Daily Pfennig : Oil

China Grows at +8.9%!

Chuck Butler — Thu, 22 Oct 2009 18:08:51 GMT

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In This Issue..

* Currency rally is reversed overnight!
* Pay Czar dreams...
* Brazil may reverse capital inflow tax...
* An Asian Union?

And Now... Today's Pfennig!

China Grows at +8.9%!

Good day... And a Thunderin' Thursday to you! It's raining outside, so... It must be a Thursday! Amazing how many Thursdays have seen rain this fall! The ground isn't the only thing that's getting watered down this morning...

Front and Center this morning, the euro traded well past 1.50 yesterday afternoon, and drug all the other non-dollar currencies higher as the day went on. But overnight, all that giddiness with seeing the euro over 1.50 for the first time since August of 2008 (and then it was on the way down, instead of this time on the way up!), has been watered down...

Here's the skinny... China printed a very strong 3rd QTR GDP number overnight of +8.9%, and instead of basking in the glow of that report, currency traders took a different route, and decided that if: China is growing that strongly, then stimulus in China will be removed soon, and other countries will follow suit... No one in the markets believes that the U.S. economy can withstand a removal of stimulus... Big Ben Bernanke might believe so, but the markets say "ain't no way!"

So, here we are once again with this stupid trading theme of "what's bad for the U.S. is bad for the world, and thus a flight to the dollar and Treasuries is required"... I just love how these guys "decide this is what's going to happen and the rest of the trading world follows them"... The non-dollar currencies got all caught up in this, and thus were sold off almost throughout the Asian and European sessions... I have seen the euro pop back up since I came in though, so maybe this will be short-lived...

There was news out of Brazil yesterday that was interesting... Yesterday I told you about the "tax" on capital inflows to slow down the stock market, and the real... Well, there were rumors yesterday that the Brazilian Gov't would change this from "Capital inflows" to "Capital outflows"... This would apply to balances that were in the country for less than 2 months... So... This removes the albatross from the real's neck, in my opinion that is...

I came across some news yesterday that just kind of hit me right between the eyes, and the light bulb went on, and so on... The news about the "Pay Czar", just got me thinking. ( I know that's a dangerous thing!)

Well... Too bad the new "Pay Czar" (man I hate that term "Czar"! I mean really, when did we become the Soviet Union?) any way... Too bad the new "pay czar" doesn't work for us in Congress! The new "pay czar" slashed compensation at 25 of the financial institutions that took Gov't. funds, lowering compensation by 50%!

But, he doesn't, and nor would his colleagues on "the Hill" like it very much if he started slashing their compensation! But wait! That's a great idea! When he's finished with the financial institutions, he can go to "the Hill" and start slashing compensation there Freddie Krueger style!

Because... Today, every dollar of growth comes with about 4 dollars of debt.

Again, the same dude sent me another email yesterday, telling me that I need to stop banging on the current administration, for deficit spending, it wasn't their fault the annual deficit went from $450 Billion in 2008, to $1.42 Trillion in 2009! AGAIN! I DON'T CARE WHO SPENT IT, WE DIDN'T HAVE IT TO SPEND! And once again, let me be perfectly clear about this... When the first $150 Billion of checks were sent to kick start the economy, I ranted and kicked and screamed... When the first TARP was introduced, I screamed to the heavens! I stated then, that I would NOT have bailed out anyone! I would not have spent the money we didn't have! I would have let those that could not stand on their own, fail... Think about that... The Big Ben's and Summers' of the world are telling you that "they saved the world"... Saved us from what? Financial ruin? We're freakin' broke now, what difference would it have made on that front? Job losses? Oh! And 10% (really 16%) unemployment is "saving us"? Or how about collapsing the markets? Well, I personally doubt that would have happened, folks... That's just a scare tactic they use...

Think about this for a minute... If we had done nothing... Like Ronald Reagan did after the stock market collapse of 1987, we would have suffered some great losses... But we would be past it by now... Instead, the same firms that took Billions from the Gov't, are still hurting... Did you see that Bank of America (BOA) booked a $2.2 Billion loss for the 3rd QTR! Even the Fed's Beige Book revealed that the Fed's regular report found that the overall economy is still plagued by weakness in banking and increasing unemployment.

Ok, I'm sorry... But once I get on a roll about this stuff, I can't stop! Just ask my kids... Their eyes begin to glaze over, they stare at the ceiling, and you can almost hear them thinking..."here he goes again with that deficit speech, when will he ever figure out that we heard it and understood it the first 50 times he's gone through this with us"! HA!

OK, back to the currencies... One currency you would have thought would have gone through the roof on the news that China's 3rd QTR economic growth was +8.9%, is the Aussie dollar (A$)... But NOOOOOOOOO! That didn't happen... Once again the thought here is that economies around the world can not withstand the removal of stimulus.... Starting right here in the U.S., but traveling around the world to China too... The thought process (strange as it might seem, and I do believe it's strange) is that if China grew this fast with stimulus the Chinese Gov't might see this as an opportunity to remove the stimulus, and when they do... All hell breaks loose!

While I don't disagree that stimulus removal in the U.S. would send our economy spiraling down the slippery slope of a double dip, I don't agree that it would be the same in China...

So... The A$ is about 1-cent cheaper than it was yesterday afternoon... Looks like, smells like, walks like, and talks like a cheaper buying level opportunity!

Remember when I thought that Sweden's Central Bank, the Riksbank, was prudent? Well, that all changed a few months ago, when the Riksbank joined the Bank of Canada in saying that they would not raise rates until the 2nd half of 2010... Well, the Riksbank repeated that line this morning after they left rates unchanged... I just don't get it... What the heck are these Central Banks thinking? I guess they just don't have a brain... The need to go visit the Wizard of Oz, I heard he's giving out brains! In fact, they're probably singing this right now!
I could wile away the hours
Conferrin' with the flowers
Consultin' with the rain
And my head I'd be scratchin'
While my thoughts were busy hatchin'
If I only had a brain

Oil is back to $80 this morning... Gold is $1,055... And that means the Canadian dollar / loonie is back on the rally tracks heading toward parity against the dollar once more!

And for those of you that like to take a walk on the wild side... The South African rand has really taken a blow to the mid-section in the past couple of days... You see, there was a rumor floating around that the South African Reserve Bank (SARB) was going "freeze" the rand, to keep it from getting too strong VS the dollar. It was rumored that the Economic Development minister, Patel, was going to propose that the rand be "frozen"... Both the ministry and the Central Bank have denied ever discussing this proposal...

Let's hope that they haven't! That would be awful! Just look at the damage the rand has suffered on the rumor! So... If the leaders in South Africa can calm down the markets, we'll see a rebound in the rand, and it will have been a case of "sell the rumor, buy the fact"...

Our office coordinator extraordinaire, Danielle Goodman, gave me one of those fake $1,000,000 bills yesterday and wanted to know if that was enough to buy a BRIC MarketSafe CD! She just wanted to hear me do Dr. Evil from Austin Power, and say with my little finger aside the corner of my mouth... One Mill-ion dollars... HA!

But that got me thinking about the hyper-inflation story I told you about the other day... Let's hope that we never have inflation that bad that $1,000,000 bills are floating around like $100 bills, c-notes, Benjamins...

The new Japanese PM is beginning to take some direction for his new Japan... For instance, this caught my eye... Prime Minister Yukio Hatoyama has advocated creation of an East Asian Community, modeled after the European Union, with China at its heart and the U.S. left outside. Hmmmm... The Big Boss, Frank Trotter and I did a report about 6 years ago for the Daily Reckoning, where we outlined this Asian Union, and called the new currency there the "Pan"... That would be truly amazing if that Asian Union came to reality!

But like we said then... The wounds run pretty deep between China and Japan, and it will take quite a lot of love and tenderness to get past that! Which country has the love and which one has the tenderness? HA!

Well... The euro has continued to push back against the dollar since I came in this morning... So, maybe it can get back to 1.50, which sure looks like a nice crooked number to me!

As I said above, Gold is $1,055 this morning having lost $5 this morning. Don't you just "love" all those commercials on TV these days with guys telling you to buy Gold? Where were they when Gold was $250, or $500, or $750? They were afraid that Gold's rise was not on terra firma, and they rolled up in a ball in the basement of their buildings, shaking with fear! HAHAHAHAHAHAHAHA! Nah... Just kidding... But I do find it weird that these guys are coming out of the woodwork like bugs now... Guys like Casey, Bonner, me, and the Mogambo Guru, have been here all along with the same message about buying Gold...

Speaking of the Mogambo Guru... I had the honor of exchanging emails with him the other day... He absolutely cracks me up!

