of 4.6% from a year earlier was the biggest drop since December 1968. Lower producer prices are a good for the European economy where industrial production rose for the first time in nine months in May and manufacturing orders in Germany increased the most in two years.

The rally by the Swiss franc was dampened by intervention as the Swiss National Bank sold the currency to halt its rise. The sales, which occurred over the past few weeks, were the SNB's first solo currency market interventions since 1992. While they have been able to beat back the currency markets for now, the SNB doesn't have deep enough pockets to fight a long protracted war against the currency market. As Chuck has pointed out several times in the past, intervention can move the market in the short term, but it takes a very large amount of reserves and an iron willed effort to fight the longer term trend. The Swiss franc will likely keep pace with the Euro, as both gain vs. a falling US$.

As investors regained their confidence, the higher yielding currencies of Australia and New Zealand advanced. Both currencies moved up over 1.5% vs. the US$ and hit the highest levels in two weeks vs. the Japanese yen. The Canadian dollar also rallied, completing its first five-day increase since May. A run up in crude oil helped strengthen the loonie by over 4% vs. the greenback last week.

Chuck is waking up in Vancouver this morning, his favorite city located north of St. Louis. While he spent most of the day yesterday traveling, he was able to send me the following from David Rosenberg, who is usually pretty good with his thoughts....

"It is the second anniversary of the credit crunch and after all of the fiscal and monetary policy initiatives, the best we get are "green shoots" and now that story is getting stale. Go back two years and you will see that the Fed Funds rate was 5.25%, Today it is zero. The fiscal deficit was 2% of GDP two years ago. Today it is 13%. Mortgage rates were 6.5%. Today they are 4.7%. Homeowner affordability with all the government measures is 70% stronger today than it was then too. The Fed's balance sheet then was $850 Billion. Today it is bloated at $2 Trillion. The government has tried just about everything. Or has it? What if we were to tell you that the one policy tool that is unchanged since the summer of 2007 is... The U.S. dollar? It is exactly the save level now, on any trade-weighted measure, as it was back then. The greenback is struggling at the 50-day moving average, and this could well be the next policy shoe to drop... "

David makes an excellent point. In spite of all of the negative numbers with regard to the US economy, the value of the dollar is basically unchanged over the past two years. This is bound to change, as US policy makers will have to let the dollar fall in order in the face of rising inflation and skittish foreign investors. As we have repeatedly pointed out, the administration has three choices with regard to the tremendous debt load which has been built up in recent years. 1) They can increase revenues (yes, they are increasing taxes, but these increased taxes are already spent on the new health care program). 2) They can decrease expenditures (big government is back, expenditures aren't going to fall anytime soon!). 3) They can let the dollar fall in order to pay back the debt with cheaper dollars (the most likely scenario!!).

As always, we encourage you to protect yourself from the eventual drop in the value of the dollar by diversifying your investments into other currencies and gold or silver.

We start what looks to be a pretty light week of data here in the US with the Leading Indicators index which will be released later this morning. This is the Conference Board's gauge of the economic outlook for the next three to six months and is expected to show an slight increase. If so, it would be the first time the index has shown three consecutive months of increases since 2004. But even those that are expecting the index to show another rise are preaching caution. Most economists believe that even if the index indicates the recession is ending, recovery will be slow. High unemployment and cautious consumers will keep the US economy under pressure.

After today, the markets will have to turn their attention to the weekly jobless claims to be released on Thursday as tomorrow and Wednesday will only bring the ABC consumer confidence number and MBA Mortgage application data neither of which are closely watched. We will also get more data on the housing market on Thursday with the release of Existing home sales data. Friday will close the week out with the U of Mich confidence number. As I said, should be a rather slow week on the data front. Now on to the currency wrap-up:

Currencies today 7/20/09: A$ .8113, kiwi .6535, C$ .9057, euro 1.4216, sterling 1.6522, Swiss .9366, rand 7.9646, krone 6.3411, SEK 7.7407, forint 192.16, zloty 3.0236, koruna 18.1879, yen 94.61, sing 1.4399, HKD 7.750, INR 48.255, China 6.8320, pesos 13.26, BRL 1.9261, dollar index 78.92, Oil $64.74, 10-year 3.69%, Silver $13.7175, and Gold... $952.98

That's it for today... As I said in the opening paragraph, the weekend weather was just phenomenal here in St. Louis. I competed in another triathlon yesterday, and did ok; not a personal best, but ran through some pretty bad leg cramps. Congratulations to my training partner, Matt B. who ended up the overall winner. And a big congrats goes out to Tom Watson, who just missed an 8 foot birdie put to become the oldest person to win a major. It is an inspiration when a guy almost double the age of his competitors can go out and beat all but one! Hope everyone has a great start to your week and a Marvelous Monday!!

