Daily Pfennig : Norway

3rd QTR GDP To Lift Our Spirits?

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

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

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

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

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

In This Issue..

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

And Now... Today's Pfennig!

3rd QTR GDP To Lift Our Spirits?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

German ZEW Underpins The Euro...

Chuck Butler — Tue, 15 Sep 2009 14:29:18 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 rally on tariff news...
* Norway's election doesn't move krone...
* Canada's Gov't problems to hurt loonies?
* 1-year since Lehman Bros...

And Now... Today's Pfennig!

German ZEW Underpins The Euro...

Good day... And a Terrific Tuesday to you! Well, just as I suspected yesterday in the Pfennig, when the U.S. traders came in and got word of the new Chinese tariffs on tires, the dollar got sold like re-mastered box sets of Beatles albums! So, we've got that to talk about, and some other items I'd like to discuss... So, here we come Terrific Tuesday!

OK... Well, just as I stated above, the U.S. traders didn't care for the new tariff, feeling that it would project a trade war, and therefore sold the dollar. The Big Dog, euro, traded to 1.4635 by mid-day... There was some profit taking late in the day, which brought the euro back to below 1.46, but then this morning, the euro got another boost from a report on German Investor Confidence, to bring it back to 1.46, as I write...

German Investor Confidence, as measured by the think tank ZEW, rose to the highest level in nearly three years this month... ZEW believes that their index predicts developments 6 months ahead... So... If that's true, then the German economy will be well on its way to a strong recovery!

So... Traders backed up the truck and bought euros this morning... I look at 1.46 like the deal we went through when the euro was 1.43... It went back and forth from 1.4150 to 1.43 for a couple of weeks, before finally breaking out to 1.45, and then 1.46... With the single unit going back and forth over and under the 1.46 figure, it's quite similar. And these are good things for buyers!

It allows buyers to buy on dips, before the assets finally breaks out... I sure hope you all are paying attention here... Sorry, don't mean to lecture... But that was an important point!

AT one point yesterday all the little dogs (non-euro currencies) were off the porch, and chasing the dollar down the street. But overnight, we've seen some news in parts of the world that haven't been of the "pro-currency" nature!

One piece of which I am talking about, is in Australia, where the Reserve Bank of Australia (RBA) issued a communiqué' stressing that it (The RBA) was seeking to avoid "premature tightening" monetary policy... Hmmm... You can look at this two ways... You can say that the RBA is just trying to get everyone to calm down, and prepare them to wait longer for rate hikes... OR... You can say that the RBA is trying to throw the dogs off the scent of a rate hike, so things don't get too heated before they actually do the deed.

I'm going to pin my colors to the mast of the second thought... I think the first rate hike is still in the cards for the 4th QTR of this year, and not 1st QTR of next year...

Unfortunately, the market participants in Aussie dollars (A$) didn't take it that way, and decided that they had run up the A$ too far, too fast... But just like we saw with Brazil, and Canada, when the "fickle traders" sold when they got scared, the A$ should come back from this, and I would look to use this as a buying the currency cheaper opportunity...

The President was out to drum up enthusiasm for the economy yesterday... He said that job losses were ending... However, I guess he didn't get the memo from Eli Lilly, that they will be laying off 5,500 jobs in the next 2 years... So... They're not ending... They're just not the same number of people working these days to lay off! So, I guess if you start out with let's say 5 million people working, and 4 million of them get laid off, then you've only got 1 million more to lay off, that's less than 4 million, and therefore the layoffs end...

OK, let's not go down that road this morning...

I've got something that is quite interesting to discuss this morning... OK, did you hear about Germany issuing "dollar denominated bonds"? What's up with that? I hear you asking... Well... There are a number of schools of thought here, but I think what we have here is a green light from Big Ben Bernanke to other countries to carry the flag of dollar destruction, that the Fed has carried since 1913...

Now, those that pay attention in class, might be saying, but Chuck! If Germany per se is issuing dollar denominated bonds, wouldn't that be good for the dollar, as dollars have to be bought by the Germans... Ahhh... But maybe, dollars don't have to be bought... Maybe dollars are already in reserves? Lots of dollars in the reserves of Central Banks all over the world!

OK, here are the scary things about this to me... 1. further dissolution of the dollar's value, 2. alternative bonds to buy other than Treasuries! 3. The dollar becomes de factor the new funding currency for the Carry Trade

When I think of all the reasons to NOT own the dollar, I'm reminded of a great song... All in all it's just another brick in the wall! With the "it's" being the reasons to NOT own the dollar!

Whew! My fingers feel like they had to type a marathon! HA!

OK... Like that one? I've got another one in my back pocket to talk to you about, but I think I'll hold it for tomorrow's Pfennig...

I received an email from a reader that explained how auto tires are made, and how the U.S. has had to import rubber for these tires from Brazil, China and Europe any way! So, tire makers won't be home free with the tariff that the President slapped on the Chinese...

I did see an article that hangs with my thought yesterday that these tariffs are "no good" for the global recovery... Nice to see others that see things like I do... I don't like being out on the limb, albeit a nice strong fat one, by myself all the time!

The Norwegian krone is trading about in at the same level as yesterday morning, which is a good thing, considering that Norway had an election that totally slipped by my radar, yesterday... There was no real change to the center-left government, but there were some thoughts yesterday that a change could take place... You have to like the krone going forward based on the government basically remaining the same, with the same monetary policies, etc. that have guided Norway's economy and banks through the stormy waters that have existed the last 2 years!

British pound sterling is weaker this morning as Bank of England Gov. King, brought to light 3 areas of concern in the U.K. economy... I've never bought into the sterling strength, so maybe this corrects some of this overbought currency.

And the Japanese yen gave up some of its recently gained ground VS the dollar overnight... The new Gov't in Japan, issued a report that calls for an increased participation in the intervention market to keep yen from getting too strong... Great! That's just what we need... NOT! The Bank of Japan already had their hands in the intervention cookie jar enough! Now, the new Gov't is calling for more participation?

I think the Canadian dollar / loonie might see some weakness in the near term, due to a development in the Parliament... The coalition Gov't that exists in Canada, is being threatened. The Liberal party, has withdrawn its support for the Conservative party vowing to bring them down... Whenever you have questions like this in Government or leadership, the currency will suffer...

Did you see that the judge residing over the Bank of America (BOA) settlement with the SEC rejected the fine of $33 million, that BOA and the SEC had agreed on? The Wall Street Journal reported yesterday that: Federal district Judge Jed S. Rakoff rejected a proposed $33 million settlement of allegations by the Securities and Exchange Commission that Bank of America "materially lied" in shareholder communications about bonuses to employees of Merrill Lynch.

The Data Cupboard gets restocked today with Retail Sales for August. I talked about this yesterday, and nothing has changed, so expect Retail Sales to have been strong in August on the Cash for Clunkers program, and back to school purchasing... And we'll see the stupid PPI for August... PPI is wholesale inflation, and is at least a bit better than the manipulated CPI version, which we'll be so lucky to see tomorrow!

Today, marks the 1-year anniversary of the Lehman Bros. collapse... What have we learned from that meltdown? Not a darn thing! We're still spending like there's no tomorrow, and we're still willing to bail out some and not others... In the past year though, Gold is up 30%... That says it all to me!

So... To recap today, ZEW says German Investor Confidence is strong, and that has helped to underpin the euro. Aussie dollars got sold after the RBA tried to calm the markets down regarding the timing of a rate hike, and Retail Sales headlines the data releases today.

Currencies today 9/15/09: A$ .8580, kiwi .70, C$ .92, euro 1.46, sterling 1.6475, Swiss .9630, rand 7.4150, krone 5.92, SEK 7.0150, forint 186.50, zloty 2.8550, koruna 17.38, RUB 30.88, yen 91.20, sing 1.4230, HKD 7.75, INR 48.65, China 6.8289, pesos 13.32, BRL 1.8125, dollar index 76.85, Oil $69.18, 10-year 3.41%, Silver $16.52, and Gold... $997.75

That's it for today... I do believe, if I remember correctly, that this is the 20th anniversary of what was once our "new house"... Can't believe that 20 years has gone by in that house... Well, that was pretty cool seeing NFL football on the tellie again this past weekend, eh? College football, and baseball going on too... And can't forget to mention that our hockey Blues started training on Saturday for the upcoming season! WOW! Overload, Will Simpson, Overload! It's going to be a looooonnnnngggg season for our Rams... Gone are the days of the greatest show on turf... Now it's more like a comedic tragedy! I heard from someone that attended the To The Point News Rendezvous this weekend that I had to back out of... I'm really upset now that I wasn't able to go! UGH! Time to get going... I've got a ton of stuff to get done this morning... So, let's get working on making this Tuesday Terrific!

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

U.S. Manufacturing On The Rise...

Chuck Butler — Wed, 02 Sep 2009 14:18:22 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..

* Risk Assets Get Sold!
* ISM hits 52.9!
* Aussie GDP rises!
* China leading the way!

And Now... Today's Pfennig!

U.S. Manufacturing On The Rise...

Good day... And a Wonderful Wednesday to you! Well, all that back and forth between rally and sell off for the currencies came to an abrupt halt yesterday, when the dollar bulls went on a rampage. There was some very strong economic data to help the move, but the real thing that brought the currencies to their knees was the stock sell off of 185 points...

Get this... Now we all know that the risk assets of stocks, commodities, and currencies have all been tied together for some time now... So, I was surprised to see a story titled: "Currency Markets Taken For A Ride By Stocks" Hmmm, maybe this person just woke up from a 9-month coma, eh? Any way, that doesn't matter, it's just another opinion that coincides with mine!

I had a read send me a note yesterday asking me to explain my lingo when talking about "handles"... OK... A quick run-though of this... It's an old Bond trading term, that I carried over from bond trading to currencies. So... A "handle" is the whole number... So, if Norwegian krone is trading at 6.0350... "6" is a serious number... It's all the fingers on your hand plus your thumber... No, Wait! "6" is the "handle"... Hope that helps!

OK... Back to currencies... One has to wonder what's going on these days... I mean for over 9 months, whenever there was strong data in the U.S. the dollar would get sold... But now, that's all changed... And, since when does a rise in manufacturing lead to a 185 point stock sell off? It's crazy out there folks! There's nothing that's trading on fundamentals...

The strong data I'm talking about is the ISM (Manufacturing) Index that printed for August yesterday... For the first time in 19 months, the Index rose above the 50 level to 52.9! That's a good performance for the manufacturing sector, and one that will probably bring economists, and politicians to claim the recession to be over... Well, that may be... FOR NOW! Double dipping... It's in our future, I can feel it! And don't forget what I explained to you yesterday regarding the weaker dollar playing a big part in Manufacturing's rise....

A reader that's a Manufacturer sent me a note... "Regarding the uptick in the manufacturing index: from where I'm sitting I don't see it as an increase in demand for our products, but rather a re-building of inventories from an oversold position. We've seen a bounce off the bottom in May that has been carried through this month but it appears to be leveling off."

So... Once again, this is the kind of thing I believe to be "real economics"... Real stuff! Not the surveys, not the hedonic adjustments, not the cooking of books... Real Stuff!

And, before I go on to other things... I normally look at the employment component of the ISM to give me an indication of what the Jobs Jamboree will show, which prints on Friday this week. The ISM employment component showed a job loss of -225,000... So, we're still losing jobs...