The Data Cupboard finally yields some data worth looking at this morning, as the Weekly Initial Jobless Claims prints along with Leading Indicators... We're still seeing +500K new jobless claims every week folks... When will this stop? I contend that the U.S. economy can not sufficiently recover until the unemployment situation is addressed... Why is our Gov't trying to shove this, that and the other thing down our throats these days, and not addressing the unemployment situation? I mean, a tax cut for businesses would be a great move there don't you think? The other thing the Gov't is ignoring is the deficit... Instead they're thinking of new expenditures! I've written my congress people until my fingers won't write any longer about this... What have you done? Come on people! This is immoral what they're doing to our grandkids, and we just let them?

OK, I've got to get off that subject!

Let's go the recap and Big Finish now, as I feel myself getting all lathered up to scream at the walls about this stuff!

To recap... The euro traded past 1.50 yesterday for the first time since August 2008, then, however, it was going down, this time it was going up! The non-dollar currencies have given back yesterday's gains after China announced a +8.9% GDP for the 3rd QTR, thus making the traders think that stimulus worldwide will be removed and that would be bad for the U.S. and thus, we return to the stupid trading theme of rewarding the dollar when things are bad! UGH!

Currencies today 10/22/09: A$ .9235, kiwi .7545, C$ .9525, euro 1.4975, sterling 1.6550, Swiss .9915, rand 7.47, krone 5.5650, SEK 6.90, forint 177.30, zloty 2.2770, koruna 17.3250, RUB 29.0845, yen 91.30, sing 1.3970, INR 7.7497, China 6.8290, pesos 12.96, BRL 1.7320, dollar index 75.34, Oil $80.17, 10-year 3.39%, Silver $17.55, and Gold... $1,056.20

That's it for today, and this week for yours truly. I will be at the hospital most of tomorrow, for annual tests, scans, needles, etc. Let's keep our fingers crossed that all's well, eh? I don't get the results until Monday afternoon, so I'll have to find something to keep my mind off what's in the results this weekend! It's Homecoming at the University of Missouri this weekend. When our older kids were there, we used to go down to look at the house decorations on Friday night, and then stay for the football game on Saturday. I won't make it there this weekend, but I hear that the game has been picked as the location for the Tailgate Tour 2009! So, if you're going, stop by and check that out! My poor beloved Missouri Tigers are having a rough go of it this year... And they picked #3 Texas as their homecoming opponent! UGH! My little buddy, Alex has a football game Saturday too! OK... Let's say our goodbyes for the week... Goodbye... And get this out the door! I hope your Thursday is Thunderin' (good that is!) Thanks for reading the Pfennig...

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

Will History Repeat Itself?

Chuck Butler — Tue, 20 Oct 2009 15:07:39 GMT

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

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

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

In This Issue..

* Non-dollar currencies rally...
* A$'s and C$'s to parity?
* Reaching 40% of expenditures...
* Gold & Oil on the rise once again...

And Now... Today's Pfennig!

Will History Repeat Itself?

Good day... And a Terrific Tuesday to you! A long day on the desk for me yesterday, left me draggin' the line... But I'm rested and refreshed again this morning, so let's get to the Pfennig for today! The Finance Ministers of the Eurozone met yesterday, as I told you, and they've tried to stem the euro's rise... But, they'll need more than words to get the job done! And so, we begin a new day...

Front and Center this morning, the currencies, which had given back ground overnight to the dollar, are back in rally mode, and are taking liberties with the dollar once more. For most of the night that was not the case, though. The dollar had rallied back and sent the euro, for instance, to the 1.48 handle, after the single unit spent yesterday at 1.49 and change... There seemed to be a move to the dollar, but that didn't last long, and the currencies are once again rallying VS the dollar this morning, and the euro has pushed to 1.4970 as I write...

Daily noise, eh? Yes, you have to wade through this daily noise most days, and keep your eyes fixed on the horizon...

OK, I mentioned above that the Finance Ministers of the Eurozone met yesterday, and tried to stem the dollar's decline by backing the U.S. administration's stated preference for a strong dollar... Of course we all know that the U.S. administration's stated preference for a strong dollar is a bunch of horse dookie! So... What was it that the Eurozone F.M.'s were backing? A false statement by the U.S.? Now, that's something to hang your hat on, eh? The dolts just continue to mount daily don't they?

But, you can't be too hard on the beaver (Eurozone F.M.'s) for they have to sound like they don't want their euro to get too strong, for if they really said what they wanted to say, the euro would be back to 1.60 with a bullet in a heartbeat! So... In the end, I don't think currency traders were swayed by the Eurozone F.M.'s, at least not for too long!

Yesterday, I talked about Canada and the Bank of Canada (BOC) and how I thought that the BOC would remove their statement about interest rates remaining on hold until the 2nd half of 2010... I had a few readers question me on this, saying that Canada's economy is in no shape to withstand a rate hike... OK... Hear me out on this... I'm not saying that the BOC will hike rates now, or even in 2009... But, if Canadian energy prices of Oil, natural gas, and coal continue to get stronger, I'm afraid the BOC will have to entertain thoughts of raising rates to fight inflation... But not now... So... I hope you get what I'm saying here...

So... The U.S. fiscal deficit for 2009 was $1.42 Trillion... Remember how I used to take the previous administration to the woodshed for posting $450 Billion fiscal deficits? How did we go from $450 Billion to $1.42 Trillion, that is if that's really the number??? Well... That's not a question to really answer, folks, we all know how we got here... But now that we're here, what happens next?

I came across this when putting the two monthly newsletter together on Sunday, I think it would be appropriate to share it with you here...

Peter Bernholz (Professor Economics in Basel) studied the world's 12 most important periods of hyperinflation and discovered that the tipping point occurs when deficits amounted to 40% of the expenditures.

For the United States we have arrived at exactly that point. The deficit of $1.5 trillion amounts to 41.7% of the $3.6 trillion in expenses.

You see, that Peter Bernholz, rounds some numbers, but for those of you keeping score at home, the real point is that the U.S. deficits are greater than 40% of expenditures... And you know me, I truly believe in this history repeating itself, or as Mark Twain put it, it may not repeat itself but it rhymes... Mark Twain also wrote: "It's not worthwhile to try to keep history from repeating itself"...

So, the point I'm trying to make here is that according to Mr. Bernholz, we can soon expect a bout of hyperinflation! OH BOY! Where do I sign up for that? Not only do we have a falling dollar causing us to lose purchasing power, but what purchasing power we have left is going to be eaten away with inflation! Like I said, OH BOY! Gee Willikers, that sounds like the cat's meow! NOT!

So... Here we go again, with me getting on the soapbox and telling you the only way to protect yourself from a falling dollar and hyperinflation is to diversify with non-dollar currencies and precious metals...

OK... I get emails all the time from readers that say, "OK Chuck, you tell us to diversify, but you don't tell us what to buy"... Well... To the untrained eye, that would be true... But to long time readers they know better... So, keep reading, and it will hit you right between the eyes one day, and you'll slap your forehead and say, "I could have had a V-8"!

The boys and girls over at Citigroup have written a letter to their clients telling them that "the dollar is weakening because foreign central banks are diversifying their reserves and U.S. investors are buying high-yielding emerging market assets." The went on to say that, "The Australian and Canadian dollars are likely to rise to parity against the U.S. currency."

So, there's one more on the roster that believe Aussie dollars (A$) and loonies will go to parity against the dollar... The loonie isn't exactly the same stretch of a forecast as the A$, as loonies are almost 97-cents right now, with A$'s trading near 93-cents...

Doesn't that make sense given the talk we just had about hyperinflation? What currencies are going to help protect you against hyperinflation? The Commodity Currencies! Aussie, kiwi, Canada, Norway, Brazil and you can even throw in the S. African rand, for those that like rides on Mr. Toad's wild ride!

The folks at Citigroup also had this to say about the euro, which I found to be quite interesting... "The euro will extend gains against the U.S. dollar and the British pound, and may reach parity against the U.K. currency in 6 to 12 months."

I would think that for the euro to reach parity with the pound, it would involve the pound falling quite a bit from current levels... And that makes sense to me... Did you see the report the other day from the U.K. where they reported bank bad debt to be twice the forecast amount? YIKES!

You know... The Asian currencies which never really participated in the first bout of dollar weakness, are still stuck in the mud... Well, they are being manipulated to be stuck in the mud, for the most part... But, something's got to give here sooner or later. Why do I say that? Well, as I've told you for months now, the Chinese economy was the first to exit their slowdown / recession... Shoot Rudy, even Japan is showing signs of economic growth! And then we have India going strong too... And of course you have the "kind of Asian countries" of Australia and New Zealand... Where we already know that Australia has raise rates and New Zealand would love to raise rates... So, this region is leading the world out of the recession... Hmmm... I thought only the U.S. economy was allowed to do that! Uh-Oh, looks like we have a shift in how the world works!

Hey! Even Big Ben Bernanke sees the Asian countries as leading the world out of the global recession! Big Ben said... "Asia appears to be leading the global economic recovery." Hmmm... See, even a blind squirrel can find an acorn! HA!