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

Currencies Rebound...

Chuck Butler — Wed, 15 Jul 2009 14:24:59 GMT

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In This Issue..

* Goldman posts a nice profit...
* I smell a rat!
* Euro nears the 1.41 mark... Again!
* Gold manipulation?

And Now... Today's Pfennig!

Currencies Rebound...

Good day... And a Wonderful Wednesday to you! Another All-Star Game, another win for the American League... I truly believed that with Tim Lincecum going for the National League, that we would win this year... But that didn't work out... I did truly enjoy the game though, and got to experience it with sons, Andrew, and Alex, with Darling Daughter Dawn's husband, Jerry... A truly memorable night...

The currencies slowly moved a bit higher yesterday, and the euro is back to 1.40 this morning... The move came as stocks rebounded some, after reports of a better than expected earnings report for Goldman Sachs. Hmmm... Now, doesn't that just tick you off a little? Here's Goldman Sachs who just months ago, changed to a Bank Holding Co, so it could take TARP money, then paid it back a month ago, and now, prints a Moon Shot profitable earnings report... I guess I should be happy for them... Unfortunately, I smell a rat...

It's as if the Risk Aversion crowd just took their dollars and yen and went home! They are nowhere to be found this morning! The euro is pushing toward 1.41 again, which... Lately has been a tough row to hoe for the euro... Every time it gets close to 1.41 or even past it, albeit briefly, it comes back... So, it will be interesting today to see if the euro can add to the overnight gains.

The negativity toward the U.S. dollar and the so-called green shoots is really building steam once again.

We saw Retail Sales for June yesterday... The "experts" believed the report would print at a positive .4% gain, following up May's .5% gain... And that's exactly what it did! Just goes to show you that no matter how many people are unemployed, and how bad the recession / depression is... Consumers still spend! And that's what makes the world go around, as my dad used to say! The Butler Household Index (BHI) was a little fuzzy this month, as I haven't exactly seen the shopping bags come into the house, but I have a funny suspicion that they were there! Lots of UPS Deliveries for sure! So... The BHI believed that June Retail Sales would be probably better than expected... ( I wrote that yesterday when I thought Chris had bailed on me... Only to find out he had already written the Pfennig! UGH!)

The German Economic Sentiment, as measured by the think tank, ZEW, printed weaker yesterday for the current month... This report had trended upward in recent months, but with the recent loss of momentum in stocks, you can understand the reason for the weaker print.

And down under... Reserve Bank of New Zealand (RBNZ) Gov. Bollard, gave a speech Tuesday night, that, as far as I'm concerned pretty much drives the final nail in the New Zealand rate cut coffin... Bollard's speech was titled, "Savings, Investment, Funding Markets Are Key To Recovery." In the speech, Bollard really made a point of expressing his fear of reigniting the housing market... Therefore, I was sure after reading the speech that the RBNZ will NOT cut rates further, since the Gov. fears reigniting the housing market! And... We all know, even if Big Al Greenspan still doesn't admit to knowing, that those low interest rates ignite housing bubbles!

You know, I just won't let Big Al Greenspan off the hook will I?... NO! Never! You can't make me do it! Pink Floyd said that money is the root of all evil today... But... I believe that Big Al Greenspan is the root of all evil today!

OK... On to other things!

There are reports this morning of a major earthquake hitting New Zealand... 8.2 magnitude, I believe I heard... If so, it would cause a short-term loss for kiwi, but afterward, it would probably be a springboard for the currency, given the re-building needed... More importantly though, I truly hope this isn't as bad as first reported and that there isn't any loss of life.

Aussie dollars are back to 80-cents again this morning... I'm sure there was some moves from kiwi to Aussie on the earthquake news...

Chris talked a bit about this yesterday, but I thought it was very important to give it to you again...