OK, back at the currencies ranch, the dollar is beating up on the currencies, but what's that I see? Ahhh... It's the Aussie dollar (A$) mounting a rally in the face of this dollar strength! Let's go to the tape to find out what's going on there!

2nd QTR GDP in Australia printed stronger than forecast at +.6%, (VS +.3% forecast) and stronger than the 1st QTR print of +.4%... This uptick has really brought the rate hike campers back out into the streets. Recall, that a couple of months ago, I wrote about how Australia might end up being the first to raise rates after the financial meltdown of 2008... (It's neck and neck between Australia and Norway)... The thought then that the rate hike would come in the 1st QTR of 2010... But there are those now that are thinking the first rate hike could come this year! October's Reserve Bank of Australia meeting is being targeted now... Put this in you calendar to come back to...

Speaking of Norway... The rate hike campers here had to take a step back yesterday after Norway's PMI (Manufacturing Index) was a disappointing print. Norwegian PMI, which just a month ago was knocking on the 50 number, at 49.7, fell back to 42.3 In August... UGH! So, the Norwegian krone, which had just Monday, traded with a 5 handle, got smoked on this print.... But, I don't think this is something that we should get our undies in a bunch about. This is just one print... And probably only delays Norway's rate hike by a month or two...

Recall on Monday this week I told you that we would have all kinds o' data this week, and all over the world. Well... In keeping with that... China too, printed their Manufacturing Index report last night. The state-sanctioned China Federation of Logistics and Purchasing said its purchasing managers index (manufacturing) rose to 54 from July's 53.3 on a 100-point scale where numbers above 50 show activity expanding. It marked the sixth month of expansion.

So... Just like I told you a couple of months ago... China was going to be the first to exit the economic mess / slowdown / recession / depression, depending on where you live... This marks 6 consecutive months of prints above 50...

I watched Gold get sold yesterday too, and wondered to myself, or maybe it was out loud, our little Christine, who sits next to me, has to listen to all my comments about things all day... I'm sure, she "heard" me wondering to myself! Any ways... What I was wondering about was the price of Gold and how it seemed to be stuck in the $950 range... I did see recently where the Central Banks around the world had signed a new agreement on the amount of Gold that they sell... The good news for Gold was that the Central Bankers agreed on a smaller amount as their maximum amount of Gold that can be sold each year...

Imagine if you will for a moment, where the price of Gold would be today, if those Central Banks hadn't dumped Gold on the markets for the last 9 years? The fact that Gold has risen from $250 to $950, in the face of these Central Bank sales is amazing! And now... The amount the Central Banks can dump on the markets each year is smaller... What do you think that means for the price of Gold? I know what I think it means!

Talk about getting "dumped" that's what happened to the Brazilian real yesterday... Yes, most of the currencies sold off... But real was really sold off! That makes some sense in that real had out performed most currencies this year, and therefore, the selling, or profit taking would be on a larger scale... I think this selling was overdone though, and I would look for the real to make an attempt to come back today...

Today, the data cupboard here in the U.S. has the ADP Employment report, which is kind of a wild hair, report that hardly ever gives a good indication of what to expect in the Jobs Jamboree... But just for the record the forecast for the ADP report is for job losses of -250,000... Which is close enough for Gov't work to the ISM employment component, I talked about above.

We'll also see the stupid Productivity report for 2nd QTR... I've explained why I think this report is stupid in the past, so I won't spend a lot of time on that.

Factory Orders is the only "real" piece of data that I care to look at this morning... July's Factory Orders will print and most likely show an increase of 2.2%...

Then later this afternoon, the minutes of the latest FOMC meeting (8/12) will print. Hmmm... You never know what these minutes might reveal, I've always maintained that if they were the "real" minutes we would see things like... B-10, By Joe, You've sunk my Battleship! HA!

And on that note... I'll head to the Big Finish...

Currencies today 9/2/09: A$ .8325, kiwi .6755, C$ .9065, euro 1.4235, sterling 1.6220, Swiss .9385, rand 7.86, krone 6.0950, SEK 7.2320, forint 193.75, zloty 2.9240, koruna 18, RUB 31.96, yen 92.60, sing 1.4430, HKD 7.7510, INR 48.98, China 6.8310, pesos 13.63, BRL 1.9140, dollar index 78.59, Oil $68.74, 10-year 3.37%, Silver $14.95, and Gold... $956.15

That's it for today... Well... I'm happy you, dear reader, are still reading... I had a guy rant at me yesterday regarding my talking about the Cardinals and Tigers and my family here... HEY! It's my letter! My suggestion... Simply stop reading at the Currency Round-up! So... That sure was a nice win last night for my beloved Cardinals... In a case of "pick your poison" the Brewers intentionally walked Albert Pujols, only to have Matt Holiday hit a home-run! WOW! This is becoming a special season for the Cardinals, for sure! Still battling pain and stiffness in my left knee, I thought the steroids that they shot in the knee joint were supposed to have begun to work by now... Oh well, ice and more ice helps... We had our draft for our Fantasy Football league.. This is silly stuff, but it's interesting at times! OK... Let's get working on what we need to do to make this a Wonderful Wednesday!

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

Stocks push the currencies higher...

Chuck Butler — Thu, 20 Aug 2009 15:16:53 GMT

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

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

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

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

* Stocks push the currencies higher...
* Norway pulls out of recession...
* Jackson Hole boondoggle...
* Oil helps rally commodity currencies...

And Now... Today's Pfennig!

Stocks push the currencies higher...

Good day... We had more rain here last night, but the storms have cooled things off and it is starting to feel a bit like fall around here. Chuck flies off to San Francisco today to speak at the Money Show, so I will be bringing you the Pfennig for the next few days. The dollar has rallied just a bit overnight, clawing back some of the losses which occurred mid morning yesterday.

And what, you might asked, caused the dollar to rally yesterday? You can re-read a bit of yesterday's Pfennig for the answer: "The data cupboard has been emptied out and is looking to get restocked today... So the only thing besides sentiment moving the markets today will be the direction of stocks..." Yes, Chuck was right on in predicting what would drive the currency markets yesterday, as the dollar got sold off as stocks moved higher.

Without any data to push the markets one way or another, investors began moving back into riskier assets, selling their 'safe haven' US treasury holdings. The currency markets have been trading on the risk theme lately, and don't seem ready to break this pattern anytime soon. Risk appetite is the main driver of the currency markets, with the dollar gaining with investor worries, and falling back down as investors feel more confident.

I spoke at an investment conference last week in Chicago, and listened to several good presentations on the current state of the economy. While every speaker had differing opinions on how to invest during the next few months, they all seemed to agree on one thing; the recent rally and 'recovery' would reverse, and the US will likely head back into another downturn. The timing of this next downturn is hard to pin down, but most believe we will see the US economy falter again toward the first quarter of 2010. If and when this occurs, the dollar could see a temporary rally as investors flee back into US treasuries. But longer term, everyone at the conference was in agreement with what Warren Buffet said in his op-ed piece yesterday: the US$ will ultimately lose value.

Speaking of Buffet, I re-read his op-ed last night during dinner, and had to laugh a bit as much of what he wrote could have been taken directly from the presentation I gave last week. The following lines were especially poignant, so I decided to include them in the Pfennig:

"An increase in federal debt can be financed in three ways: borrowing from foreigners, borrowing from our own citizens or, through a roundabout process, printing money. Let's look at the prospects for each individually - and in combination.

The current account deficit - dollars that we force-feed to the rest of the world and that must then be invested - will be $400 billion or so this year. Assume, in a relatively benign scenario, that all of this is directed by the recipients - China leads the list - to purchases of United States debt. Never mind that this all-Treasuries allocation is no sure thing: some countries may decide that purchasing American stocks, real estate or entire companies makes more sense than soaking up dollar-denominated bonds. Rumblings to that effect have recently increased.

Then take the second element of the scenario - borrowing from our own citizens. Assume that Americans save $500 billion, far above what they've saved recently but perhaps consistent with the changing national mood. Finally, assume that these citizens opt to put all their savings into United States Treasuries (partly through intermediaries like banks).

Even with these heroic assumptions, the Treasury will be obliged to find another $900 billion to finance the remainder of the $1.8 trillion of debt it is issuing. Washington's printing presses will need to work overtime.

Slowing them down will require extraordinary political will. With government expenditures now running 185 percent of receipts, truly major changes in both taxes and outlays will be required. A revived economy can't come close to bridging that sort of gap."

This is what we have been preaching over the past several years, that the deficits, if unchecked, will ultimately lead the government to put the printing presses in overdrive, and we will attempt to inflate our way out of debt. This will cause the value of the US$ to drop. Buffet ended his piece with the following line: "Unchecked carbon emissions will likely cause icebergs to melt. Unchecked greenback emissions will certainly cause the purchasing power of currency to melt. The dollar's destiny lies with Congress."

Sorry to spend so much time on Warren Buffet, I know he isn't the most popular guy with many Pfennig readers. But you can't deny that he has been an extremely successful investor, and the piece he wrote for the NY Times was just right on in my opinion.

Lets get back to the currency markets. Good news helped propel the Norwegian krone higher overnight. Norway's economy grew last quarter, pushing the worlds fifth largest oil exporter out of recession. Norway's mainland economy (ex oil and gas) was able to grow .3% during the second quarter. Economists had predicted Norway's economy would contract by the same margin. The overall economy still contracted, as oil revenues declined, but the recent move higher in crude should help keep Norway on the growth path in the second half of 2009. Petroleum exports make up a quarter of Norway's output, so a global recovery is definitely good news for Norway. This currency, which was called the safest in the world by the NY Times, should be part of every investors portfolio.

The UK economy is doing quite as well as Norway's, as Britain reported a record $13.2 billion budget deficit in July. This is the largest deficit reported for July since records began. Quarterly tax payments usually boost the revenues in July, but the recession has taken its toll on tax revenue, and unemployment benefits are pushing outlays higher. The UK is predicted to have the biggest deficit in the G20 next year according to the IMF. The pound sterling was the largest loser vs. the US$ on the back of this reported deficit.

Minutes of the BOE's August 6 meeting were released yesterday, and it showed BOE Governor Mervyn King pushed for an even looser monetary policy. King pushed to expand the 'quantitative easing' which the BOE began in March. The pound lost more ground after the release of the report, as investors lost faith in King as an inflation fighter.

Chuck sent me this note last night and wanted me to include it in today's Pfennig:

"I forgot all about the fact that this is that time of year again when Central bankers and economists from around the world have a boondoggle at Jackson Hole Wyoming... You might recall that last year they all hunkered down and tried to think of ways to keep the financial mess forum worsening, only to have Lehman Brothers collapse a few weeks later!

Well... I'm sure we're going to hear a lot of rhetoric about the "recession coming to an end"... but they have it all wrong! this isn't a recession it's a depression...

With pockets of risk remaining, such as the collapsing U.S. commercial real estate market, and the double digit unemployment rate... I would think that these guys who missed seeing the subprime meltdown coming and then when it was presented to them, told us it wouldn't filter out into the economy... should just keep their opinions to themselves and read newsletters like The Pfennig and The Currency Capitalist, and the Daily Reckoning, and the 5-minute Forecast... OK I've had my say, thank you for letting me vent! Have a nice day!"