I had to laugh when I read this headline this morning... "yen rises as Fujii repeats reluctance to stem currency's rise"... I laugh because the last time Japan's new Finance Minister talked about not intervening to stop the yen's rise, he back-pedaled and said that traders mis-took him to say that he was not going to intervene... So, this on again, off again love affair with Fujii and intervention, just makes me laugh! I would think that after getting burned on Fujii comments a couple of weeks ago, that Traders would not get too lathered up when he talks about not intervening...

Ok... Here in the U.S. while we are still a sovereign nation, the cartel, I mean the Fed Reserve, is doing some testing of reverse repos as a means of drawing the excess liquidity / stimulus out of the markets... I don't think we have to put too much into these tests right now... But it will be a method that the cartel uses at some point in the future... The IMF is against removing any stimulus now... So, that may carry some weight with the cartel, I don't know...

Gold prices rose yesterday for the first time in a couple of days, pushing back above $1,060... I would think that until we know for sure that the cartel is removing stimulus, that Gold would remain well bid... When we do know that stimulus is being removed... Gold might take a step or two back... But then we'll have to wait-n-see what happens with inflation...

I read where ETF holdings of Gold are sluggish... Well, that certainly makes sense to me! With what we're seeing these days from our Gov't pushing us toward who knows what (I know, but I get blasted by people whenever I say it out loud), physical Gold is the thing people want right now... And you can't get physical Gold out of an ETF! So... All those people that have long said that the ETF was just as good as holding Gold either in your buried coffee cans in the back yard, or in pooled accounts, are wrong, when it comes to physical Gold demands...

And, don't know about you, but I filled my gas tank the other day, and the price of gas has really shot up recently, eh? And a quick look at Oil prices and that tells it all... Oil prices have risen to $79, while trading at $69 just a month ago! Is Oil the proxy for rising inflation?

OK... To recap... The dollar rebounded a bit overnight, but has given back to a currency rally this morning. Citigroup believes Aussie and Canadian dollars will reach parity to the U.S. dollar. The Bank of Canada meets today. Our fiscal deficit reached 40% of our expenditures, which historically is a harbinger to hyperinflation, and Gold is back above $1,060 this morning...

Currencies today 10/20/09: A$ .9280, kiwi .7545, C$ .9690, euro 1.4975, sterling 1.6435, Swiss .99, rand 7.32, krone 5.56, SEK 6.9350, forint 176.50, zloty 2.7735, koruna 17.1470, RUB 29.15, yen 90.40, sing 1.3890, HKD 7.75, INR 46.11, China 6.8266, pesos 12.85, BRL 1.7360, dollar index 75.27, Oil $79.31, 10-year 3.37%, Silver $17.80, and Gold... $1,065.50

That's it for today... My good, dear friend, Mary Anne Aden, sent me a note last night, that really lit up my day... Mary Anne told me that Richard Russell recently mentioned me and the Pfennig... WOW! When a man as well respected as Richard Russell mentions me and my humble little Pfennig newsletter, then that's a great day! Mike Meyer just came in, returning from a trip to Jacksonville to watch the Rams / Jaguars game on Sunday... He travels once a year to watch the Rams... It actually was a nice day here yesterday with the sun out, and a hint of warmth in the air! The weather forecasters say El Nino is going to keep our winter warmer than usual and dryer than usual... That's fine with me! Well, I've got to go... I hope your Tuesday is Terrific!

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

RBA's Stevens Turns On The Green Light!

Chuck Butler — Fri, 16 Oct 2009 15:21:59 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 Nov. 5, 2009. Apply today or learn more at http://www.everbank.com/001CertificatesMSBRIC.aspx?referId=11808

In This Issue..

* The dollar bounces back a bit...
* Euro retreats from highs...
* Is the economic recovery for real?
* Ignored data...

And Now... Today's Pfennig!

RBA's Stevens Turns On The Green Light!

Good day... And a Happy Friday to one and all! I believe it will be a Fantastico Friday as well, because when I go in my car this morning to come to work, the radio was playing, "It's a Beautiful Morning"... It had to be a sign, right? I certainly hope so any way!

Well, I'm back! I have to say that I've never been to the mountains of North Georgia before, and they are beautiful... Well, most of the parts of this great country are, when I come to think of it! Well, it was nice to walk in the door yesterday and sit down, close my eyes, and get work off my brain!

So... That lasted about 2 hours, and then it was back to the news wires to see what was going on with the currencies. So, now that we've got the housekeeping out of the way, we had better go Front and Center with the story o' the day... (Well, in my mind any way!)

So, Front and Center this morning, we've got the Aussie dollar (A$) rallying strongly, and a lot of that move is coming to us by way of an interview with Reserve Bank of Australia (RBA) Gov. Stevens...

Gov. Stevens when asked at a breakfast function in Perth whether the RBA had any tools to prevent speculators driving the A$ to US$ 1.10

Mr Stevens replied that, rather than speculators, there usually was a rational reason for big exchange rate movements... (Ok Mr Stevens I guess you are going to tell us what that rational reason is for the A$'s big move?)

"We've got one of the better-performing economies in the world. Even at very low interest rates, we still have a positive differential and we're a country where the people here are, I think, reasonably confident about the future and foreigners are fairly confident about our future, and it's not entirely surprising that they're a bit keen on the currency."

WOW! The RBA Gov. said that? That's amazing! Of course it's true, it's true, and I've told you that for months now, but to hear the RBA Gov. say it, now that's a horse of a different color, indeed!

OK... So... The RBA Gov. gave the green light to currency traders, investors, and whomever else to take the A$ to $1.10... Now, will it ever get there? Well, that's a different thing altogether! I remember last year, before the HUGE deleveraging that went on, and then the collapse of Lehman Brothers, that the A$ was marching toward parity to the U.S. dollar, and when the you know what hit the fan, the risk assets got the snot knocked out of them, including the A$... I had said that I thought the A$ could make it to parity, and when it got stopped at the border, and had only reached 98-cents, you should have seen the emails, accusing me of mis-leading people... Come on! 98-cents is so close to parity, it can taste it!

So, it is with a weariness in even reporting this story, that I will make this point... I DIDN'T SAY THE A$ WOULD GO TO $1.10!!!!! I JUST TOLD YOU WHAT THE RBA GOV. SAID WHEN ASKED ABOUT THE A$ GOING TO $1.10!

Well... The Big Dog, euro was really taking a shot at the dollar overnight, but has backed off in a bout of profit taking, I'm sure... The single unit went as high as 1.4970 overnight, but has backed off to 1.49 as I write... I got a kick out of a quote that I saw the other day by European Central Bank (ECB) President, Trichet, that..."The euro was not created as a reserve currency"... Oh! Come on Jean Claude! You know darn good and well that the euro was created to compete with the dollar! You guys in Euroland, were determined that a single unit covering several countries, could work... It was a precursor, if you will, to what we're hearing about more and more these days... A global currency... So... Call it what you want Jean Claude... I know, and now all of my readers know that the euro was created to be a reserve currency in waiting...

OK, maybe that wasn't really clear... I know, I hear you saying, yeah, Chuck, clear as mud! But, the point is simply that Trichet once again was trying to defend the dollar in a kind of back-handed way... By downplaying the euro's ability to be a reserve currency... The other stuff is just Chuck talking about his greatest fears... And we don't need to have him go any further there!

OK... I'm back, I was away for a minute, and I came back to consciousness and saw that two paragraphs had been typed... I had better go back to see what my alter-ego wrote, but, nah... We'll throw it out there anyway!

The news wires are filled with stories today about how the dollar is going to bounce here, because the selling has been too hot and heavy in recent days, and that the economic recovery is too strong to warrant a currency sell off like we've seen... Well, that's all good, as long as one truly believes that the economic recovery here in the U.S. is on the up and up...

Do you believe it to be? I don't! I wish I could... But I don't! Not when the unemployment is so bad, and the little pulse that we see in the economy is from the Gov't's efforts to pump life into the economy... But this unemployment thing is absolutely awful folks...

Alrighty then, let's go on to something else... The Canadian dollar / loonie has really been on a roll VS the green/peachback dollar... Canada will print their latest CPI (consumer inflation) this morning, and I think it will tell us a lot about loonie's ability to continue to move toward parity once again... The Bank of Canada (BOC) meets next week, and long time readers will recall that I've been pretty hard on the beaver (BOC) in recent months, as they kept saying that they would leave rates at current levels until the 2nd half of 2010... And they well should have been taken to the woodshed for those comments... Well, if Canadian CPI shows some inflation pressures, it will be down to the BOC's meeting next week, to see if they change their previous stance... I think they will, and thus the loonie will continue to move higher VS the dollar... But that's just my opinion, folks, I don't have a crystal ball, and I could very well be wrong! (That's for the legal beagles!)