With three months left to go in the budget year, the U.S. government's deficit has hit an all-time high of $1 trillion. The Congressional Budget Office predicted that by the end of the year, the deficit will be 13% of the country's GDP. That compares with a recent high of 6% of GDP in 1983 during the Reagan administration and 30.3% in 1943, when the U.S. spent a huge amount of money to fight World War II. OUCH! But, that's nothing folks! This budget Deficit is going to get larger and larger! And IF all the beans are counted... This will be quite ugly!

But, that just means more supply of Treasuries that will have to get auctioned folks... More and more... And it just scares the bejeebers out of me, what will take place...

OK... Before I go to the Big Finish... I want to talk to you about two things that hit the newswires yesterday... I get a lot of flak from some readers whenever I talk about the direction the U.S. Gov't is taking our "republic"... But that doesn't stop me, no sirree Bob!

Here's the first one...

Increased taxes for households with an annual income of more than $350,000 could pay for an overhaul of the U.S. health care system, according to a plan supported by House Democratic leaders. Proposed measures include a 5.4% surtax on couples earning more than $1 million a year. Charles Rangel, chairman of the House Ways and Means Committee, said the wealthiest Americans were singled out to pay the extra taxes because that option imposes "the least amount of pain on the least amount of people."

I guess it all depends on who you are talking about with regards to people experiencing pain!

And then there was this...

U.S. government officials are weighing a plan that would let borrowers who have fallen behind on their mortgage payments avoid eviction by renting their homes instead, sources familiar with the administration's thinking said on Tuesday.

Under one idea being discussed, delinquent homeowners would surrender ownership of their homes but would continue to live in the property for several years, the sources told Reuters.
Officials are also considering whether the government should make mortgage payments on behalf of borrowers who cannot keep up with their home loans, tapping an unused portion of a $50 billion housing aid kitty.

As part of this plan, jobless borrowers might receive a housing stipend along with regular unemployment benefits, the sources said.

Remember the famous line by President Reagan when he said the scariest words someone could hear... "I'm from the Government and I'm here to help"...

I see that Gold has finally shown some life this morning, adding $12 overnight... A reader sent me a link to a story about the manipulation of the Gold price, which I truly believe has been going on for years, but keep it in my back pocket only to bring out when it makes sense to do so... Here's a snippet of the report by GATA (Gold Anti-Trust Action Committee Inc.)

New York and Tokyo commodity exchanges have been permitting their gold futures contracts to be settled not in real metal but in shares of gold exchange-traded funds (ETFs). This essentially allows the gold shorts (and the exchanges themselves, which guarantee futures contracts) to transfer their obligations to third parties that may not have the metal they claim to have and that, in any case, are operated by the investment banks running major short positions in gold.

Thus it is likely that the paper claims to the world's supply of gold are greater than even GATA has suspected -- that the gold supply is even more oversubscribed and that "paper gold" is being created at an ever more frantic rate to suppress gold's price.

OH BOY, now that should stir up the drink, eh?

Currencies today 7/15/09: A$ .8030, kiwi .6475, C$ .8910, euro 1.4090, sterling 1.6450, Swiss .93, rand 8.1550, krone 6.3965, SEK 7.7820, forint 193.75, zloty 3.0425, koruna 18.38, yen 93.60, sing 1.4515, HKD 7.75, INR 48.60, China 6.8317, pesos 13.66, BRL 1.9460, dollar index 79.41, Oil $60.50, 10-year 3.50%, Silver $13.34, and Gold... $936.95

That's it for today... A late night for yours truly, got me into work later than usual this morning, thus the lateness of the Pfennig! There was a very interesting moment in the pre-game ceremony last night, that took me by surprise... It occurred during the talks by the past Presidents... I was also very disappointed in the way our Greatest Cardinal, Stan, the Man, Musial was presented... This was our chance to show the world what an unbelievable talent he was on a ball field, and off the field as a gentleman... We blew it! Can't go back and correct it now! A great moment by our catcher, Yadier Molina, getting a two-out RBI hit... And some spectacular defense by all-world player, Albert Pujols, but after a first inning error. UGH! OK. It's over... The All-Star week is over... Time to go to Vancouver! See you there! Wait, I don't leave until Monday! OK... Then let's make this a Wonderful Wednesday!