Yes, the 'top' economic minds (minus Chuck) will be meeting in Jackson Hole and Ben Bernanke will undoubtedly trumpet the fact that data shows the US economy is starting to pull out of its recession. This morning we will get the index of US leading economic indicators which is projected to show a move up in July; the fourth consecutive positive monthly move. The weekly jobless claims are also expected to be a bit positive, with a fall to 550k from last weeks 558k. But the jobless rate is still projected to reach double digits (the real number has been in double digits for a while!) and housing will continue to be a drag on the economy.

The administration will also announce the US deficit for 2009 will be slightly less than what was forecast in May. Yes, our government's deficit will total just $1.58 trillion, about $262 billion less than the previous estimate. But the change isn't due to increased revenues, it is mainly due to the administration's scrapping of a $250 billion contingency plan to aid the financial industry. With the recent signs that the economy is starting to pull out of recession, the Obama administration decided it no longer needed to hold the quarter trillion dollars in reserve to meet predicted bank failures. But I would still be a bit worried if I were the administration, as there will likely be a few more 'big' bank failures down the road. Personal bankruptcies continue to climb, and as Chuck pointed out above, the commercial real estate market still has a few 'surprises' in store for the economy.

Even after this adjustment, the deficit figure would amount to 11.2% of the GDP, the largest share since 1945 when we were paying for WWII. And unfortunately, with growing outlays for Social Security, and interest on the debt eating up a larger overall percentage, the deficits won't be shrinking in the near future.

A jump in oil prices and a reversal of risk aversion caused the South African rand, Mexican peso, and Australian dollar to rally. South Africa led all currencies vs. the US$ overnight, with a .54% appreciation. Mexico's peso rose for a second day as oil moved back above $72 per barrel. Oil revenue funded 38 percent of the Mexican government's budget last year, so the peso is somewhat linked to the price of crude. The jump in oil also helped the Canadian dollar reverse earlier losses.

The Australian dollar rallied as risk investors moved back into higher yielding currencies, and good news in the Asian stock markets continued the rally. The Aussie dollar also benefitted from the rally in oil, Australia's fourth most valuable raw material export. The Aussie dollar is one of the best performers over the past 3 months, with only the New Zealand dollar and Brazilian real out performing it vs. the US$.

Currencies today 8/20/09: A$ .8289, kiwi .6731, C$ .9105, euro 1.4219, sterling 1.6461, Swiss .9376, rand 7.9792, krone 6.055, SEK 7.1810, forint 191.02, zloty 2.9211, koruna 18.009, yen 94.15, sing 1.4477, HKD 7.7508, INR 48.695, China 6.8318, pesos 12.8717, BRL 1.8415, dollar index 78.62, Oil $71.92, 10-year 3.47%, Silver $14.01, and Gold... $943.27

That's it for today... I know Chuck already mentioned it, but Happy Birthday to Chuck's daughter Dawn and Christine's little buddy Jamieson!! Both are celebrating big milestones; Dawn is 30 and Jamieson is 5. The Cardinal's ownership is getting St. Louis pumped up about fall as they continue to set the team up for a nice run into the post season. The Cards signed veteran pitcher John Smoltz yesterday which made our #2 trader Jennifer extremely happy (she is a huge Smoltz fan). It sure looks like the Cardinals will be the ones to beat in the NL with the addition of another strong arm to our rotation. Christine just came in with the breakfast sandwiches, so I gotta get this out the door. Hope everyone has a Tub Thumpin Thursday!!

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

Dollar continues it’s slide...

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

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

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

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

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

And Now... Today's Pfennig!

Dollar continues to slide...

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Gold Vending Machines!

Chuck Butler — Thu, 18 Jun 2009 14:59:35 GMT

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

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

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

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

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

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

In This Issue..

* More range trading...
* SNB doesn't target the franc...
* Norges Bank cuts rate but looks forward...
* Buy your gold and Snickers!

And Now... Today's Pfennig!

Gold Vending Machines!

Good day... And a Tub Thumpin' Thursday to you! It was 95 here yesterday, and forecast to be even warmer, or should I say hotter, today! WOW! Like overnight, it turned to summer, after the coldest, most wet, spring I can ever recall... I know, I'll get 100 emails reminding me that summer doesn't officially start until next week... I'm just talking about the summer-like weather!

The currencies remained in that range I talked about yesterday, with a slight bias to sell dollars, but not much of one. Crude Oil prices moved higher on the day and overnight, which doesn't play well with a dollar rally, and therefore, has pushed the dollar down a bit... But again, we're talking minor moves. It's as if someone (traders) are waiting for something BIG to happen with data, the Fed, the Treasury, before taking one direction.

Did you hear about the Gold vending machine in Germany? I saw this yesterday morning, and thought it to be a hoax... Then someone in the office brought me a print out of a story in the U.K. Telegraph... OK, so maybe it's not a hoax... Any way... Here's the skinny... In Germany, they've come up with a vending machine that can update prices of Gold every few minutes, and... Dispense 1 gram Gold wafers, 10 gram Gold bars, or coins... There's about a 30% increase in the market price! WOW! Imagine that, you need some Gold in your pocket just for GP, and you simply walk up to a vending machine and buy some, as simple as getting that Zero bar, or Snickers!

OK... What gives a guy this kind of idea to make a vending machine that disperses Gold? It's all about taking advantage of the times, folks... I may have told you this in the Pfennig before, I don't recall, but I use it in my presentation for Gold... Investment in Gold increased 427% last year... To put it into Tonnes of Gold, retail investment purchases of Gold reached approximately 108 Tonnes of Gold in 2008, up from 36 Tonnes in 2007, and 28 Tonnes in 2006!

I was talking with the Big Boss, Frank Trotter, who, by the way scored a goal from about 30 yards out in his soccer match the other day... Ty Keough, our one-time national team player, and long time pro, was quite impressed, and that says a lot, because Ty has seen some soccer in his years... You may know Ty or heard of him... But do you know his dad? His dad is a soccer legend, playing on the U.S. national team that beat Great Briton in the World Cup in the 50's, and then went on to be the winningest college coach, with multiple national championships at St. Louis University...

Oh, I digress, there, I'm so sorry... But once I got talking about soccer, of which I played a ton of in my youth, I just started typing... UGH! Any way, I was talking to the Big Boss, Frank Trotter, the other day, and Frank mentioned that he was concerned that Gold could be the next bubble... I assured him that I didn't see it that way, not until my neighbors are asking if they can buy Gold at $1,200 oz! (I tried to get them to buy it at $800 oz, to no avail!)

Remember when we were kids? No wait, we wouldn't all have been kids at the same time you dufus Chuck! OK, when I was a kid... We used to have these bomb shelters in our schools, and we would practice going into them... It was a different time, the cold war was strong, and the fear was put in all of us toward Russia... I had a teacher, many moons ago, that told the class that it was a good thing that Russia and China didn't see eye-to-eye... Well... I wonder what he thinks about the news that China and Russia have agreed to use each other's currencies and eliminate the use of dollars in their trade?

It kind of feels like Russia and China are ganging up on the dollar!

The other "new kid on the block" Brazil, is joining in with Russia and China... But that news didn't help the Brazilian real yesterday, as it saw one of its worst days in weeks! But that's the real... I watch it trade some days, and your eyes grow very wide open in amazement of the wild swings in this currency. It will move 2-3% in a day, either way, in a heartbeat! Which tells you that the "number of players" in real, is smallish when compared to the second most liquid currency in the world... The euro! So... If you're going to own reals, you need to be aware that it has these wild swings!

Speaking of the euro... It's getting a boost this morning from an improved outlook for risk today, as U.S. stock futures are stronger. The "Big Dog" looks a little tired of chasing the dollar, and then being pulled back on to the porch over and over again recently... But, as always, always I tell you tutor turtle, be yourself... No wait! I always tell you that all this is "noise"... Investment portfolio diversification into currencies and precious metals is a long-term relationship... The dollar didn't lose over 90% of its value overnight! The euro didn't gain over 50% VS the dollar overnight! These things are long sweeping moves, and you have to drown out the "noise"... Otherwise, you'll become a currency and metals "trader", and chasing these assets all over the board!

Pound sterling is getting hit on the chin this morning, as retail sales fell in May, which was the first drop in 3 months... Retail Sales fell .6% in May, and pretty much squashes those so-called "green shoots" that have been talked about for the U.K. economy... I think you can expect to see stuff like this for the next year... Up and down, in and out, green and brown shoots... And... Like I've said before, if it's happening in the U.K. it won't be long before we experience the same, as the U.K. just seems to be ahead of the U.S., time-wise...

The Swiss franc is stronger this morning than recent trading sessions as the Swiss National Bank (SNB) met, left rates unchanged, and made a statement that has given a green light to franc traders to buy... The SNB announced that they were not targeting a specific exchange rate for the currency. You may recall that the SNB had previously stated that they were not happy with franc strength, and had intervened on occasion to keep the currency from strengthening... I would be careful here, as this could be a "trap" Oh, you don't think Central Banks set traps for traders? OK, well, maybe they don't really set a "trap", but they do send mixed messages that cause losses!

Big Al Greenspan was famous for these "mixed messages" that were called "Greenspeak"... After reading two books on Big Al, I can tell you that I personally think that "Greenspeak" was gobble-de-gook! Confuse everyone so they think you are some sort of messiah! Right Big Al? When... In reality, he was just "a guy", who really screwed things up!

Today, we will see the Weekly Initial Jobless Claims, which for me has turned into watching the "Continuing Claims"... This part of the data tells me if unemployed people are being re-hired... I haven't see that happening, as Continuing Claims have continued to grow larger in numbers... We'll also see the Philly Fed Index, (manufacturing)...

The real meat (where's the beef?) will come from a testimony before the Senate Banking Committee by U.S. Treasury Sec. Geithner, on the President's plan to overhaul the U.S. Financial regulatory system... I doubt these Senators will understand what Geithner is talking about, and will "rubber stamp" the plan... Which means, folks... That the Gov't gets its foot in the door further...

I know, I know, I get quite a few emails from people that take exception to me getting upset with the Gov't getting more involved in the markets, etc. as they say, "Yeah, Chuck, and you think the "markets" have done a better job?" Well... The markets are the markets, folks... If left alone, they will act as markets should... What? You didn't like the fact that the Mr. Market, as my friend, Bill Bonner, calls it, turned the whole credit, and deficit spending on its ear? Mr. Market was just trying to correct what was wrong... Getting the Gov't involved is just plain, wrong! One foot in the door... Then next it's the next thing, and the next, and pretty soon, the Gov't is completely in the door, and hanging out on your couch!

Please... These are just my opinions... If you don't like them, you have that right! It is still a free country for speech! Just delete it and go on with your life! OR... You didn't pay anything for all this, that I've been giving to people since 1992...

In Norway yesterday, the Norwegian Central Bank, The Norges Bank, surprised me and the markets by cutting rates 1/4% of 25 BPS... I did say the other day that the Norges Bank was the only Central Bank that was meeting this week, that had some room to cut rates... The Norges Bank did say in their press conference after the rate announcement that rates were at the "bottom" and that they were looking toward the first quarter 2010 as the timing on the first rate hike!

Well, with traders so forward looking, this was good news for the krone, as the rate cuts was quickly put in the rear view mirror, and now everyone is looking forward to higher rates!

And under the heading of "dirty float"... The Reserve Bank of Australia (RBA) is reported to have sold the most A$'s in the month of May, since February 2004! Now, go back to May and recall the move in A$'s... The currency gained almost 10% in the month... So, the A$ would have gained even more if the RBA had not sold A$1.4 Billion A$'s in the month! I personally think the RBA was just trying to smooth out the trading the A$, which given this information would have been moving up the charts with a bullet in May!