Today's data cupboard here in the U.S. will be interesting in that the TIC's data will print, but for the most part, this VERY IMPORTANT PIECE OF DATA has been largely ignored by the markets... Why is that? Well, I don't really know, but if I were to put my conspiracy hat on, I would say something like that the markets have been directed by the Gov't NOT to make a big deal out of, to downplay the Gov't's inability to finance the deficit, for if that were to be the case, it would be curtains for the dollar!

We'll also see two of my faves... Industrial Production, and Capacity Utilization... For all the new readers to the Pfennig, I particularly like Capacity Utilization, and always have for that matter, because it's about the only "forward looking" piece of data (along with Leading Indicators)... So... Capacity Utilization is running around 69%... What does that tell us? It tells us the economy sucks! And don't believe those that keep telling you the coast is all clear!

And then since no one pays attention to those three pieces of data, the U of Michigan Consumer Confidence will print and THAT WILL catch everyone's attention! UGH! Even with a soaring stock market, I would have to think that Consumer Confidence would be taking a hit of sorts... It would be difficult at best to do a survey these days about Confidence and not run into quite a few negative thoughts from all the unemployed Americans!

And then there was this from the Wall Street Journal... "High unemployment in the U.S. has led to rising charge-offs and delinquencies at credit card companies. The firms are reacting by limiting credit, raising the bar on lending standards and cutting back on loan portfolios."

So... Again, this is just another reason why I don't believe the economic recovery campers!

And to add to that thought... Have you noticed the huge jump in the oil price? And have you been charting the rise in Treasury yields? Well... Either of these look good for the U.S. consumer... Oil has jumped to $77 a barrel, and the 10-year Treasury yield has really pushed higher to 3.47%! ( I guess it's time for the Fed to buy some more auctioned Treasuries to bring the yield back down, eh?) But... These two things are very good, when not manipulated by the Gov't at telling us about the future...

OK, to recap... The A$ is pushing higher toward parity with the dollar once again, and when asked about what the RBA can do to stop the A$ from going to $1.10, RBA Gov Stevens basically gave the all clear to traders to take it there! The euro had moved to 1.4970 overnight, but is seeing some profit taking this morning, and the data cupboard has some important data this morning, but for the most part the markets will ignore it...

Currencies today 10/16/09: A$ .9220, kiwi .7440, C$ .9685, euro 1.4915, sterling 1.63, Swiss .9830, rand 7.3420, krone 5.5915, SEK 6.95, forint 179.40, zloty 2.8220, koruna 17.2550, RUB 29.63, yen 91.10, sing 1.3940, HKD 7.75, INR 46.24, China 6.8267, pesos 13.05, BRL 1.70, dollar index 75.56, Oil $77.35, 10-year 3.47%, Silver $17.39, and Gold... $1,049.88

That's it for today... Well, I'm sure this come as a shock to the boys and girls here, but today is Boss's Day! I hear that it's been quite wild here since I left, that's a good thing! Hey! Our Ty Keough was named to the St. Louis University Billiken 50th year soccer team! Congrats Ty! The picture of you in college that the University posted is AWESOME! And then, I wanted to give my own congrats to our little Christine, for her performance in the Chicago marathon last weekend... Good show! Little Delaney Grace came over to try on her Dorothy dress for Halloween, and my beautiful bride made... She performed for us on the fireplace hearth, singing somewhere over the rainbow! What a CUTIE! And she's only 2! My little buddy, Alex, has two football games this weekend... So, I'll be doing a lot of sitting on bleachers this weekend! OK, I had better stop there, and get this out the door! I hope your Friday is Fantastico!

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

RBA Raises Rates!

Chuck Butler — Tue, 06 Oct 2009 14:22:32 GMT

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In This Issue..

* Pandora's Box of rate hikes is opened!
* Is the dollar being removed from oil trades?
* Deficits do matter, eh?
* Gold heads toward its all-time high...

And Now... Today's Pfennig!

RBA Raises Rates!

Good day... And a Terrific Tuesday to you! A Tuesday morning that is seeing a HUGE currency rally VS the dollar on the news that the Reserve Bank of Australia (RBA) opted to go ahead and hike rates now, and not wait for November's meeting, as I had thought they would do! WOW!

The first hike... It has opened Pandora's Box of interest rate hikes around the world... For, if the RBA went this soon, then we can expect Norway's Norges Bank to push their rate hike earlier on the calendar, maybe even later this month! And they won't be the only ones! Look for New Zealand to hike rates this year, and who knows what other country (Brazil?) will follow after that... But I see them coming, and they're marching the death march of the dollar!

OK, that was a little dramatic, while I don't believe, although I have more doubts every day, that the dollar would collapse to nothing, I do believe it has a long way to go when it comes to weakening. How else will the U.S. pay pack their debts in the future? It sure won't be because of a cut in Gov't Spending! That is... Unless all this deficit spending can be reversed and Gov't is cut (in size) to resemble something from 50 years ago! But, that's like asking for the moon and sky, eh?

Let's get back to the Aussie rate hike, that's more exciting and upbeat than talking about what's going to be needed in the future here in the U.S! The statement that followed the RBA rate hike, was very upbeat... So... I totally expect another rate hike next month from the RBA!

OK... The dollar's weakness this morning isn't all due to the Aussie rate hike, and prospects for other rate hikes around the world... In 2001 I wrote a white paper called, "The Demise of the Dollar"... This was the thesis for all the things I talk about almost daily regarding the reasons the dollar would got into a secular bear market... And this was one year, let me repeat that, one year, BEFORE the dollar entered into a weak dollar trend in Feb of 2002!

The reason I bring this up here in 2009, is that there is an article in the U.K. Independent that's making the rounds, that's called... "The Demise of the dollar"! This report though is about secret meetings with the Gulf Arabs along with China, Russia, Japan and France, and they are planning to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.

Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars.

Uh-Oh... That's serious stuff folks... And that death march I talked about above? Well, if this story is true, that death march just became much louder!

Right now, however, the markets are not taking the story hook, line and sinker, just yet... Yes, the dollar has been sold, but not like you would think, if traders had taken the story to heart... I think some digestion time needs to be had first... I mean the currency traders had the first rate hike and then this story on their plates all at one meal... That's a lot to digest! And Besides.. The Saudi Bank Gov. is denying that any of these meetings took place... Of course to conspiracy buffs like me, that's akin to saying, "These meetings DID take place, and we're just covering up the evidence" HA!

Now... Some might be cursing these countries right now, for dealing this rumored blow to the dollar... But, it's not like the dollar didn't have it coming! The Deficit Spending... For instance, is one thing that people that "know better" realize that the U.S. will not be able to climb out from under the deficit rock... And those knuckleheads who said "Deficits don't matter"? Well... I've said this many times before, but I can't talk about the Deficits don't matter crowd without talking about how these people remind me of a guy... He's standing on top of the Empire State Building, and decides to jump off... As he passes the 56th floor, he says... "So far... So good!"

Well, unfortunately for our "Deficits don't matter" guy falling to the ground, the sidewalk is coming at him very quickly now...

And here's another thing that should just tick you off to no end, but you have to think that the people that have loaned us money, are wondering if they'll ever get paid back... What I'm talking about here is the story from yesterday, regarding the TARP funds... You might want to sit down for this one folks...

Neil Barofsky, the special inspector general for the Troubled Asset Relief Program (TARP), says that despite multiple statements on Oct. 14 of last year that these nine banks were healthy and only receiving government funds for the good of the country's economy, federal officials knew otherwise. He went on to say that "the Treasury Dept. and the Federal Reserve lied to the American public last fall when they said the first nine banks to receive government bailout funds were healthy."

That's right... They LIED TO US! Now, doesn't that just tick you off? It sure ticks me off!

So... You can see some of the reasons the countries mentioned above might be thinking about removing the dollar as the pricing mechanism when it comes to oil...

OK... We started up beat, then got brought down, let's get back to upbeat! Hey! How about Gold? When I turned on the screen this morning, Gold was $1,020! You would think that even if the U.K. Independent story is just a rumor, that Gold would gain on the rumors...

I read a story last night, while waiting for the so-called "Epic Battle" between the Vikings and Packers on Monday Night Football, that one analyst was of the belief that Gold was about to return to its link to the price of Oil... Hmmm... Well, I personally hope that's not the case, as I certainly don't want to see the price of Oil rise to the levels I think Gold is going to rise to!

Yesterday, I did a presentation on the DTI network... (I had given you all the link to it last week) My power point presentation didn't work, so I had to just "wing it" (yeah, like talking for 30 minutes on how we got here, what's going on, and why one needs the power of portfolio diversification was difficult for me! HA!) I think they want me to come back next week... DTI educates investors / traders/ and people that just want to know how the markets work, so it's all for a good cause, because... An educated investor, is a good investor!