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

The U.S. Treasury Moves The Goal Posts...

Chuck Butler — Wed, 01 Jul 2009 14:33:01 GMT

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In This Issue..

* A 4-day rally gets stopped at the border...
* Home Prices fall at a -18.12% pace...
* Alice Rivlin gives her 2-cents...
* Kiwi bond maturities galore next month...

And Now... Today's Pfennig!

The U.S. Treasury Moves The Goal Posts...

Good day... And a Wonderful Wednesday to you! As tradition with the Pfennig would have it, here's my introduction to July... There I was... On a July morning... Looking for love... With the strength of a new day dawning, and... The beautiful sun...

Yes, for those "old rockers" from the 70's like me... That's Uriah Heep, at their best!

OK... So, welcome to July! The last day of June was quite the volatile one to say the least! There we were waiting for the S&P/CaseShiller Home Price Index to print, and show that home prices were still down by quite a bit, when it did, it did, it printed at -18.12%... But! The media was all over that like a cheap suit, clamoring that the spiral down in Home Prices had come to and end! Which, may be true... But wouldn't you want to wait to see if next month's report confirms it? And... By the way... Since when does -18.12% fall in home prices beckon a rally? Yesterday, would be that answer!

So... The currency rally that was going on for a 4th day, was quickly wiped out, Ventures style... What? Don't know who the Ventures are? Boy, you really missed a lot of great instrumentals! Any way, the euro sunk like the Titanic from a level of 1.4130 to 1.40... The iceberg that caused this mess was simply the fact that traders, etc. believe the U.S. is on its way out of this mess... Of course, they must not be Pfennig readers, because... They would have read yesterday how I detailed the monthly numbers and showed how even with the spiral down in Home Prices ending, it would take until 2011 before the Home Prices got back to zero!

But NOOOOOOO!!!! They couldn't read it until late yesterday afternoon, because... Houston, we had a problem, with the Pfennig's delivery yesterday... See, how I've mellowed? I'm not even going to rant about this... Instead, I'll just remind everyone that whenever the Pfennig doesn't show up in your email box, you can most likely find it to read on the Pfennig's website, where you can view that "glamour shot" of me, and archives of the Pfennig! You can find it here: www.dailypfennig.com ---- Hope that helps!

OK... Well... After the thrill is gone, and the dust settled on all that yesterday, the euro is leading the other currencies higher once again... Here are a few things that have caused a sell-off of the dollar overnight once again...

Not that I'm a fan of his... In fact, I don't really care at all... But George Soros, normally has some interesting things to say, that end up being bang on... So here are a few one liners from a speech by George Soros yesterday... I believe this sounds very much like the things I tell you, have told you, and will continue to tell you...

SOROS SAYS SEES A "STOP-GO" ECONOMY GOING FORWARD
SOROS SAYS SELF-CORRECTING MARKETS IS A MISCONCEPTION
SOROS SAYS INFLATION FEARS WILL DRIVE UP RATES AS MARKETS REVIVE, CHOKING OFF GROWTH
SOROS SAYS CURRENT SUPER BUBBLE MADE POSSIBLE BY PAST INTERVENTION, EFFORT TO RESOLVE PREVIOUS BUBBLES
SOROS SAYS FORMER FED CHAIRMAN GREENSPAN REFUSED TO ACCEPT RESPONSIBILITY FOR STOPPING BUBBLES

And then there was Alice Rivlin, she of former Budget Director, and former Fed Reserve member, fame, had a few things to say to the House Budget Committee... Good stuff, but you have to wonder if anyone was paying attention! Here's Alice!

"The long term budget outlook: impending catastrophe"

"No one needs to remind this Committee that the outlook for the federal budget is worrisome indeed, scary. Long before the financial crisis and the current deep recession, this Committee was anxiously pointing out that current federal spending and revenue policies are on a risky, unsustainable course. Promises made under the major entitlement programs (especially Medicare and Medicaid) will increase federal spending rapidly over the next couple of decades, as the population ages and medical spending continues to rise faster than other spending. Federal expenditures are projected to grow substantially faster than revenues, opening widening deficit gaps that cannot not be financed."

Hmmm... Sounds like me too! Is this "sound like Chuck day?" HA!

OK... Enough of all that, I don't want anyone to get hurt, and I should have told everyone to put away the sharp objects before reading!