I don't think the RBA would get involved if the move was a slow, general appreciation of the currency... So, I don't look for future intervention to keep the A$ from gaining the ground I believe it will gain rest of this year, as inflation fears grow stronger and stronger...

And on that positive note... I think I'll head to the Big Finish!

Currencies today 6/18/09: A$ .7945, kiwi .6355, C$ .8835, euro 1.3935, sterling 1.6260, Swiss .9280, rand 8.1380, krone 6.37, SEK 7.8725, forint 204, zloty 3.26, koruna 19.16, yen 95.80, sing 1.4570, HKD 7.7503, INR 48.25, China 6.8350, pesos 13.46, BRL 1.97, dollar index 80.42, Oil $71.30, 10-year 3.69, Silver $14.25, and Gold... $938.20

That's it for today... That's a pretty interesting story about the Gold vending machine, eh? Here in the office we have one of those "honor snack trays", where people pay for what they take... Can you imagine one of those that had Gold coins in it? HAHAHAHAHA! Another good win for the Cardinals VS the Tigers last night... Of course I can only watch 5 innings or so, before it's bed time. I get up the next morning, and watch the highlights! This weekend is Father's Day... Don't forget your dad! More on that tomorrow... I just love this time of year when the daylight lasts until 9 pm... The daylight lifts spirits, I believe, and now spirits get lifted longer each day! HA! OK... How about making this a Tub Thumpin' Thursday, eh?

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

Currencies Continue to Rally...

Chuck Butler — Fri, 24 Apr 2009 16:08:07 GMT

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

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

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

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

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

In This Issue..

* An auction announcement...
* Euro soars!
* Gold back to $900...
* Who's telling the truth?

And Now... Today's Pfennig!

Currencies Rally...

Good day... And a Happy Friday to you! A Fantastico Friday to boot! I leave for Bermuda very early tomorrow morning, so no late night shenanigans for me tonight! HA! I'm still trying to make sure I've beaten that pneumonia, and being a "good boy"!

Well... Front and center this morning, we have a Big currency rally going on... Recall yesterday, I told you of the beginning of the rally... Well, it really got legs as the day went on, and once again, it was not sold off overnight, but added to! Here's what I believe, and you won't see this anywhere else, my friends, is moving these currencies so violently higher VS the dollar...

First, let me set the stage... I've been carrying on about how the Deficit Spending here in the U.S. was going to require a TON of Treasuries to be sold to finance that Deficit Spending... I even told you the other day that the U.K. Gilts were getting clobbered because of the largest Budget Deficit in the U.K. since World War II, and that what happened in the U.K. had been carrying over to the U.S.... OK... Got the picture, right?

Well... Yesterday morning the U.S. announced that they would sell Treasuries in these amounts, and tenors... $40 Billion 2-year, $35 Billion 5-year and $26 Billion 7-year next Monday, Tuesday, and Wednesday respectively... OMG! That's over $100 Billion in new Treasury issuance that the markets are going to have to digest... Is it the straw that breaks the proverbial camel's back? Are the markets saying, "we don't believe you will be able to successfully auction that amount without aggressively raising the yield?" I think so... Now, see if CNBC, MSNBC, FBN, CNN or any of the other media stations run this story!

There's nothing else THAT BIG that could have moved the euro like this... Oh! I haven't even told you where the single unit is trading this morning! My Bad! 1.3230! That's right... It skipped to my Lou right through the 1.31 handle, like a hot knife goes through margarine! The euro did get an additional boost this morning when it was announced that German Business Confidence, as measured by the think tank IFO, rebounded from a 26-year low this month...

So... Let's slow down, those beginning paragraphs have me out of breath! OK, I'm calmed down now... So, let's look around the horn to see what the other currencies are doing, now that the BIG DOG, euro has left the porch to chase the dollar down the street. Well, the usual suspects like the euro-alternative currencies like Norway, Sweden, Switzerland are all much stronger VS the dollar this morning... And a look to the High Yielders, shows that they too have moved in step with the Big Dog.. Aussie, kiwi, rand, and real are all taking liberties VS the dollar.

There's another high yielder that I don't talk about all the time, and the last time I did, I gave it the kiss of death, watching it fall a couple percent after I mentioned it... The Indian rupee... Well... The rupee is on the rally tracks again, and this time, someone other than me is noticing... The folks over at Reliance Equities International have noticed that the Indian stock market has risen for 7 straight weeks, and believe that they will see additional flow into this market... Therefore they believe the rupee may be in store to gain 6.7% in the coming weeks... Now, for you big swingers out there... 6.7% probably doesn't even show up on your radar... But for all the rest of us, worried more about the "Return of Capital, rather than the Return on Capital" these days... That doesn't sound too shabby!

On the data front yesterday we had the Initial Weekly Jobless Claims, which came in as expected, which doesn't make it any better! The total of unemployed people filing claims last week totaled 640,000! Something that most people don't look at, but I've trained the folks here to do, as Chris Gaffney yelled out yesterday morning... "Continuing Claims are awful, they have risen to 6,137,000!"

Existing Home Sales continued to show the housing markets is still in search of a bottom... Existing Home Sales fell 3%, and the home prices continue to fall with the median price down 12% from a year ago... The other day, I made a statement that I should have been taken to the woodshed for... I said that with interest rates this low, people should be taking advantage of them and buying those houses now... But... As I keep saying, home prices will continue to fall... So why buy now if you can get it cheaper tomorrow? Sorry... What I should have said was to refinance now is a very good idea!

In Canada yesterday... The Bank of Canada (BOC) explained the details of Quantitative Easing "should they need it"... That was HUGE for the loonie, as the BOC hasn't implemented this monetary policy yet... They just have it ready and on the shelf should they need it... Good plan!

Another item that has helped to boost the loonie (Canadian dollar) was a report yesterday that showed Retail Sales unexpectedly rose .2% in February... Geez Louise, can't they get this data on a more timely basis? February seems like a month of Sundays ago to me! Any way, the Canadian economy does have a pulse... And that's a good thing!

Gold didn't like the color of the Treasury Auction announcement yesterday either, and the shiny metal pushed back over $900 once again. Oh... And here's a story that just hit the news wires this morning... It is reported that China has increased their Gold holdings 76% to the 5th Biggest Country (of Gold holdings). China increased their holdings from 454 Tons to 1,054 Tons... For those of you keeping score at home that's $31 Billion dollars worth of Gold!

OK... Before we head to the Big Finish today... Have you heard or seen the story going around about Bank of America's (BOA) purchase of Merrill Lynch (Merrill)? OMG! This is HUGE! BOA's CEO, Ken Lewis testified this week and said that Fed Chairman Ben Bernanke and then-Treasury Department chief Henry Paulson pressured Bank of America to not discuss its increasingly troubled plan to buy Merrill Lynch -- a deal that later triggered a government bailout of BOA... Now, all my licenses in the brokerage business tell me that that's a HUGE NO-NO! A Company is supposed to alert their shareholders of any materially significant financial hits... If I were a shareholder of BOA, I would be steaming mad right now! As a market participant it still ticks me off!

Now... Here's the latest from the Wall Street Journal this morning... "The Federal Reserve didn't advise Bank of America or CEO Ken Lewis "on any questions of disclosure," a spokeswoman for Fed Chairman Ben Bernanke said."

Oh Great! Now we have a "he said - no he didn't" scenario! That's their plan folks... Attempt to confuse the masses, throw up smoke screens, and maybe it all goes away... Not on my watch! We need to know who's telling the truth!

And one of the things they will use to direct everyone's attention away from this awful thing, is... Drum roll please.............. The Stress Tests! That's right! They are supposed to be talked about today... I still hold to my beliefs that we won't really be told the truth about these 19 largest banks... I can only hope to be wrong!

Oh, and one more thing... A reader asked me why I never talked about Silver, always choosing to talk about Gold... Hmmm... I guess it's sort of like the Paris Hilton thing... Or let's see what else could I compare it to.... Any way, I don't mean to short change Silver, when I talk about Gold you can believe that it includes Silver... Imagine my poor fat fingers if I had to type Gold and Silver every time I talked about Gold and Silver...

And... On that note... Time to go to the Big Finish!

Currencies today 4/24/09: A$ .7185, kiwi .5680, C$ .8225, euro 1.3250, sterling 1.4625, Swiss .8775, rand 8.8550, krone 6.5650, SEK 8.20, forint 223.40, zloty 3.4150, koruna 20.1950, yen 96.88, sing 1.49, HKD 7.75, INR 49.88, China 6.8272, pesos 13.12, BRL 2.2050, dollar index 84.78, Oil $49.91, Silver $12.82, and Gold... $911

That's it for today... And for me for the next week! Chris Gaffney will have the conn on the Pfennig next week. I'm very excited about going to Bermuda, although it looks like the good folks at the Sovereign Society are going to keep me busy! Cardinals sweep the Mets! Wow! That has a great sound to it... The Cubs come to town tonight, it sure would be sweet to sweep them too! But that's getting greedy, I would be giddy with 2 of 3! Tomorrow is the draft for the NFL, the Rams have the second pick... Memo to the Rams... Don't blow it! An absolutely beautiful day here yesterday... My dad used to say to me when it would be blue skies, sunny, warm days... He would say... "Chuck, they don't have days like this in the Soviet Union"... I use that saying with my kids, and they look at me like I should be wrapped in a white suit! OK... Time to go... Hope all's well with everyone, and you have a Fantastico Friday!

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

Throwing A Cat Among The Pigeons...

Chuck Butler — Tue, 07 Apr 2009 13:17:10 GMT

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

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

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

In This Issue..

* Risk Aversion returns...
* RBA cuts 25 BPS...
* Eurozone recession deepens...
* Oil backs off...

And Now... Today's Pfennig!

Throwing A Cat Among The Pigeons...

Good day... And a Terrific Tuesday to you! OK... I'll get to Opening Day in the Big Finish today, first, and foremost, I need to tell you about a guy that really threw a cat among the pigeons yesterday, causing a BIG scare and sell off of risk assets... Currencies that is...

His name is Mike Mayo, and he used to work at Deutsche Bank, and now is a banking analyst at Caylon Securities... And brother can he ever move a market! To make a long story short... Mr. Mayo basically said yesterday in a report that "Bank Loan Losses Will Exceed Depression Levels"... So, all that James Brown, feeling good, that went on last week with the G-20 singing everything is beautiful, all went down the drain after Mr. Mayo spoke...

The Wall Street Journal printed the following.... "One reason why he (Mayo) believes the banks will face more pressure is because the legacy loans they hold on their balance sheets have not been marked to market - he estimates the marks at about 98 cents on the dollar, a much higher estimate than what others would come up with.

We see more downside with government programs regarding those bank stocks with more traditional banking since this business - aside from when involving an acquisition - is not marked to market," he writes.

As a result, he believes the government's help will either result in rosier-than-expected projections that allow the banks to maintain their unwanted assets on their balance sheets, or hammer them with demands for more capital, which will "hurt traditional banking more."

>>>>> OK.. Back to me... I want to make perfectly clear that Mr. Mayo isn't talking about banks that did things right (Like EverBank!) and didn't get caught up in the "fee income mania" that the money center banks did.... The currencies got caught up in the tidal wave of risk assets being sold. The euro, which on Sunday night was 1.35 when I wrote yesterday morning, traded all the way down to 1.3365 at the end of the day. And in the overnight market saw even more selling back down to 1.3275...