OK... Let's see... OH! I wanted to talk about this yesterday and totally forgot, but it's not too late today to talk about it...

One thing that we'll begin to see this month is the earnings season...
You might recall that in previous quarter ends I thought that stocks would get taken to the woodshed, because of lousy earnings, only to be surprised at the earnings that were posted... But trying not to be the boy who cried wolf, I'll once again say that I just don't see the earnings to support stock prices. This time I think we'll see that the method used in previous quarters by Corporations to produce the earnings was cost cutting... One would have to think that the Corporations have cut to the bone... And now, we'll get to the cheese that binds for earnings... A lack of revenue...

I really liked the reaction of the non-dollar currencies, led by the Aussie dollar, after the RBA rate hike... It was like "old days"... Uh-Oh, I have a song in my head... "Old days
Good times I remember, Fun days, Filled with simple pleasures, Drive-in movies, Comic books and blue jeans, Howdy doody, Baseball cards and birthdays, Take me back, To a world gone away,
Memories, Seem like yesterday....

Yes, the "old days"... Well, in this case I was talking about currencies trading on "Fundamentals" not stupid trading themes, not flights to safety, not deleveraging, but plain and simple fundamentals, things that ordinary people, like me, can understand, and place a value on a currency based on the fundamentals!

But... We've not really seen a fundamental trend since July of 2008... However, if we begin to see the rate hikes that I think we'll begin to see, it could be the harbinger of a return to fundamentals... And that, my friends, and dear readers would be like manna from heaven for your Pfennig writer!

Well... Since I came in this morning, Gold has gained $5 more, to $1,025! Looks like the all-time high of $1,033.90 that came in March of 2008, could be in jeopardy... My love's in jeopardy, baby... Oooh, ooh, ooh, ooh...

Maybe Gold moving higher can get Silver going too! My friend, the Mogambo Guru, reported yesterday that silver analyst, Ted Butler, reports that in the last 10 months, "some 150 million ounces of silver can easily be documented to have been bought by investors.
Undocumented purchases would add tens of millions more ounces."

In fact, when you add it all up, "Investment demand for silver this year is running at a full 25% of world mine production and over 20% of total production (including recycling). This is a remarkable historical turnabout."

Chuck here... Back from a trip to the Mogambo's letter... I just love the way the Mogambo ends his letter each week... He talks about how people should be buying Gold, Silver, and Oil, and then says... "Hey! This investing stuff is easy! Whee!"

OK... To recap... The RBA did raise rates 25 BPS last night, and sounded quite upbeat in their after rate hike statement. Look for other countries to follow now that Pandora's Box of rate hikes has been opened. There's a story going around about countries banding together to remove the dollar as the pricing mechanism for Oil trades... It's being denied, but there's smoke... And you know what I say when there's smoke... And Gold is pushing the envelope on its all-time high of $1,033.90...

Currencies today 10/6/09: A$ .8875, kiwi .7355, C$ .9395, euro 1.4730, sterling 1.59, Swiss .9745, rand 7.4230, krone 5.6920, SEK 6.97, forint 181.15, zloty 2.8370, koruna 17.3360, RUB 29.81, yen 89, sing 1.4025, HKD 7.75, INR 46.99, China 6.8263, pesos 13.56, BRL 1.7593, dollar index 76.35, Oil $71.13, 10-year 3.22%, Silver $16.99, and Gold... $1,025.45

That's it for today... I did get to watch the 1st QTR of the "Epic Battle" last night before going to bed! I don't understand why they start those Monday Night Games so darn late, I mean on the east coast, it would be past my bed time! The New Orleans Investment Conference, also known as the "Granddaddy of Investment Conferences" takes place later this week... The Big Boss, Frank Trotter, will be there to talk on Thursday and Friday night. I'm not going this year... Last year, I had to cancel at the last minute, after finding out my left eye was being taken over by cancer. The cancer in the eye is all gone, but it left me very little vision with the eye... So, if it looks like I'm winking at you, I'm not... Just closing it to keep light refraction from giving me a headache! WOW! The sky just lit up followed immediately by one of the loudest thunder-boomers I've ever heard! Ok... Kristin returns today after speaking last week in Las Vegas, so we've got that going for us! Yay! Time to go... Hope your Tuesday is Terrific!

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

G-20 Heats Up...

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

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

In This Issue..

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

And Now... Today's Pfennig!

G-20 Heats Up...

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

More Strong Data Sinks The Dollar...

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

...But First, A Word From Our Sponsor...
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* 4 BRIC currencies: Brazilian real, Russian ruble, Indian rupee, Chinese renminbi
* High upside potential
* No market risk to deposited principal
* Low $1,500 minimum deposit

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

In This Issue..

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

And Now... Today's Pfennig!

More Strong Data Sinks The Dollar...

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

A Rout On The Dollar!

Chuck Butler — Tue, 08 Sep 2009 14:35:19 GMT

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In This Issue..

* Currencies rally strong!
* China is upset with printing of dollars...
* The UN talks of a new currency...
* Unemployment rate rises to 9.7%

And Now... Today's Pfennig!

A Rout On The Dollar!

Good day... And a Terrific Tuesday to you! A long Holiday Weekend, that was quite good for yours truly! A great tailgate, a great Missouri Tigers victory, 3 of 4 for the Cardinals, a great end of summer bar-b-que at the Butler House, and a day to recharge the batteries... Really couldn't ask for much more... Yes, the weather could have cooperated a bit better, but, hey, that's nitpicking!

Well... Last night I was checking the markets to see what was going on, since I had walked away from the desk on Friday afternoon... And much to my surprise, the currencies, led by the euro, seemed to be breaking out of their recent trading ranges. The euro was trading 1.4335, when I checked then... And when I turned on the currency screens here at the office this morning, the euro has stretched that move to the 1.4480 level! WOW! Looks to me as though the deficits that the dollar drags around are not looking to sharp to investors... But then, what took them so long to dump that fashion faux pas? Ahhh, grasshopper... As I've said many times before... The markets will do what they are supposed to do... Just not when... Which means, sometimes you have to wait... And wait... And think that they guy ranting each day in the Pfennig is barking up the wrong tree!

Chinese stocks were up 2% overnight, so that has led to even more risk taking this morning in Europe... Wait till the "Big Boys" get back from the Hamptons this morning and see what's gone on since they left for their 3-day Holiday weekend!

You know when the dollar is not faring well, when not only the usual suspects of euro, Aussie, kiwi, loonies and francs are taking liberties with the dollar, but also the Japanese yen... And THAT folks, is an indication to me that maybe, just maybe, cause you never know, fundamentals could be coming back to the head of the class. Oh! And one other thing, that puts a nail in the dollar's coffin is, last night I checked the price of Gold too... Then it was $999. This morning... It's $1,005!!!!!!

So... We've got euros kicking tail and taking names later, and Gold kicking the dollar when it's down. We've seen this type of rout on the dollar before... They used to take place at least once a week before the financial meltdown in August of 2008... And before the collapse of Lehman Bros. That's when the markets, traders, and investors, all had their eye on the fundamentals ball, and whacking the dollar out of the park whenever another piece of bad data came the dollar's way.

If this is the beginning of another period like we saw pre-August 2008, then get strap yourself in, and make certain to keep your arms and legs inside at all times during the ride! If it's a false dawn, it sure is a strong false dawn!

One of the best writers for a newspaper, that I've come across is Ambrose Evans-Pritchard, and I came across an article he did this weekend... This news could also be one of the reasons the dollar is getting sold across the board this morning. Here's a snippet of the story...

"Cheng Siwei, former vice-chairman of the Standing Committee and now head of China's green energy drive, said Beijing was dismayed by the Fed's recourse to "credit easing"... He went on to say, "If they keep printing money to buy bonds it will lead to inflation, and after a year or two the dollar will fall hard. Most of our foreign reserves are in US bonds and this is very difficult to change, so we will diversify incremental reserves into euros, yen, and other currencies."

So... According to a top member of the Communist hierarchy... The U.S. Federal Reserve's policy of printing money to buy Treasury debt threatens to set off a serious decline of the dollar and compel China to redesign its foreign reserve policy... Shouldn't that be enough to compel other owners of dollars to do the same? I would certainly think so, folks... I would certainly think so!

And in a not so wide spread story... The United Nations (UN) is talking about creating a new global reserve bank to issue a new currency to protect emerging markets from the "confidence game of financial speculation... HEY! The UN said this... Not me! So... Those of us who have read the book, The Creature from Jekyll Island, have the conspiracy chills going down our collective spines right now...

Isn't this the second time this year that we've heard about a "global reserve bank"? The first time we heard about it, the IMF was to assume that role and issue special drawing rights (SDR's) as a global currency... Now, we hear something a big different, but it's the same folks... I'll tell you right now what they are doing... The "powers to be" are "getting us used to hearing about this" by releasing stories here and there... That way, when the time comes for them to unveil their plan to have a global currency, they'll be able to say..."We've been talking about this for a long time, and no on had a problem with it then!"