In other data yesterday, Consumer Confidence took a step backward, and fell in June to 49.3 from May's figure of 54.8... Maybe those that were surveyed has just read Alive Rivlin's talk to the House Budget Committee! Seriously though, this was a surprise, given the fat that the DOW gained 838 points in the 2nd QTR! At least, that's what the Wall Street Journal said!

Today, we get a truckload of data starting with Challenger Job Cuts, and the ADP Employment Change. Those are followed by the ISM Manufacturing Index, Construction Spending, Pending Home Sales and Vehicle Sales... Not a lot of "major" data prints, but still stuff to check the pulse of the economy.

I was talking to my good friend, and an economics professor at a prestigious University, yesterday, and she mentioned that "this piece of data is questionable as to the inputs"... I said to her... "What piece of data isn't questionable these days?"

OK... The "demand for high yield" was put on hold yesterday... But it will return, or at least I should say I think it will return... I don't know for sure to say "it will", so had better make the legal beagles happy... That's funny! To say that they would be "happy" with me... They cringe, and get very uncomfortable every day when they read the Pfennig! HA!

But you know me... I'm just trying to provide Market Commentary, and other things that I think are important, well, important to me that is!

Like... A long time reader sent me a note yesterday, and said, "hey Chuck, did you see the story in the Wall Street Journal (WSJ) on Foreign Demand for Treasuries?" Well, I hadn't and went immediately to the WSJ, and there it was... Tucked away in a corner so that no one would see it, if they weren't looking for it... A story, by Min Zeng, titled, "Is Foreign Demand As Solid As It Looks?

These are the things that really TICK ME OFF folks, so stay with me on this... Basically, as we all know the U.S. Treasury Auctions have been getting "covered" easily recently... And foreign demand was listed as the reason... Which would have been the exact opposite of what I was saying about foreigners shying away from Treasuries...

Here's the skinny... But I'll let Min Zeng tell it, since he did the research and brought this to the public, even though it was tucked away so no one would notice!

"But in a little-noticed switch on June 1, the Treasury changed the way it accounts for indirect bids, putting more buyers under that umbrella and boosting the portion of recent Treasury sales that the market perceived were being bought by foreigners.

The new definitions are deep in the arcane world of Treasury auctions. The change involves buyers who place orders through primary dealers. Those had been counted as direct buyers, but as of June 1 they were classified as indirect buyers, making that group larger than before. Because investors view that group as being dominated by foreign buyers, they assumed foreign demand was higher."

>>>> OK, back to me... Ahhh, so that's what's going on... The Treasury "moved the goal posts on us"... As Sylvester would say... That's despicable! Why isn't someone in Washington D.C. shouting from the roof tops about this? Oh, that's right, they're all in cahoots!

This is HUGE folks... So... When the markets were thinking that foreign demand was increasing, it was actually, as I had said, shying away from Treasuries! Which, if the market participants are thinking that as long as foreigners are "buying into our deficit spending" then the dollar will be on terra firma, but instead are getting "duped" by the U.S. Treasury, you would think that someone would have some xplainin to do... Right Lucy?

And here's another thing that just ticked me off when I read it this morning... Recall, last week I told you about how someone in China was dissing the talk that China's stimulus was working, and that China would not be recovering, which sent the Aussie dollar to the woodshed until this news had passed? Well... Talk about egg on their face! Here's the skinny...

China's manufacturing expanded for a fourth month in June... The official Purchasing Managers' Index rose to a seasonally adjusted 53.2 in June from 53.1 in May... And just like here in the U.S. any reading above 50 is thought to show manufacturing is expanding... The manufacturing index in the U.S. is around 44, so... We DO have the tale of two economies...

In one corner, we have the Chinese who have spent about $585 Billion worth of renminbi in stimulus, and are seeing the results... Whereas in the other corner we have the U.S. who have spent... More money than you can shake a stick at, and are not seeing green shoots like they "think they are", instead they see dandelions, and weeds!

And the currencies of Australia and New Zealand have responded positively to this news from China...

And since I'm talking about China, might as well check on the other members of the BRIC's (Brazil, Russia, India and China) Brazil's real just posted its best quarterly performance on record, and India was Asia's 3rd best performing currency, and if you throw out the two currencies above India that are illiquid, South Korea, and Indonesia, India was the best performing currency in Asia in the second QTR...