Of course the news this morning that the recession in the Eurozone is deepening... And that the Reserve Bank of Australia (RBA) decided to come back to the rate cut table, and cut 25 BPS, or 1/4% from their internal rate of, making it the lowest its been in 49 years!

You may recall that the RBA had skipped coming to the rate cut table at their last meeting, and there was hope that they had completed their rate cut courses at the table... Apparently not! The good news for the A$ is that the 1/4% is less than some traders were thinking the RBA might cut, so the A$ has been able to hold off the major selling...

While I'm "down under"... A reader asked me my opinion on the New Zealand dollar / kiwi... Well, my opinion hasn't changed... New Zealand has too much debt, period. Yes, when the high yielders were rallying during March, kiwi was right there among them... But, as soon as you see any move toward Risk Aversion, kiwi gets hammered more than A$'s...

OK, back to the Eurozone and their deepening recession... An unexpected downward revision to Eurozone 4th QTR GDP put additional pressure on the euro. Final data showed GDP contracting 1.6% in the 4th QTR. But... Just like I keep saying over and over again, their problems aren't as bad as ours!

I hear people on the speaking circuit point to Ireland and the fact that this country might default... Look! It's just like here in the U.S. Ireland is a "state" of the European Union, just like California is a state of the U.S.A. And someone is going to tell me that Ireland's problems are on the same scale as California's? Let me remind you that California was once and probably still is a top ten economy in the world!

These Euro bashers also point to the Eastern European Banking problems... And at one time I too feared what might come of this... But... When you hear stuff like what Reuters reported yesterday from the European Central Bank's (ECB) minister, Nowotny, you have to think about changing your mind... Reuters had this headline "ECB'S NOWOTNY SAYS NOT ECB'S JOB TO INTERVENE TO SUPPORT E.EUROPE CURRENCIES"

OK... I don't want to get into a you know what contest with the euro bashers... Just wanted to make my opinions clear on the subject... I look at it like this... As long as there are people on the other side of the fence, it makes for a great trading market! You wouldn't want everyone on the same side of the fence...

So, in the cat and mouse game that goes on with currencies when Risk is taken off the table... The Japanese yen rallied... It's been this way for months now, no reason for it to change now!

Gold, certainly has taken it on the chin lately, falling back below $900 the other day, and struggling to maintain a bid... The shiny metal has caught a bid in the overnight markets showing a nice $9 gain... But, you know those wild swings in Gold could wipe that out in a NY minute... And then again, it could add to those gains in a NY minute also... The good news though is that it did catch a bid this morning...

Have you seen the price of Oil falling again? Yes, Jed Clampett's bubbling crude, black gold, Texas Tea, has fallen back to $50.50... When the price of Oil weakens, it adds pressure to the "petrol currencies"... And our fave there is Norway... The krone, called the "safest currency in the world" by Time last month, has lots of price determinates, but the biggest is the price of Oil... So, those lofty levels the krone was enjoying yesterday morning, have backed off... But hey! Doesn't that mean it gives a buyer a cheaper level to buy? Of course it does, Sherlock!

And speaking of currencies influenced by Oil... The Canadian dollar / loonie is also in that basket... And as long as Oil is as cheap as it is (compared to last year), the loonie will struggle... It's a currency that likes to get "juiced" by energy prices... And with Oil down, and natural gas down... The loonie doesn't get to party like it's 1999!

The Mayo letter really spooked the markets yesterday, and we saw them slip back into the Trading Theme of last year for the day... Remember? Whenever the deepest, darkest, most dangerous data printed for the U.S. economy, the dollar was rewarded... Sort of like a Twilight Zone episode it's so strange, but it was true... Let's hope this trip to the Twilight Zone is but a brief stay, and it goes away before we are saying...
Help, I'm stepping into the Twilight Zone
The place is a mad-house, feels like being cloned
My beacon's been moved under moon and star
Where am I to go now that I've gone too far

Currencies today 4/7/09: A$ .7090, kiwi .5770, C$ .8025, euro 1.3265, sterling 1.4650, Swiss .8730, rand 9.1470, krone 6.6525, SEK 8.2215, forint 223.50, zloty 3.3770, koruna 20.0425, yen 100, sing 1.5130, HKD 7.7510, INR 50.02, China 6.8365, pesos 13.77, BRL 2.2225, dollar index 85.38, Oil $50.50, Silver $12.27, and Gold... $880.76

That's it for today... Well... Opening Day in St. Louis was freezing cold, with snow flurries flying around. But... I got to watch the game with my little buddy, Alex, and see the procession of cars carrying my beloved Cardinals into the stadium. The Cardinals lost the game in the 9th, a problem they experienced about 31 times last year! Let's hope it's not a sign for this year! UGH! I also spent some time with my good friend, Rick, before the game, so that was fun... So... Back in the saddle now for a few weeks... This will feel good, not as good as it felt to sit on the balcony facing the ocean on Singer Island for 3 weeks, but... Good... I tell you though, and I go through this every year after vacation, each year, I get closer to retirement I can feel it in my bones! I can still write in retirement! OK... So Mother Nature was not kind to us for our Opening Day... No biggie, I think it was Nature's Way of telling us something's wrong! Playing baseball in 38 degree weather is wrong! Oh! Congrats to North Carolina on their NCAA Basketball Championship won last night, while I was watching 24! They were led by a kid from Missouri! OK... I'm out of stuff here, so I'll get to the pile of papers on my desk... I hope you have a Terrific Tuesday!

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

ECB rate decision looms...

Chuck Butler — Tue, 31 Mar 2009 14:46:52 GMT

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

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

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

* ECB rate decision looms...
* China pushes for a bigger seat at G20...
* Declining global reserves hurt US Treasuries...
* Commodity currencies come back...

And Now... Today's Pfennig!

ECB rate decision looms...

Good day... The dollar held on to its gains through out most of the day yesterday, as investors continued to look for a parking place in the volatile markets. But late in the day, the sentiment changed and the dollar started getting sold vs. most of the currencies. This dollar weakness continued overnight with the Euro gaining back 1 cent to trade back above 1.33 and the commodity based currencies of Norway, New Zealand, Australia, and South Africa all gaining over 1 percent vs. the greenback.

What caused this sharp turn around? I had to look hard to find anything which set this reversal in motion, and could only find references to the upcoming ECB rate decision due on Thursday. The euro had come under selling pressure the past few days as currency traders bet the ECB would be cutting rates by 50 basis points on Thursday. This cut would, of course, narrow the yield advantage the Euro holds over the US$ and therefore make it less attractive to investors. There were also many who believed the ECB should follow the path of the US, UK, and Japan and begin using quantitative easing to further force down rates.

But rhetoric out of the ECB late yesterday seemed to indicate the ECB would be reluctant to cut rates or follow up with untested 'quantitative easing'. The ECB will stay focused on maintaining price stability in the Euro region, and not get pushed toward using new and untested efforts to flood the markets with liquidity. The markets have now priced in a rate cut by the ECB later this week, and will be analyzing the accompanying statements to try and determine if additional rate cuts are planned.

Last week I touched on China's call to replace the US$ as the international reserve currency. Indonesia, Malaysia, and Thailand quickly came out in support of China's call for a new global currency in order to insulate the world from a deep recession in the US. Russia soon followed with a proposal of its own calling for a conference to draft new international agreements on global monetary and financial policies, including a new global accounting unit or a new global currency. Even the new US Treasury Secretary said it sounded like a good idea, but quickly corrected himself to assure the markets the US$ is still the one and only reserve currency.

Several Pfennig readers have written me asking more details about this new currency. Is it the Amero? Not hardly. What China is suggesting is an expansion of the use of something called special drawing rights (SDRs), which were introduced by the International Monetary Fund back in 1969. These drawing rights were issued to support the Bretton Woods fixed exchange rate regime which collapsed in the 1970s. The value of these SDRs are based on a basket of four currencies, the US$, yen, Euro, and Sterling. China has proposed expanding this basket to include the currencies of all major economies. Countries would entrust a portion of their SDR reserves to the IMF. The value of these SDRs would float with the broad basket of these currencies, and the SDRs would eventually replace existing reserve currencies.

Obviously, the introduction of this new global currency would be devastating for the value of the US$. Countries, who are now obliged to invest a majority of their currency reserves into the US$ would no longer have to buy them. And the US treasury market, where much of these reserves are parked, would also suffer. As I said when the story first broke, I don't think this poses an immediate danger to the US$, as the proposal would require unprecedented cooperation among global trading partners; and the US is going rally support to fight it. But it is something to keep an eye on, as it was met with a surprising amount of support.

I don't think it is any coincidence that the timing of this proposal by China coincides with the upcoming G20 meeting. China has been happy to grow their economy while mostly maintaining a lower profile at most of these economic summits. It now looks like China will be demanding a more prominent seat at the table. And justifiably so, as they recently overtook Germany to become the world's third largest economy. They also hold more than a few US Treasuries, giving them even more power at the table. The suggestion of replacing the US$ as a reserve currency was definitely a shot aimed at the big dog on the porch, and the US isn't in the best shape to defend itself right now.

While this proposal for a new 'global reserve currency' has received a lot of press not much has been written about the impact of the global economic slowdown on overall currency reserves and the resulting impact on the US treasury market. China and Japan stockpiled huge reserves on the back of the US consumers, who eagerly bought goods produced in Asia. But US consumers are cutting back, and global trade has slowed dramatically as a result. Both Japan and China will therefore have smaller trade surpluses in 2009, and less money to invest back into the US treasury market.

Unfortunately, this fall in global reserves coincides with a big increase in funding requirements by the US Treasury. Funding requirements of all of the stimulus packages will dictate trillions of dollars worth of new supply. The US government and Federal Reserve have now spent, lent or guaranteed $12.8 trillion in their attempt to get the US economy back on its feet. Even the planned $300 billion of purchases by the Fed won't put much of a dent in that supply. With less buyers chasing more supply, the price of these Treasuries will fall, and rates will rise. Foreign investors will need to be enticed into purchasing this new debt, and the sweetener will be a fall of the value of the US$.

This decrease in overall reserves available for investment into the US treasury markets is probably a bigger threat to the US$ than the institution of a new global reserve currency. While the new reserve currency is still a possibility, the reduction in global reserves, and the subsequent drop in US treasury purchases is a reality.

As I mentioned in the first paragraph, the commodity currencies were the big gainers overnight, with the Aussie and New Zealand dollars jumping over a cent vs. the US$. The precious metals and oil all traded higher, providing additional support to these currencies. With oil moving higher, the Norwegian Krone move up over 1% vs. the US$.

The markets are mainly concentrating on the ECB rate decision and talk of what will come out of the G20 meetings later this week. Data released this morning in the US will confirm house prices in the US continue to drop. The CaseShiller Home Price index is expected to show a drop of over 18%, but this number reflects January sales, and won't confirm or reject the better numbers released for February. We will also get two separate measures of Consumer Confidence in the US, both of which are expected to show further deterioration of consumer attitudes. Tomorrow will bring additional data on the housing and automobile industries in the US, neither of which are expected to show signs of a turnaround.