OK... Enough of the conspiracy stuff... Let's see what's going on with the other currencies beside euros and yen! Well, first off we'll get Central Bank meetings from the Bank of England (BOE), Bank of Canada (BOC), and the Reserve Bank of New Zealand (RBNZ), all on Thursday... I think that for the most part, the data that will print this week will be important, but all print as expected, which doesn't really move a market...

For instance... We'll see the latest Trade Deficit data, and Monthly Budget Statement... Those numbers will be not so great, but as long as they print as expected, they won't cause major earth movements. And as far as today and tomorrow are concerned the data cupboard is pretty bare, with only the Fed's Beige Book printing tomorrow afternoon... So... This rout on the dollar could get extended and push the envelope on dollar weakness...

In Australia, The August NAB Business Confidence and Conditions printed a very strong increase to put the report at a 6-year high... This report only leaves me to believe that the Reserve Bank of Australia (RBA) will probably hike rates as soon as October... Just thinking of the RBA raising rates lights a fire under the A$, and it's trading this morning at 86-cents and change...

The Canadian dollar / loonie is trading with some fire this morning after creating 27,100 new jobs in August! Canada's jobs report showed that 27,100 new jobs were created in August, when a decline of 15,000 was expected! Add this news to the one last week where Canada's output increased in the 2nd QTR, and one would have to begin to believe that Canada has exited their recession... However, the Bank of Canada (BOC) as they will prove this Thursday when they meet, has already stated that they will keep rates low until an economic recover is firmly in place and the downside risks have been put in the rear view mirror... So, the loonie won't get help from the BOC... But with Gold at $1,005, and Oil on the rise again... Well, I talked about this last week, and it's playing out... I love it when a plan comes together!

Speaking of jobs... The U.S. Jobs Jamboree on Friday held a couple of surprises... 1. the number of jobs lost in August was smaller than expected at -216,000... And 2. the unemployment rate rose to 9.7%... Oh! And the previous month's number was revised up from -247,000 to -276,000... Sneaky how that do that, eh? The media is all over the better than expected -216,000, and forgot to mention the upward revision to the previous month's number, which wasn't small potatoes either!

For many years, I've tried to get people to look at the revisions, the Weekly Hours worked, and the Avg Hourly Earnings to get the "real" beef from the Jobs Jamboree report... We just talked about the revision... The Weekly Hours Worked and Hourly Earnings were a non-event, with nothing to tell us that the economy is growing stronger, or that it's getting weaker... So, to me... The Jobs Jamboree was a washout except for the revision!

The Brazilian real got a boost yesterday, as it was announced over the weekend that a new offshore Oil reserve had been discovered. And I really liked what President Luiz Inacio Lula da Silva is proposing... The President is proposing that Brazil begin to form an Oil Fund, that would be similar to the one that I've talked glowing about for years, in Norway...

Speaking of Norway... The Norwegian krone, has taken a que from the euro, and really made a strong move overnight VS the dollar.

And in yet another step toward gaining a wider acceptance for their currency... The Chinese announced the issuance of renminbi denominated bonds in Hong Kong... This would be the first renminbi denominated bonds to trade in the Capital Markets, and a large step for the Chinese and their currency.

Speaking of the renminbi... The Chinese allowed the currency to gain VS the dollar by a wide margin overnight. This is the first significant move VS the dollar in some time...

And with all these strong currency moves... The dollar index has fallen to a low for the year at 77.24... This is a significant move, folks... Because... In the 1st QTR of this year, the dollar index got down to 77.40, and bounced higher from there... And here we are again... It was thought that the 77.40 figure would prove to be a resistance figure... But the dollar slid right past that figure... I would think that having the index remain below 77.40 for the day and overnight would be HUGE!

So... Before we head to the Big Finish... Let's recap... The dollar has fallen big overnight... The Chinese are not happy with the Fed printing dollars... The UN is talking about replacing the dollar with a global currency that is issued by a "new global reserve bank"... And all the currencies along with Gold and Silver are rallying on these things...

Currencies today 9/8/09: A$.8640, kiwi .6975, C$ .9350, euro 1.4490, sterling 1.6560, Swiss .9560, rand 7.5250, krone 5.9150, SEK 7.03, forint 186.90, zloty 2.8170, koruna 17.5475, RUB 31.32, yen 92.20, sing 1.4250, HKD 7.75, INR 48.47, China 6.8275, pesos 13.25, BRL 1.8410, dollar index 77.24, Oil $69.53, 10-year 3.43%, Silver $16.75, and Gold... $1,005

That's it for today... The boys and girls on the trading desk got to take a tour of our new space that's being created for us... Yes, the scheduled move to the building next door, is finally in stone! We'll be on the 7th floor of the tallest building around it, which means the views are something! So... How about them Tigers! Having 6 players drafted into the NFL didn't slow them down, at least it didn't against Illinois on Saturday! And, a very strong showing from my beloved Cardinals this weekend! Little Delaney Grace was quite the little show off on Sunday for all our guests... She's so darn cute! My darling daughter, Dawn, sent me a picture of her in a Missouri Tigers cheerleading outfit, the other day, and I had to show it the boys and girls on the desk (before working hours!) OK... I'm carrying on too long... Got to get this out the door... I hope your Tuesday is as Terrific as it can be!

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

Yet Another Jobs Jamboree Friday!

Chuck Butler — Fri, 04 Sep 2009 16:04:00 GMT

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In This Issue..

* Currencies trade in a tight range...
* G-20 to shun an exit from stimulus?
* Gold and Silver and Oil... A new trend?
* Loonies follow the commodities higher...

And Now... Today's Pfennig!

A Jobs Jamboree Friday!

Good day... And a Happy Friday to one and all! Well... Once again, my day didn't turn out exactly as planned, but as they say... A bad day at the ballpark is better than a good day and then you plug in the place... It could be work... It could be cutting the grass... Etc..

OK... I heard a great song on the radio this morning on my way to work... And I said to myself... Chuck, now that's a great song to start a day with, that everyone should hear each day! It's a song from the 60's (of course!), by the Rascals, called... It's a Beautiful Morning... Here's the first verse, and if you know the song, I'm sure you'll want to sing along, but if not... Look it up, I'm sure, you'll agree that it's a great way to start a day!

It's a beautiful mornin' Ahhh
I think I'll go outside a while
An jus' smile
Just take in some clean fresh air boy
Ain't no sense in stayin' inside
If the weather's fine an' you got the time
It's your chance to wake up and plan another brand new day
Either way
It's a beautiful mornin' Ahhh

OK... I know, some of you are getting ticked right now, because you remind me all the time, you don't read this to sing songs, etc. But hey! You've got to have a song in your heart, I truly believe that!

One of the reasons I thought it to be OK to go off on that tangent was the fact that the currencies remain in a range... The euro's range has been between 1.41 and 1.43... One day up a bit, the next day down... No direction... I think the culprit behind this is that there are so many people on each side of the fence right now, claiming that they know what is going to happen to the economy... I, for one, still believe that we're going to experience a "W" affect...

Joseph Stiglitz, the Nobel Prize-winning economist (and don't get me started on the questionable people that have won Nobel Prizes), believes there is a "significant" chance of a "W"... "it's not inevitable, but there's a "significant chance of a "W"..." he went on to say... "It's not clear that the U.S. is recovering in a sustainable way."

So... There you go... In the past two days, you've heard me, Bill Gross, and now Joseph Stiglitz, all talk about a "W", which in it's simplistic form is double dipping for the economy...

As I said yesterday morning... The real winners of the day were the Precious Metals... It could be repeated this morning too! And most likely Monday morning too! Gold is taking off in flight right now, and if you blinked the last two days, you've missed it! It's off about $3 bucks this morning, but give it a chance to have investors see it heading to $1,000 again!

The thing I think you need to think about here is the fact that there are tons, and tons of money sitting in bank accounts right now, and I wouldn't be surprised to see that money begin to make its way toward Gold purchases! This is normal isn't it? I mean, an asset class, like Precious Metals / Gold, begins to move higher, and then the money begins chasing the price higher and higher... There's an old saying about how you can lead a horse to water, but you can't make it drink... That's how I feel about Gold... I've have given the wink and nod for so many years about Gold... But I can't make you buy it!

Ok... Enough... Let's go to the Eurozone and see what's up there! The European Central Bank (ECB) met yesterday, and you may recall that I said that the markets were looking for ECB President, Trichet to get them "pumped up" on economic growth expectations... I said the risk for the euro yesterday was that Trichet disappoints the markets expectations... Well, I believe that's one of the reasons for the move down from 1.4330 yesterday to the low 1.42 handle...