And the people over at the Royal Bank of Scotland (RBS) believe that the rupee won't stop here... RBS issued a research report calling for a record 11% gain by the rupee in the 3rd QTR... I bet this news is music to the ears of my colleague on the "other" newsletter that I write... The Currency Capitalist... (to find out more: https://www.web-purchases.com/CUC/WCUCJ900/landing) My colleague, Ashish Advani, at the Sovereign Society, has been saying the rupee would be a strong performer for months now!

Here's something you might want to be aware of, regarding the New Zealand dollar / kiwi... About $4.5 Billion in kiwi Uridashi and euro kiwi bonds denominated in kiwi will expire next month... I'm told that this is more than 4 times the size of a usual monthly expiration of bonds. This could very well be the hoola hoop the Reserve Bank of New Zealand (RBNZ) is looking for, given their wish that kiwi would weaken...

Royal Bank of Canada's Currency guru, Sue Trinh, says that kiwi weakness could be beneficial to Aussie dollars, as the Japanese are leaning toward Aussie over kiwi these days...

Sounds about right to me!

And then there was this... OK, you all saw that Bernie Madoff was given 150 years in prison... Did you see that his wife, Ruth, reached an agreement with the authorities to return all of her wealth except $2.5 million that she got to keep? The thing that I still don't get is how there aren't more people going down with the ship on this one... I've been in the back office of brokerage firms, ran a margin dept, etc. and know this wasn't just Bernie and his accountant... There was a lot of wool pulled over many eyes... And this will be the next step in the investigation by the U.S. officials... To see, who else knew what... If a whole stable full of people aren't found to have known, then I'll be surprised...

Currencies today 7/1/09: A$ .8045, kiwi .6410, C$ .8640, euro 1.4050, sterling 1.6430, Swiss .9220, rand 7.7675, krone 6.39, SEK 7.6337, forint 192.50, zloty 3.1390, koruna 18.3315, yen 96.90, sing 1.4475, HKD 7.75, INR 47.90, China 6.8330, pesos 13.18, BRL 1.9515, dollar index 80.11, Oil $71.27, 10-year 3.54%, Silver $13.67, and Gold... $931.20

That's it for today... So sorry about the tardiness of the Pfennig yesterday, but I can't do anything about it when we have technical difficulties... You know that I get up before the milkman, and the paper man, to get here to write it... It wasn't like I was dilly-dallying around and didn't get it done until 5 in the evening! HA! I see that my little buddy, Alex, got a 2nd and 3rd in backstroke and freestyle respectively at his latest swim meet. Really long time readers might recall when Alex's older brother, Andrew was a highly decorated swimmer, and I would write about his swimming records... And their sister Dawn, also was a medal winner as a young girl! So... It's now up to granddaughter, Delaney Grace to carry on the swimming tradition! HA! Cards lose again... UGH! OK... Time to try to get this out the door, hopefully it will go without a hitch... But whether it does or doesn't it won't stop me from having a Wonderful Wednesday... How about you?

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

Desperately Seeking Yield...

Chuck Butler — Fri, 26 Jun 2009 15:27:32 GMT

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

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

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

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

In This Issue..

* Currencies rally...
* More on the BRIC's...
* New Zealand's GDP contracts..
* Bernanke gets grilled!

And Now... Today's Pfennig!

Desperately Seeking Yield...

Good day... And a Happy Friday to one and all! The end of what seemed to be a very long week... The last weekend in June, can you believe that? Next week, we'll be getting ready for the 4th of July celebrations! WOW!

Well... What a volatile week it has been in the currencies! Up, down, all around, and settling back to levels that we saw before the Fed's FOMC meeting earlier this week. Suddenly, investors are looking for yield again... Looks like they are "Desperately Seeking (not Susan) Yield! And why not? The Fed, and the Bank of Canada (BOC) have come out and said that there will be no interest rate hikes until we've turned quite a few pages on the 2010 calendar.

So, with investors clamoring for yield, the dollar gets taken to the woodshed... As I said earlier this week, one of these probes above 1.40, need to take hold of the figure and build on it, otherwise we're doomed to remain in the 1.35-1.40 range, and range trading is for the birds! Talk about counting flowers on the wall, and watching paint dry! UGH!