I wanted to write a bit about the expected outcomes of G20, but my workout ran a bit over this morning, so I'll keep that for tomorrow. Now on to the currency wrap-up:

Currencies today 3/31/2009: A$ .6908, kiwi .5701, C$ .7991, euro 1.3294, sterling 1.4282, Swiss .8765, rand 9.5533, krone 6.7387, SEK 8.2517, forint 232.54, zloty 3.5326, koruna 20.64, yen 98.30, sing 1.5206, HKD 7.7502, INR 50.825, China 6.8339, pesos 14.2218, BRL 2.331, dollar index 85.35, Oil $49.23, Silver $13.125, and Gold... 918.60

That's it for today... I have two of the four remaining teams in our office NCAA bracket, with UCONN and MICH STATE. I have to thank Mike Meyer for the picks, as I was in Florida when they drew teams. The great thing is I am guaranteed to be in the finals, as these two teams play each other on Saturday. Busy day on the desk yesterday, the metals calls continue to dominate our phones. Looks like another rainy spring day here in St. Louis, I guess that is better than the snow we got this weekend! Less than a week until opening day here in St. Louis! Hope everyone has a terrific Tuesday!!!
Chris Gaffney, CFA
Vice President
EverBank World Markets
1-800-926-4922
1-314-647-3837

UK data boosts the dollar...

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

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

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

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

In This Issue..

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

And Now... Today's Pfennig!

UK data boosts the dollar...

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The Treasury Secretary rides to the rescue...

Chuck Butler — Tue, 24 Mar 2009 14:58:15 GMT

.........But First, A Word From Our Sponsor..........
Our 3rd Quarter numbers are in. And the news-as expected-is quite good.

Thanks to our balanced business model, EverBank® continues to grow and prosper despite challenging market conditions. During the 3rd Quarter of 2008, we solidified our place as one of the nation's strongest and most stable banks. We achieved:
*Record year-to-date deposit growth: $392 million
*Record year-to-date earnings: $23.9 million
*Record total assets: over $6.5 billion

While other banks and financial groups are struggling right now, the EverBank family is prospering. We're well-diversified, we've never engaged in subprime lending and we've got smart, dedicated folks working for us. Take advantage of our strength and stability. Visit http://www.everbank.com/?referid=11808.

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

* Geithner rescues the stock market...
* Commercial real estate, the next big drag...
* Norway: the new safe haven...
* China pushes for a new reserve currency...

And Now... Today's Pfennig!

The Treasury Secretary rides to the rescue...

Good day...

It was a dramatic day on Wall Street yesterday, with the major stock indexes surging as much as 6 percent, including the Dow Jones which jumped more than 400 points. The reason for all of this euphoria on Wall Street? A combination of Geithner's plan to rescue the banks from the toxic debt in which many are mired, and a surprisingly large uptick in existing home sales. I touched briefly on the Giethner plan in yesterday's Pfennig and readers know I am more than a little skeptical about its possible success.

But the housing numbers really caught me off guard. Existing home sales jumped a tremendous 5.1% in February, clearly above all expectations. But Chuck pointed out that the almost 1/2 of the sales were either foreclosures or short sales, hardly what you would call a "rebound" in home sales! And these additional existing home sales came at deep discounts. The median price for an existing home fell 15.5% in February 2009 to $165,400 as compared to $195,800 in February of 2008.

Investors are desperate for any sign the housing crisis may be coming to an end, so the housing report was greeted with enthusiasm in the markets. This is the second positive report for housing in the past two weeks, as Mike reported housing starts for February came in much better than expected last week. I don't mean to rain on everybody's parade, but this is looking a lot like a sucker's rally to me. Traders had become overly pessimistic, and traders who don't want to miss out on the next big rally jump back into the market on the smallest kernel of good news. Unfortunately, I don't think the good news will continue.

I don't expect today's housing data to surprise the markets, as we will see the House price Index which is expected to have fallen by almost 1% MoM. We will also get the ABC Consumer Confidence number which will likely show a another drop. Tomorrow will bring more negative data with the release of Durable goods orders here in the US which is expected to show a drop of 2.5% in February after a 5.2% fall in January. More housing numbers will be released on Wednesday which could confirm yesterdays surprise uptick in the housing market. Thursday will bring us the big kahuna for the week, with the release of 4th quarter GDP along with the weekly jobless claims.

I got a call mid morning from another WSJ reporter by the name of David Gaffen who wanted to know what the new Tarp plan meant for the dollar. In particular, he wanted to know why the dollar was rallying at the same time we were seeing a major rally in stocks and a sell off in bonds. I explained to him that today's movements just didn't fit the 'normal' trading pattern which we had established for the dollar. The equity markets looked like investors were confident that the Geithner plan would finally thaw the credit markets. But if investors confidence was returning, why was the dollar strong? Well the explanation was pretty simple: investors were taking profits from last week's dollar weakness, and moving these profits back into the stock market. I explained that this move wouldn't have legs, and the dollar will likely see more selling over the next few days. You can read the entire article by David Gaffen at http://blogs.wsj.com/marketbeat/2009/03/23/the-new-tarp-good-or-bad-for-the-dollar/.

Yesterday afternoon I spoke to a gentleman who is a 'workout' expert for commercial real estate. Banks seek out his expertise in turning around failed or near failing commercial properties. Needless to say, business is booming, and in his opinion it will only get better. He says banks have been knocking down his door to try and help them 'work out' of some major commercial projects. He predicts that during the next several months we will begin to hear about some major commercial projects going belly up. I know commercial real estate is already starting down in the St. Louis area, but he claims this is only the beginning. Many of these projects have been just hanging on, hoping consumers will return with Obama's second stimulus. But the newest stimulus doesn't put money in consumers hands, so these commercial projects will have to fold.

While the housing market is showing some indications that a bottom could be near (not in my opinion, but some data does look positive), the commercial real estate market is just beginning its dive. Banks who are finally ridding themselves of toxic home mortgages will now have to deal with even more toxic commercial loans.

So what did all of this new found excitement on Wall Street do to the currency markets? As I mentioned earlier, the dollar began the day weaker; probably due to profit taking. As the day wore on, investors started to return to the higher yielding currencies, with Australia topping the return charts again. This was the 10th day in a row for gains in the AUD$ vs. the US$, its longest winning streak since October 2007. The relatively high yields available in Australia combined with improved commodity markets are the major reasons for the continued strength of the Aussie dollar.

Both the New Zealand dollar and Swedish Krona were also stronger, rising over 2% in the past 24 hours. The Canadian dollar extended its two week advance vs. the US$ jumping up an additional 1.5%. Even the Brazilian real, which had been slipping lately enjoyed a day in the sun. Much of this recent strength is related to the beginning of a commodity rebound. Precious metals and oil have both rebounded recently with the prospect that global demand will begin to pick up later this year. Continued investment into infrastructure improvements should help revive demand, as the US and China have announced plans to spend $1.4 trillion on roads, bridges, schools, and hospitals. Crude oil has rose to the highest level in almost four months, another good sign for commodity based currencies.

But commodity prices are the only thing stoking this latest commodity currency rally. With the Fed turning toward additional stimulus in the form of quantitative easing, currency traders are looking toward countries who are maintaining current interest rate levels. With deflation seemingly taking a back seat, and inflation coming back into the picture, countries which have resisted dropping rates to near zero have much better prospects. These include some of our favorites including the Australian dollar, Swedish Krona, and Norwegian krone.

An associate of mine, Keith Rigdon, sent me an article which appeared in the online version of Time magazine yesterday. The article's title says it all: "Why the Norwegian Krone is the World's Safest Currency". The article, written by Adam Smith, draws heavily on research done by HSBC. The main reasons given by HSBC are well known to Pfennig readers. "Norway's budget and current-account surpluses are the biggest among nations with the 10 most traded currencies. Factor in the country's $350 billion sovereign wealth fund pumped full of the country's oil revenues, and the cost of insuring against government default in Norway - a key measure of a currency's safety - is the lowest of those countries" writes Smith.

According to the article, the series of interest rate cuts over the past several months have started to work. This "makes it unlikely Norway's central bank will need to revert to quantitative easing, the modern day equivalent of printing money that's currently in fashion from the US to the UK." According to HSBC, "the Norwegian krone is probably the best currency in the world."

You can read the full article at the following URL: Http://www.time.com/time/business/article/0,8599,1887090,00.html

China's central bank Governor Zhou Xiaochuan was in the news again yesterday. He suggested the IMF should look to create a 'super sovereign reserve currency' that is not connected to any individual nation. Sounds like China is continuing to look for alternatives for their $1.95 trillion of reserves. They will present their proposals to reform the IMF at next month's Gorup of 20 meeting. While a super sovereign reserve currency is probably a ways away, it is obvious that China is wanting to find alternatives to their huge investments in the US$. Not a good sign for the green/peachback.

Going a little long this morning, so I'll get to the currency wrap up now:

Currencies today 3/23/2009: A$ .6994, kiwi .5654, C$ .8160, euro 1.3535, sterling 1.4666, Swiss .8878, rand 9.4611, krone 6.3442, SEK 8.0223, forint 222.38, zloty 3.3544, koruna 19.8690, yen 98.07, sing 1.5097, HKD 7.75, INR 50.66, China 6.8295, pesos 14.247, BRL 2.2449, dollar index 83.84, Oil $53.40, Silver $13.51, and Gold... 930.43

That's it for today... We had another beautiful spring day here yesterday. Got home and actually had to cut the grass for the first time. I also began my annual battle with the moles which seem to multiply each winter! Those little guys can sure tear up a lawn in a hurry. Today we are supposed to get a batch of spring thunderstorms, and the weatherman is actually saying we may see a light dusting of snow by the weekend. Crazy spring weather! Hope everyone has a Terrific Tuesday!!

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

A Horrific Jobs Report!

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

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

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

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

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

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

In This Issue..

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

And Now... Today's Pfennig!

A Horrific Jobs Report!

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Shrove Tuesday!

Chuck Butler — Tue, 24 Feb 2009 14:25:56 GMT

In This Issue..

* No follow through on the Eurozone bond idea...
* Mirror, mirror on the wall...
* AIG to set record for losses...
* Finding another Pfennig Reader!

And Now... Today's Pfennig!

Shrove Tuesday!

Good day... And a Terrific Tuesday to you! A Shrove Tuesday to boot! Shrove Tuesday you say with a tone of thinking that I have made up another word for a day? Yes... Shrove Tuesday! For Catholics in some regions of the world (Ireland originally), the day before Ash Wednesday is Shrove Tuesday... Or here in the U.S. it's Pancake Day! You see, long ago, pancakes would be served up on this day as a popular way to use up fat, butter and eggs before Lent got underway. So... Happy Shrove Tuesday!

Well... The Eurozone bond story that I brought to you yesterday failed to materialize yesterday, recall I told you that Germany was against the idea, and this failure to launch... Pushed the euro back down from the high 1.29 handle late Friday afternoon, to the 1.27 handle this morning... I see where the euro has rebounded back above 1.28 as I went through the explanation of Shrove Tuesday, so at least it shows a pulse every now and then!

The Risk Takers have crawled back under rocks and into the walls again, as Risk Aversion weighs heavily on the currencies... I saw a headline this morning that made me laugh out loud... Some writer believes that the "Dollar Is Best Looker in Ugly-Currency Parade"... Hmmm, apparently he didn't take the time to look at Norwegian krone! Now, here's my version of Mirror, mirror on the wall...

Long time readers know my affection for the Surplus / Positive Balance of Payment countries and their respective currencies... Norway, always drifts to the top of those discussions, and then last night I came across a report by the research team at HSBC that graded the currencies... Their pick for Best Currency? Norway... Now, I can't give you all the results of their report (It's THEIR REPORT!) but, the note that was on the internet is up for grabs, so lets listen in to the research team at HSBC....