Trichet basically told the markets that it's premature to call the financial crisis over... And that was enough for the markets... But in reality, Trichet did the right thing... The ECB does not, bow to the markets! If it wasn't the right time to talk about growth expectations, then don't do it! I raise a glass to Claude Trichet this morning...

I mentioned that the Trichet statement was one of the reasons the euro had a tough row to hoe yesterday, the other reason was the Weekly Initial Jobless Claims... Weekly Initial Jobless Claims printed at 570,000 (last month was revised up to 574,000), and the Continuing Claims continue to be quite the heavy load for this economy. Continuing Claims hit 6234K! People who know that these things don't stack up when talking about a strong economy, took money off the risk assets table...

Yesterday, I talked about how the Fed officials had begun to talk about exiting the stimulus measures, or monetary candy, as I prefer to call it, but Treasury Sec. Geithner, spoke out against that. Well, we have a G-20 meeting that begins today in London... I suspect that G-20 will issue a communiqué that basically said that the members do not believe that now is the time to exit the monetary candy...

The price of Oil rebounded yesterday for the first time in a week... I would have to think that with the price of Gold heading toward $1,000 again, it's taking Oil along for the ride! The weak dollar, feeds higher Oil prices... I would think that we all would recall that to be the case, from the spring and early summer of 2008! The euro was 1.60, Gold was near $1,000, and Oil was $140+!

With both Gold and Oil prices percolating... The Canadian dollar / loonie gets to get in the game! The loonie is so dependent on commodity prices, but especially those of Oil and Gold. So... If this rise of Oil and Gold becomes a trend, I think you could look for loonies to make a run at parity again... But, only if, the rise in prices of Oil and Gold become a trend...

Well... All eyes are focused on the Jobs Jamboree this morning. Hmmm... The ridiculous Bureau of Labor Statistics (BLS) will print their adjusted nonfarm Payrolls this morning... It is forecast to show job losses of 230,000... I know, you're saying but Chuck, just earlier you told us the Job Claims filed just last week was 570,000, how do we only show 230,000 for the month? Ahhh grasshopper... It's two different methods of reporting... The Jobless Claims is a "real" number... They have the claims and all they have to do is add them up! So... In my mind wouldn't it make sense to just add up 4 of these for the monthly total? Unfortunately, that's not what the BLS does... Instead they do a "survey"... And then make adjustments where they believe they need to be made, because they're so smart and know all these things... NOT! Geez Louise, even though I was being facetious I still can't believe my fingers would allow me to write that the BLS was smart!

So... We get stuck with a massaged survey... But, it is what it is, and nothing more... So... I guess we carry on despite the dolts we have to deal with and their cooked books! But, be it as may be, the 230,000 job losses is still bad... Let's go back a year ago, before we had the eye-opening 600,000 job loss months... If the BLS had printed a 230,000 job loss month, the Chicken Littles of the world would have been screaming that the sky was falling, for crying out loud! But now? The dolts will be spouting off about how that's a "good number"!

I had better stop there, I was really beginning to pound on the keys! Speaking of which, we were talking the other day, and saying that keyboards some day, will be able to describe the emotion of the person typing! Wouldn't that be cool?

I'm working on a report about what the IMF did last weekend that most people don't even know about... But, I've got more research to do, so, hopefully I can have that ready for the Review & Focus monthly letter that goes to customers of EverBank World Markets.

I just did a video the other day on a brief but chock-full-0-information history of the dollar. You all know that I write another monthly letter for my friends over at the Sovereign Society, called... The Currency Capitalist. You actually have to pay to receive that letter, but as a subscriber you not only get the letter, but weekly videos of me, answering questions that readers send in... Pretty cool, eh? You can subscribe here... https://www.web-purchases.com/CUC/WCUCJ900/landing

OK... That was a shameless plug... But I couldn't pass it up! Besides this I my letter, I can talk about anything I want!

The Chinese renminbi finally moved below 6.83, which it held for months! It will be interesting to see if this move higher VS the dollar continues, or if the renminbi pops back over 6.83 next week... I'll keep an eye out for that!

Well... We went through yesterday, and touched on what's going on today... (Jobs Jamboree and G-20), and spent a lot of time talking about Gold... It's a Beautiful Morning isn't it?

Currencies today 9/4/09: A$ .8430, kiwi .6845, C$ .9150, euro 1.4270, sterling 1.6365, Swiss .9415, rand 7.6775, krone 6.0450, SEK 7.2120, forint 192, zloty 2.8850, koruna 17.90, RUB 31.65, yen 92.80, sing 1.4380, HKD 7.75, INR 48.88, China 6.8299, pesos 13.55, BRL 1.8590, dollar index 78.34, Oil $68.50, 10-year 3.37%, Silver $16.07, and Gold... $990.75

That's it for today... It's a Friday before a 3-day holiday weekend! YAHOO! Tomorrow, my beloved Missouri Tigers start their football season VS Illinois... M-I-Z! (you're supposed to come back with Z-O-U!) The Butler family is going to the game (except darling daughter Dawn and beautiful Delaney Grace). Sunday is the annual Butler House end of summer bar-b-que with neighbors, family and friends. It's always a good day! And Monday I'll try to relax and recharge the batteries, for I'm dragging the line today! Next week, the NFL season begins... WOW! All these sports going on at one time is too much excitement for me! HA! Well, I guess I'll end this here, and hope you have a beautiful morning... And a Fantastico Friday!

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

Making The Fed Reserve Accountable!

Chuck Butler — Tue, 25 Aug 2009 12:30:43 GMT

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In This Issue..

* Currencies sold overnight
* But rebound in early morning trading...
* China throws cold water on stock values...
* German exports rival the Big Kahuna!

And Now... Today's Pfennig!

Making The Fed Reserve Accountable!

Good day... And a Terrific Tuesday to you! I returned home from San Francisco last night, and am back in the saddle today! Not the way I like to travel, where I get a day when returning home to recharge the batteries, but it is what it is... I did an interview with MarketWatch yesterday morning, talking about... Well, what else? The deficits, and diversification! My presentations in S.F. were well attended... On Saturday, my power point froze up, but I carried on in spite of the technical difficulties!

You know... I really, heard a lot of people talking about the rumor / conspiracy story that there will be a bank holiday at the end of the month (this weekend) and the Gov't will announce major changes to the currency... Now, before anyone begins to believe that I am on board with that rumor / conspiracy story, STOP! I am NOT! I've read all the theories, and I've heard all the information regarding this, but just do not understand why this would be done... So... I just wanted to throw it out there, and let you all know where I stand on this...

OK... Well... As always, Chris did a fabulous job in my absence... He helped the currencies rally, which again, plays along with the old theory we held that when Chuck's away the currencies rally! As I sit down this morning and begin to write, the currencies, led by the euro, have backed off their lofty figures of yesterday. Stock futures must be down, eh?

It was all seashells and balloons for the currencies the last 3 trading days, but that seems to have all ended in the overnight markets. The euro has lost the 1.43 handle, and the Aussie dollar (A$) has lost the 84-cent handle... In keeping with the trading pattern of some time now, we have Japanese yen rallying...

You know, I had a long conversation with a customer in San Francisco and he wanted to know why Japanese yen was considered a "safe haven currency"... I told him, that other than the fact that the Japanese economy is the 2nd largest in the world, I didn't see any other reason for Japanese yen to be considered a "safe haven currency"... The Japanese economy recently saw a 3.7% gain in 2nd QTR GDP... But come on... Do we really expect to see this followed through on? I've been following the Japanese yen for over 12 years now, and I've seen this a dozen or so times, when everyone gets all giddy, with goose bumps, and chills down the back of their necks over a rise in Japanese GDP, only to have the rug pulled out from under them the following quarter... Safe Haven Currency? It makes me shake my head... But it is what the markets make it to be... So we carry on...

Hey! Did you see where a Manhattan Chief U.S. District Judge ruled against the Fed Reserve? Way to go Loretta Preska, the judge, who has rejected the argument that the Federal Reserve was making about disclosing loan records... The Fed said that loan records aren't covered by the law because their disclosure would harm borrowers' competitive positions... The judge said, that the Federal Reserve MUST identify the companies in its emergency lending programs...

This just makes me jump for joy, because the cartel, I mean the Federal Reserve System, (and notice I don't call it a bank, because it's not a bank!) has to be accountable, don't you agree?

While I'm on the cartel, I mean the Federal Reserve, I see where the President is going to nominate Big Ben Bernanke for a 2nd term... Why wouldn't he? Big Ben has been playing along with the Goldmanites, I mean the Administration's plans hasn't he? He sure has... And for that, he gets a 2nd term!

OK... Enough of the Fed, they make my stomach turn any way!