I was shocked yesterday to see but a few emails asking me more about the SDR's story that I talked about... Men, women, boys and girls, all... This is important stuff! Don't take it lightly! There's a movement underway that could end up costing you dearly, if you do not take the diversification steps...

I think it is important to know that the BRIC countries (Brazil, Russia, India, and China) are serious about replacing the dollar with a "global currency" i.e. the IMF's SDR's... And... That the BRIC's want more power on the World's stage... And why not? These countries currently have almost 3 Trillion in foreign reserves... And... A very large piece of the world's population... (Thanks for that fodder, Kevin!)

OH! And guess who was banging the drum for a "super-sovereign" currency overnight? China, that's who! So... They're Baaaaaaaaccccckkkkk! OK... This was the People's Bank of China (the Central Bank), that made this statement, along with a call for the IMF to manage part of member's foreign exchange reserves... Hmmm... OK, I just said that China wants more power on the world stage, and here they are saying that their puppet will be the IMF! OK, I took some liberty with that, but it's the way I see it!

OK... Back to what's going on in the currencies today... Hmmm... The dollar is getting taken to the woodshed to end the week, that's what's happening! And the currency leading the pack with regards to performance VS the dollar, drum roll please.... The Brazilian real... A 3 day "winning streak" has the real back to levels it saw before the Brazilian Central Bank (BCB) cut rates about 10 days ago...

The way I see it, and long time readers know this will be interesting in the least, is that investors want to invest in the BRIC countries, but there's very little liquidity there in each of those currencies, along with very little yield, except... In Brazil... Liquidity isn't what the majors enjoy, in fact it's still traded on what's called a "non-deliverable forward", which means it can only settle in dollars, with no deliverability, but... It's traded easier and less costly than the other BRIC's and... It has the highest interest rate available... So... You can see why investors are buying reals...

Having said that though... You must know about the volatility... Look at what happened this week... On Monday, we started the week with the real at 1.9750, only to see it rocket to 2.0326 in one day's trading, a near 3% move / loss in one day! Then we saw it rally back to 1.9795 the next day, and after 3 days of gains the real sits at 1.9420 this morning, thus generating a "gain" for the week! And... The other thing, is that Brazil is considered an Emerging Market... And long time readers have learned over the years that when one Emerging Market gets slammed, they all get taken to the woodshed... So... Be careful out there!

A high yield currency that far removed from the early days of trading like Brazil, but offers yield, is the New Zealand dollar / kiwi... And kiwi has been held back, although still posting a gain VS the dollar, overnight as 1st QTR GDP printed at a negative -1%, thus marking the 5th consecutive quarter of negative growth in New Zealand...

I'm probably out there on the big fat limb (to hold me up, of course!) by myself on this one, but... I personally believe that both the Reserve Bank of New Zealand (RBNZ) and the Reserve Bank of Australia (RBA) have seen the lows in their interest rates, and no further rate cuts will come from these respective Central Banks. I know, that last week, we were all hyped up about future rate hikes from the RBA in 2010, and we probably got a little ahead of ourselves with that thought... I'm probably ahead of the curve on the "end of rate cuts" talk... But that's where I like to be!

So... When the world's investors are looking for yield, they don't have to go to Brazil, or India... They can go to the old reliables... Australia and New Zealand, with a reduced fear of further rate cuts... At least that's they way I see it! And yes, I could be wrong...

And how about Gold and Silver this week? What a week on Mr. Toad's Wild Ride for precious metals... The main thing though is that they are finishing the week with a rally, and Gold which was trading at $922 on Monday, is $944.85!

And how about that grilling that Big Ben Bernanke received yesterday by legislators over the Fed's conduct in the Bank of America (BOA) takeover of Merrill Lynch... You may recall that BOA's CEO, Ken Lewis said he was "bullied" into taking over Merrill and not disclosing to his shareholder all of Merrill's losses that were on the books... Big Ben denies that he participated in any bullying... (doesn't that lead to Paulson then? Did Big Ben just throw Paulson under the bus?)... Any way... Big Ben did little to convince the legislators that the Fed didn't keep their hands out of the cookie jar... And that, my friends, may be the foot in the door that we've been looking for... Maybe, just maybe, because you never know, but with the legislators having questions about the Fed and Big Ben, they probably aren't in any mood to hand over the regulatory powers that the President wants to give them...