"The world is in total flux and, as such, we have released our new interim forecasts for the global economy today. Based on these numbers, which make depressing reading, we look at who comes out the best amongst the G10. We give all the variables an equal weight. We could have quite easily given CDS spreads a higher weight, which we believe is a key driver of the FX market at the present time, but even with equal weights the answer is still the same - Norway wins hands down. In addition, the JPY and the CHF are both losing their safe haven status and the best safe haven currency is the NOK. The NOK is our preferred G10 currency where we expect a sustained appreciation over the next 18 months."

OK... NOK is Norwegian krone, JPY is Japanese yen, and CHF is Swiss francs... Just to make that clear...

So... I my colors are already pinned to Norway's mast... Has been, and will continue to be, until something changes...

Now that I've said all that, I will say this just to make the Legal Beagles happy with me (yeah, like they're ever happy with me!) And that is, simply this is a fundamentals choice, and has been... You can go back to the start of 2006, when we issued a 20 year anniversary for World Markets newsletter, and in it, I talked about the Surplus countries being at the top of my Hit Parade... And which Surplus Country was the first one I mentioned then? Norway... But to carry on with the Legal stuff... Again, this is a fundamental choice, there are times the markets do NOT follow fundamentals, and fundamental choices do NOT perform.

And with a currency like Norway... It really needs the euro to be underpinned for the krone to outperform the single unit... So... All, I'm really saying here is that the dollar isn't the "Best Looker" in my opinion... That claim to fame would be Norwegian krone!

Whew! That was a long talk, and my fingers are tired... I'll have to give them a break here for a minute... Hold on, I'll be right back!

OK, I'm back now! Hope you didn't miss me! HA! This morning, the euro saw some selling based on a rotten German Business Confidence report that was issued by the think tank, IFO... The rot on the German Business Confidence vine wasn't that bad compared to last month, as the index fell from 83 to 82.6, but it was enough, when added with the fact that the Eurozone bond idea fell apart, to kick some sand in the euro's face this morning. It was also a 26-year low for the report...

In further evidence that Japanese yen is losing its grip on the claim of "best performing currency", the yen has fallen to a 12-week low this morning of 95.60... I began writing about the possible end of the Carry Trade Unwinding a couple of weeks ago... And since then more and more evidence to prove that thought has come about. Some traders and writers believe the yen's weakness has to do with it losing it's "safe haven allure"... While that's all fine and dandy, I truly believe it has more to do with the end of the Carry Trade unwinding...

Now, here's a guy that's been reading the Pfennig and probably the Review & Focus, and might even subscribe to my "pay for" newsletter, The Currency Capitalist, for listen in to what he's saying and see if any of it sounds familiar... It should! This story appears on Bloomberg...

"LGT Bank in Liechtenstein (Singapore) Ltd., part of the bank for the wealthy owned by Liechtenstein's royal family, is favoring gold and shunning Treasuries because of the risk inflation will quicken.

U.S. government and Federal Reserve efforts to snap the recession in the world's biggest economy will push up prices for goods and services, said Hans Goetti, who oversees $10 billion in Asia as LGT's chief investment officer. President Barack Obama's spending plans will force the government to borrow more, another reason to stay away from Treasuries, he said.

We are setting ourselves up for inflation maybe 12 to 18 months from now, Goetti said. The borrowing requirement will go up. There's no doubt. I cannot see bond yields staying at these levels."

>>>>> Hmmm... Yep, he's a "reader"!

OK... I've been on the soapbox many times on this bailout of AIG that happened last year... Well, as a taxpayer, you had better get pretty darn upset with this latest news... A reader sent me this story so I wouldn't miss it!

"American International Group Inc., the insurer bailed out by the U.S., may restructure its rescue package for the second time in four months as the recession forces down the value of the firm's assets.

AIG may announce that it is converting the government's preferred shares into common stock to relieve pressure on the New York-based firm's liquidity, a person familiar with the situation said. AIG pays a 10 percent dividend on preferred stock, and none on common shares."

OK... So, AIG wants to bleed slower than the current pace... So... The Gov. owns the preferred shares, but would see their return reduced by 10%, if AIG converts their preferred shares to common shares... Doesn't this just tick you off? Oh, and before I go on... Sources close to the company (AIG) said the loss (when reported next week) will be near $60 billion due to write downs on a variety of assets including commercial real estate. That number, if it prints at $60 Billion will se a record for the largest loss in U.S. Corporate History!

Alright, I had better stop there... You see what I keep talking about though? You apply a tourniquet to a bleeding company, and sooner or later they'll come back and need more...

Speaking of tourniquets... The stock markets of the world need one badly... Here in the U.S. yesterday, the DOW fell to its lowest closing level since May 1997 as stocks dropped across the board on fears that the recession will worsen. The S&P 500 dropped 3.5% to its lowest close since April 1997.

Personal wealth is falling down a hole... And suddenly people look up and say..."if I had only saved more money instead of trying to be the next Warren Buffett!" Things are falling apart all around... Clowns to the left of me, jokers to the right...

A month or so ago I went off on a tangent about how I felt a lot of all this mess with financial instruments that have failed, came about... And my words pale in comparison to those of former Fed Chairman, Paul Volcker, who summarized this failure of these instruments in a recent speech... Here's Paul Volcker...

"There was so much opaqueness, so many complications and misunderstandings involved in very complex financial engineering by people who, in my opinion, did not know financial markets. They knew mathematics. They thought financial markets obeyed mathematical laws. They have found out differently now. You know, they all said these events only happen once every hundred years. But we have "once every hundred years" events happening every year or two, which tells me something is the matter with the analysis."

That's right! That's my feelings in a nutshell! And it's such a shame... OK, I've got to get to something that lifts my spirit this morning... YES! Let's talk about Gold!

As I signed off yesterday, Gold was trading down on the day at $986... The shiny metal then rallied on the day back to $995, but has seen more profit taking overnight to $990... And now $989, as I glance at the screen. Recall when I kept mentioning and even gave the "wink, wink" that Gold was "still" trading below $900? Well... A couple more days of this below $1,000 trading, and I'll be tempted to wink again!

Currencies today 2/24/09: A$ .6490, kiwi .5110, C$ .80, euro 1.2790, sterling 1.4525, Swiss .8640, rand 10.0725, krone 6.8120, SEK 8.8250, forint 233.40, zloty 3.6690, koruna 22.2325, yen 95.80, sing 1.5270, HKD 7.7530, INR 49.86, China 6.8375, pesos 14.97, BRL 2.3810, dollar index 87, Oil $38.50, Silver $14.44, and Gold... $989.60

That's it for today... Well... How about those Missouri Tigers? #8 in the country! But, they have some dates on their upcoming schedule that could put a dent in that lofty ranking... K-State, Kansas, and Oklahoma await the Tigers... But, Shoot Rudy! That warms my heart on yet another cold day, #8! Have you heard the little comedy skit about the new breakfast cereal? It's called Credit Crunch, and it's high in federal bailout to meet your daily requirement! HAHAHAHA! Our little Christine just called, she can't answer the bell today, sounded very sick! Still no improvement in my left eye, it will be one month this Friday... I go to the doctor to see what's up with it on Thursday... OK... Time to go! No Christine, means I better get going! I hope your Shrove Tuesday is Terrific!

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

"The Cheater" Speaks...

Chuck Butler — Tue, 27 Jan 2009 14:50:17 GMT

In This Issue..

* Currencies rally...
* IFO unexpectedly rises...
* Norway looks good...
* Gold hits $900 again!

And Now... Today's Pfennig!

"The Cheater" Speaks...

Good day... And a Terrific Tuesday to you! We received the snow and ice they forecast, but the drive in to the office was no biggie, so the street crews did a fair job, I would say... We'll see when I head into the city for my radiation this morning...

Hey! What a day for the currencies yesterday! Geez Louise, it's seems like it's been a month of Sundays since I could say that! And there's been follow up overnight, although, I do believe I'm seeing some profit taking right now... I went to radiation yesterday with the euro trading around 1.2965... I came back 2 hours later, and it was 1.31! And it didn't stop there, trading up to 1.3175, but running into a wall of resistance there... But that was temporary, as the overnight market pushed the single unit higher to 1.3250... It did trade all the way up to 1.33 and change on news that the German Business Confidence, as measured by the think tank IFO, unexpectedly rose for the first time in 8 months. This improvement was a result of the European Central Bank (ECB) cutting interest rates...

Of course, you know me... And I always say that one swallow doesn't make a summer... And that can be used here, as this IFO report is just one sliver of hope for the German economy... There needs to be more, or this will report will be put in the rear view mirror soon. So, I'm not pinning my colors to the mast of a German economic recovery, just yet! But, the data did "goose" the euro higher, and for taking part in that, I give the IFO kudos!

The Big Winner of the day though, was pound sterling... In a case of an asset "falling too far, too fast"... The pound sterling has done a Super Ball Bounce from Friday's price, and has rebounded to 1.4190... Of course, that's a rally from Friday's figure of 1.3570... It certainly STILL shows the rot on the vine in the U.K. from last summer's 2.00 for pound sterling. I would be very careful here, as the U.K. is in the same boat, smaller in size, but the same boat as the U.S....

I had a great lunch yesterday with the Big Boss, Frank Trotter, and we were discussing what we would talk about next week at the Orlando Money Show. I told Frank that I really believe in the prospects of a nice big rally in Norwegian krone... Let me tell you why... First and foremost, it remains a Surplus country... A positive balance of payments... And that surplus has allowed Norway to weather the storm that's hit just about every other country in the world... See, why I believe the Surplus countries should always be considered when buying currencies? Anyway... The main reason it lost ground from last July's levels is the drop in Oil prices... They like the other types of Commodity driven currencies like Aussie, Canada, Brazil, New Zealand, South Africa, just got hammered due to the selling in Commodities... But... You know my outlook for the inflation in this country, and that will be driving Commodity prices higher by year-end... But the leader in the forefront of all this move will, in my opinion, be Oil prices... And IF Oil prices rebound like I suspect they will, that will be a very nice underpin for Norwegian krone...

And Gold traded above $900 yesterday... It has seen some profit taking overnight, and fallen back to $896... But, again, these are stair steps to higher levels for the shiny metal... But then that's just my opinion. You have to make your own investment decision...

OK, the data yesterday was not good, Yes, the Existing Home Sales moved higher, but only at the expense of a falling Home Price... The median home price was $175,400 in December, down 15.3% from $207,000 in December 2007, the National Association of Realtors said Monday. The median price in November this year was $180,300. Here's the real indication that this rise in sales wasn't at good levels... Of all sales in December, about 45% were distress sales at discounted prices. That's foreclosures and auctions on foreclosed homes folks... I don't think we want to get up on the fence and crow about this report...

And then, after all my harping about how the markets should pay closer attention to Leading Indicators data, the report for December showed an unexpected gain of .3%... Again, the one swallow doesn't make a summer, applies here too... I'm from Missouri, and I'll need to be shown more of this to believe it...

Today, we get the color of the S&P/CaseShiller Home Price Index, which will repeat what yesterday's Realtors report showed... Expect more rot on the vine here though, with home prices showing an -18% drop...

And we'll see Consumer Confidence, which I suspect will bump higher in December, although in reality I don't know why... But it most likely will, based on the stock market's head fake rally in December...