And... My old fave Central Banker, NOT! Big Al Greenspan was back in the news last night... I'm trying to figure out how he and I got on the same side of the ship... But, here was Big Al, my nemesis for years, talking about inflation being a concern... Let's listen in to Big Al... Alan Greenspan, former chairman of the Federal Reserve, said the threat of inflation needs to be confronted because it poses a threat to economic recovery. "Excess capacity is temporarily suppressing global prices. But I see inflation as the greater future challenge," Greenspan said. "If political pressures prevent central banks from reining in their inflated balance sheets in a timely manner, statistical analysis suggests the emergence of inflation by 2012."

Of course, I think inflation will be showing its ugly face next year, not 3 years from now!

And on the data front... The Weekly Initial Jobless Claims "surprised" economists by moving back up, after falling last week... 627,000 unemployed Americans filed for unemployment claims last week... No "green shoots" here! In fact... We need to see if we can use these so-called Green Shoots that the President and Big Ben keep talking about, for ethanol... They've got to be good for something! HAHAHAHAHAHAHAHA! I must say that a reader gave me that line!

And here's Warren Buffett on Green Shoots... "I had a cataract operation on my left eye about a month ago and I thought maybe now I'll be able to see green shoots. We're not seeing them. Whether it's retailing, manufacturing, wherever. We have a big utility operation. Industrial demand is down like we've never seen it for a simple thing like electricity. So it hasn't happened yet. It will happen. I want to emphasize that. But it hasn't happened yet."

And... Then... There was this... A good story to end the week and head to the Big Finish with...

Barclays Capital Inc. (Barclays) the world's third largest currency trader, have lowered their one-year forecast for the dollar, saying foreign investors will reduce their purchases of U.S. assets... Barclays referred to the dollar's status as "safe-haven paradise lost", due to the ballooning fiscal deficit and the printing of money by the Central Bank... Barclays believes that the euro will be trading at 1.50 in a year...

Hmmm... Nothing new there for Pfennig readers, but, I always find it to be good to see others with their BIG research departments, no divisions, yeah, divisions, that's bigger than a department! Wait, get back on track, here Chuck! Yes, the Big research divisions, that finally come around to what little old me has been saying for months now... Oh! And that "little old me" has just got to crack up any one that knows me, and have seen me lately!

And one more thing... Oil is back to $71 this morning, as there has been more problems in Nigeria... Let's hope these problems go away!

Currencies today 6/26/09: A$ .8055, kiwi .6450, C$ .8710, euro 1.4085, sterling 1.6490, Swiss .9210, rand 7.9680, krone 6.4250, SEK 7.8125, forint 196.20, zloty 3.1975, koruna 18.50, yen 95.40, sing 1.4540, HKD 7.75, INR 48.21, China 6.8338, pesos 13.18, BRL 1.9420, dollar index 79.86, Oil $71.07, 10-year 3.55%, Silver $14.25, and Gold... $945.65

That's it for today... Well... Today marks the 2-year anniversary of the surgery that removed my cancer ridden femur, and replaced it with a prosthetic. Quite an ordeal, but... Here I am! Rock you like a hurricane! Oops, sorry, got carried away there! I'm so happy that's behind me now! Well... Michael Jackson has died at 50 years old... When I think of Michael Jackson, I just remember my two oldest kids, playing that Thriller album over and over again. The heat wave over us continues, but is expected to back off next week... My little buddy, Alex, turns 14 on Sunday. WOW! We began a tradition when he was quite young, of the two of us going to breakfast on his birthday. Two years ago, when I was in the hospital, my darling daughter, Dawn, brought Alex to the hospital with breakfast, so we could continue the tradition. I hope I can continue celebrating with him for many years to come. So... Happy Birthday Alex! Real long time readers might recall when Alex was 3, and would sit on my lap as I wrote the Pfennig from home, and every once in awhile the text would look like this... 9087lkndy7, and I would say, "sorry, Alex is helping me again"... Alex has already made me aware that he can get his drivers permit next year... YIKES! OK, time to head off into the sunrise... (not sunset, as I'm writing at daybreak, HAHAHAHA) The currencies are having a Fantastico Friday, so why don't we joining them?

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