I see that "the cheater" a.k.a. Tim Geithner was confirmed as our U.S. Treasury Sec. I really didn't think I would ever have another punching bag Treasury Sec. like I had with King Henry Paulson, but, then along came "the cheater"... I have to tell you that this is scary stuff folks... In his confirmation he said, not once, but twice, that "President Obama, backed by the conclusions of a broad range of economists, believes that China is manipulating its currency. President Obama has pledged as President to use aggressively all the diplomatic avenues open to him to seek change in China's currency practices."

OK folks, this is where the problems begin... If in his confirmation, he's making statements like that, you can expect that Obama will push for legislature to put tariffs on Chinese goods... Protectionism... This is ALL GOING IN THE WRONG DIRECTION!!!!!!! And believe me now and hear me later... "the cheater" didn't just make up this response! This was given to him by Obama, and "the cheater" made certain that everyone hear him, by repeating the answer!

I've told you before, folks, that Protectionism is to a currency, like kryptonite is to Superman... So... Not only is the Gov't on the path to spending even more than the previous administration spent, they look as though they will go down this protectionism path... Add to that, the recession and zero interest rates, and you've got the ingredients for a huge swat at the dollar...

I read a report by Stephen Jen of Morgan Stanley, where he writes that he believes the euro will trade back to 1.20 in the coming months... Well, that may be, and would play well with my Obama bounce thing... But with this all happening so fast in the past couple of days, I might have to rethink that Obama bounce thing... We may get an Obama bounce, but it may be for the euro and other currencies!

Oh... And one more thing on China, before I go on... The IMF's Managing Director, Strauss-Kahn, was talking yesterday, and said, "I have said repeatedly that the renminbi is undervalued" He went on to add, "What we need is for the Chinese to change their policy and shift to more domestic-led growth than to focus on exports. Most Chinese officials are convinced that this is in their own interest."

So... The IMF believes the renminbi is undervalued, and that the Chinese should do something about it, and so does the Obama administration... And you say, "Trade wars"? I bet you can! And not a good time for them either! Not when the whole globe is suffering... Dolts, all of them, they can't see the Big Picture... Shame, Shame, Shame!

OK... I could really get going on all that... But... I'll shift gears and talk about the bailouts... Have you seen the Neil Young, you know THE Neil Young, video on YouTube? He's singing about the bailouts... Here are the lyrics...

There's a bailout coming but it's not for me
It's for all those creeps watching tickers on TV
There's a bailout coming but it's not for me
There's a bailout coming but it's not for you
It's for all those creeps hiding what they do
There's a bailout coming but it's not for you
Bailout coming but it's not for you

So... When guys like Neil Young know that these bailouts aren't working, and they aren't good... It should be very apparent to the likes of Pelosi, and Obama...

Oh... And Home Depot announced 7,000 layoffs yesterday, Sprint announced 8,000 layoffs, while Caterpillar announced 20,000...

I'll get to the Big Finish here in a minute... But first, and finally I wanted to talk briefly about New Zealand... The Reserve Bank of New Zealand (RBNZ) meets this week, and I truly expect them to continue their interest rate cutting. 325 BPS have already been cut from their once highest interest rate in the industrialized world... Finance Minister Bill English was speaking last night and said that the "economic outlook had deteriorated since the government's Dec forecasts, and that the economy now looked to be closer to the Treasury's "worst case scenario"." In that scenario, he suggested that recession would continue through to 2010, the current account deficit would balloon beyond 10% of GDP, and unemployment would rise sharply rising. These aren't "good times" for kiwis... So... Look for the weakness in the kiwi-dollar to remain in place here...

Currencies today 1/27/09: A$ .6625, kiwi .5280, C$ .8160, euro 1.3250, sterling 1.41, Swiss .8790, rand krone 6.7325, SEK 7.9660, forint 215.90, zloty 3.2950, koruna 21, yen 89, sing 1.4990, HKD 7.7690, INR 48.93, China 6.8615, pesos 14.05, BRL 2.3120, dollar index 84.36, Oil $46.27, Silver $12, and Gold... $897.40

That's it for today... Well... Only 6 more weeks until Pitcher and Catchers report for Spring Training... I think I can hold out! HA! The euro has just sold off while I was typing by 1/2 cent... The selling is fast and furious in the past 1/2 hour... My little buddy, Alex, wore his pajamas inside out last night, as a "rally" tool for a "snow day" today... It worked! He'll be sliding down the hills today... (lucky dog!) Well... It's like "old times" in the office this morning, as Suzy-Q, is here! Sue, used to be here in the early morning all the time, so this morning it was a special treat! Well... I guess I had better get going to radiation, as the roads aren't good, and it will take me a bit longer to get there! I hope your Tuesday is Terrific!

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

Santa rally continues...

Chuck Butler — Thu, 18 Dec 2008 16:30:33 GMT

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

Our 3rd Quarter numbers are in. And the news-as expected-is quite good.

*Record year-to-date deposit growth: $392 million

*Record year-to-date earnings: $23.9 million

*Record total assets: over $6.5 billion

EverBank is a Member FDIC and Equal Housing Lender.

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

In This Issue..

* Santa rally continues...

* Norway cuts 175 basis points...

* Japanese intervention possible...

* Indian rupee moves up...

And Now... Today's Pfennig!

Santa rally continues...

Good day... The dollar is falling much faster than it rose, the euro surged over 6 cents vs. US$ since yesterday at this time. The 5 day return chart for the major currencies vs. the US$ is pretty impressive: Swiss Franc +12.55%, Euro +9.5%, Danish Krone +9.44%, New Zealand $ +8.41%, Australian $ +5.08%, Swedish Krona +4.85%. And it continues. The past two weeks have been the most dramatic move by the dollar that I can remember. The dollar index, which tracks the US$ vs a group of major currencies is back trading right where it was at this time last year.

I pulled a chart of year to date currency returns vs. the US$, and there are now 5 major currencies which have appreciated vs. the greenback: Yen +26.44%, Swiss + 8.07%, and Singapore, Danish Krone, & Euro + 1%. And with the recent big moves, our phones have been lighting up with investors moving back into currencies. I love the fact that all of these investors are diversifying, but the speed of this recent move demonstrates why we suggest keeping your investments spread across all asset classes. Trying to time into or out of a market can be frustrating, while keeping consistent asset allocations is the key.

The cut by the FOMC is putting pressure on other central banks to follow suit. Norway's central bank cut its benchmark rate by 1.75%, a huge move meant to counter the growing global recession. The Norges bank said the rate could go even lower during 2009 as falling oil prices reduce the risk of inflation. The Czech central bank also cut rates yesterday, but kept its move at a relatively small 50 basis points.

Chuck sent me the following note last night, as he is feeling better and keeping an eye on the currency markets:

"So... I read to Dawn's class on Wednesday, they were all so cute... They were completely convinced by the time I left that I WAS Santa Claus. I left to the sounds of "Merry Christmas Santa"... So cute!

What another day for the currencies, eh? 1.45 in euros? That's a rise from 1.27 just a week ago. I read something that said this was the largest 1-week move higher EVER in the euro VS the dollar! I guess investors and traders don't appreciate the Fed's new ZIRP! (zero interest rate policy)

This is what the Japanese policy has been called for over a decade now, so why would the U.S.'s policy be any different? I'm turning Japanese... The stimulus packages are just like Japan's of the 90's I'm turning Japanese, I really think so... The bailouts, and everything in between is just like Japan of the 90's!

The "other stars" right now are Gold and Silver... If you are a "believer" (and I'm not talking about whether I'm Santa Claus or not!) of the lofty prices for Gold that are being bandied about, then you have to think that these are bargain basement prices, and if these are bargain basement prices, then what we had just a month ago and all autumn long were dirt cheap prices! Dirty deeds, done dirt cheep! OK, I have no idea why I went into that AC/DC song! But see, I even do this at home! Which by the way, you should not try at home without an adult's supervision! HA!

Now, most of you who are long time readers have probably been asking where Chuck's take on the Bernie Madoff scandal is.... Well, I would be right there with my voice, if it wasn't the SEC... The last thing I need is to get in a fight on a Saturday night in Jackson Mississippi, with the SEC! But, I don find it to be very sad that the SEC admits that the SEC had credible and specific allegations going back to at least 1999! Now investors are licking their wounds to the tune of at least $50 Billion in losses... I'll steer clear of this one, and let those that have armored shields take their shots...

Have a great day! I'm off to the eye doctor, and not "looking" forward to it!"

I spoke to Jeff Opdyke at the Wall Street Journal yesterday about a story he was writing with regard to the Japanese yen. He was wondering why the BOJ hasn't intervened yet. It is an excellent question, as the yen has continued on its assault on the US$ unabated. Finance Minister Shoichi Nakagawa has been trying some verbal intervention, letting currency traders know that they stand ready to intervene. But the BOJ is smart enough not to jump out in front of a freight train, and as Chuck points out above, the speed of the dollar's recent fall has been unprecedented. Also, since Japan imports almost all of their oil, a stronger yen reduces the price of crude imports. So at least some of the pain felt by Japanese manufacturers/exporters is being mitigated by these lower oil prices.

If Japan does intervene, the thin markets during the holiday season would be an excellent opportunity. There is also a chance that the BOJ will lower their interest rates tomorrow, following their two day policy meeting. This would be another good opportunity for additional 'verbal' intervention. Holders of yen may want to book gains, and look toward the Singapore dollar or Chinese Renminbi to maintain their Asian exposure.

India's rupee has climbed for a fourth day as the Indian stock exchange headed for the biggest advance in more than a week. Capital inflows across all of Asia have increased as the dollar continues to lose its status as a safe haven. India's inflation rate, as reported today, fell to the lowest since March as crude oil prices have fallen. Prices increased 6.84% last week vs. an expected increase of 7.5%. The slight fall in inflation may allow officials to lower interest rates, which are currently some of the highest in Asia. The rupee has benefited from high interest rates as investors return to carry trades.

The Australian dollar will increase another 12% vs. the US$ according to a note by the head of currency strategy for National Australia Bank Ltd. The strategist believes the Aussie dollar hit a bottom of 60 cents in October, and says the currency will begin to outperform as growth in China starts to recover. He targets 79 cents as the top.

We agree with the report, and suggest the Aussie dollar will again begin to rally as the commodity prices recover. Raw materials account for 60 percent of Australia's exports, with China being one of their biggest customers. Growth in China has slowed, but remains at a relatively strong level above 6%. The stimulus package announced by China will concentrate on infrastructure construction, which will increase demand for commodities.

Currencies today 12/18/08: A$ .7081, kiwi .6002, C$ .8432, euro 1.4675, sterling 1.5366, Swiss .9541, ISK 112.19, rand 9.7288, krone 6.6677, SEK 7.5780, forint 183.20, zloty 2.837, koruna 18.1062, yen 88.39, baht 34.39, sing 1.4279, HKD 7.75, INR 46.95, China 6.8292, pesos 13.18, BRL 2.3527, dollar index 77.822, Oil $40.68, Silver $11.39, and Gold... $875.98

That's it for today... I head off to a 'hand specialist' today, the hand feels much better this morning. Thanks to all the readers who sent me notes, my favorite was from a long time investor who is 90 years old, he wrote one simple line: "Stick with what your good at son." Some very wise advice!! Hope everyone has a Tub Thumpin Thursday!!

Chris Gaffney, CFA

Vice President

EverBank World Markets

1-800-926-4922

1-314-647-3837