The word overnight is that China is attempting to throw cold water on stock valuations, telling investors that the values are overblown... I've also heard a few voices in the U.S. state the same thing... Of course, long time readers of the Pfennig, know that I've tried to throw cold water on the stocks for months now... I just don't see how they are rallying, given the rot on the vine, including the unemployment problem. But... Who knows? I still believe there is market manipulation... And the people at CNBC can laugh at it all they want! If they don't want to believe former Fed Head Big Al Greenspan, who admitted there was a Plunge Protection Team... And if they don't believe that the Gov't has had a hand in manipulating the markets, then that's their problem! (I still get very mad when I think about them telling me I should take this thought to Hollywood.... !!)

Speaking of China... I read a story on Reuters that quoted Chinese Premier Wen Jiabao regarding keeping the stimulus for the economy going... Let's listen in... "We must clearly see that the foundations of the recovery are not stable, not solidified and not balanced. We cannot be blindly optimistic," Wen said. "Therefore, we must maintain continuity and consistency in macroeconomic policies, and maintaining stable and quite fast economic growth remains our top priority. This means we cannot afford the slightest relaxation or wavering."

And here's where I make sure you understand the difference between China adding economic stimulus, and the U.S. adding economic stimulus... China has the treasure chest of reserves to do so, and the U.S. doesn't! They are working from a position of monetary strength... The U.S. on the other hand, has done a wonderful job of jacking up the national debt! And we still have 1 in 5 people unemployed! We still have banks failing left and right, 77 of them in 2009, and we still have an economy in depression...

Oh... And did you see the announcement the other day by the administration that they are forecasting that the Budget Deficit will continue for the next 10 years? OK... This is where I have to come out and talk about how badly these forecasts are! For instance 10 years ago, these forecasters said we would be enjoying a Budget Surplus right now... Buzz! Wrong! Thank you for playing, there's a nice parting gift for you at the door! Johnny? Tell them what they won! How about a near $2 Trillion (by Gov't accountants figures) Budget Deficit instead? Which will be more than $500 Billion more than these accountants forecast just a year ago!

OK... Enough of that, my blood pressure is rising right now!

Oil Prices have fallen first yesterday and then overnight, and that news has weighed heavily on the Norwegian krone... I would just hold tight here, because there are a number of reasons to hold krone, other than an "oil play"... A Huge Surplus is the number one reason in my book... A great fiscal position, a mildly strong Central Bank, and being a "euro" alternative, are added to the "oil play" story...

And in Germany this morning, we should see the final GDP figure that would re-confirm that the German economy pulled itself out of recession in the 2nd QTR... I saw something that caught my eye this morning, that I think will amaze you... But, after the amazement has settled in, you'll say... WOW! No wonder Germany's economy is on the mend! What I'm talking about here is a report by the World Trade Organization that in the first half of this year... Germany and China were neck and neck for first place in the Exports by a country category... WOW! I know that everyone and their brother, believed that China was the Big Kahuna when it came to exports... But looky there! Germany is keeping up with the Big Kahuna!

I received a note from a reader last week regarding Germany... "We just returned from a trip to Germany and got the feeling that the recession has past. In short everything we saw pointed to a healthy economy."

That's the kind of economics that work for me... It's how I view economics, as a hands on kind of thing... How it affects you, me and the guy down the street. It's how I believe we should all view economics... No need to get all "book smart" with all those technical descriptions... Just see it for what it is, and report on it!

Today... The data cupboard has a few economic reports to print... Leading off and playing 2nd base is the S&P/CaseShiller Home Price Index, which I've heard more than one economist say that they think the index will show an improvement. In other words, home prices don't fall as much! We'll also see the color of the August Consumer Confidence report, which is forecast to be stronger in August... Then there will be few 2nd tier reports that also print, but not market movers, so we'll not spend time talking about them!

OK! Now that I've talked about the risk assets getting sold overnight, I'm sitting here watching the currencies rally right in front of my eyes! The euro has climbed back above 1.43, and so on...

Currencies today 8/25/09: A$ .8380, kiwi .6865, C$ .9275, euro 1.4320, sterling 1.6575, Swiss .9430, rand 7.8150, krone 6.0250, SEK 7.0670, forint 187.30, zloty 2.8560, koruna 17.75, yen 94.10, sing 1.4415, HKD 7.75, INR 48.78, China 6.8319, pesos 12.89, BRL 1.84, dollar index 78.23, Oil $73.97, 10-yr 3.47, Silver $14.14, and Gold... $947

That's it for today... My beloved Cardinals just returned home from a great west coast road trip in first place and looking better than they have all year. Kristin was telling me in S.F. that she saw football on TV and was very excited about the upcoming football season. Me too... Very unsure what to expect from my beloved Missouri Tigers... Well... We put the finishing touch on our first BRIC MarketSafe CD yesterday. It was quite the issue! And judging from the interest in it at the S.F. Money Show, the next funding of October 13th, should be good too! I saw quite a few "old friends" / customers at the S.F. Money Show, and that was fun. My next trip is in September to Williamsburg. Then Atlanta, New Orleans, and Marco Island to finish out the year... My knee is not any better, and in fact it's worse! Maybe a couple of days at home will help... Ok.. That's enough for today... I sure hope you can make your Tuesday, Terrific!

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

European orders support the Euro...

Chuck Butler — Mon, 24 Aug 2009 15:06:22 GMT

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In This Issue..

* European orders increase more than expected...
* Was Cash for Clunkers necessary?...
* Roubini sees a 'W' not a 'V'...
* Lessons from Mary Poppins...

And Now... Today's Pfennig!

European orders support the Euro...

Good day... And welcome to another week, the last one in August! The weather here in St. Louis has shifted toward fall, which is my favorite season. Chuck is flying back home from San Francisco today and will be back in the saddle tomorrow. Both he and the big boss, Frank Trotter, sent me some great Pfennig pfodder over the weekend so lets get right to it.

The dollar continued to drift lower throughout the trading day on Friday, with the commodity currencies of Australia, South Africa, and New Zealand leading the way. Confidence is returning to the markets, and investors are once again moving out of the 'safe havens' of the Japanese yen and US dollar. The reports coming out of Jackson Hole indicate that central bankers believe chances for near-term growth appear good and recent data seem to support this conclusion.

European industrial orders increased more than economists forecast in June rising 3.1% from May. This was the largest gain in over a year and a half, and is the latest sign that the European economy is starting to climb back out of recession. But many economists question the strength of the recovery, saying the pick up in economic growth was mainly due to government programs. ECB President Jean-Claude Trichet sounded cautious after the report. "We see some signs confirming that the real economy is starting to get out of the period of freefall," Trichet said in Jackson Hole. But this "does not mean at all that we do not have a very bumpy road ahead of us."

The home sales data released in the US on Friday were surprisingly strong, with existing home sales increasing 7.2% month on month. We get a bit of a break in the data releases today with just the Chicago Fed index; but the rest of the week will give us plenty of data to digest. Tomorrow we see the S&P/CaseShiller housing data, US consumer confidence, and ABC consumer confidence numbers. Wednesday will bring Durable Goods orders along with New Home sales. Thursday will give us another look at the estimate for 2nd Quarter GDP here in the US along with the weekly jobless claims. And we will close out the week on Friday with the release of Personal income and spending for July.

Should be a busy week ahead, and I would expect for most of the data out of the US to continue to confirm a government led recovery is underway here in the US. In particular, the consumer spending and durable goods orders should show a nice uptick on the back of the cash for clunker program. But Chuck sent me a note over the weekend which questions the 'success' of this program. Is it really what the US economy needed? Here are Chuck's thoughts from San Francisco:

"I was sitting here thinking about something that had flashed across the TV screen here in my room, and that is the "Cash for Clunkers" program... I blasted this program two weeks ago, and now that it's finally done with and $3 Billion was spent to artificially boost auto sales, I will put my final thought on this... Of course I already talked about the obvious things wrong with this program. But here's my final thought, and that is... I believe the program is going to end up hurting the most vulnerable consumers in the U.S. Middle Class buyers, traded in their "paid for" cars, and leveraged up to buy a new car, when they probably shouldn't have done so, given the rot on the economy's vine.

So... Once again, I'm reminded of the words that President Reagan said were the scariest words that could be spoken... "I'm from the government, and I'm here to help"...

The reason I'm all over this program today like a cheap suit, is that this weekend, I heard that Big Ben Bernanke made a claim at the Jackson Hole boondoggle, that "we saved the world"... Oh, Come on Big Ben, isn't that just a bit dramatic? Does this statement have anything to do with the fact that you are up for re-appointment in January, and you would love to have that thought of you "saving the world" on the minds of the administration?

So... In the end, we'll see if "he saved the world"..."

I'm with Chuck on this one. It seems the US government is intent on getting consumers to go back to their borrow and spend habits. This is what created the bubbles, and the administration seems intent on creating another bubble economy. US consumers have made some historic cut backs on the amount of debt they are amassing (whether or not these cutbacks are by choice). The US government should not be encouraging these consumers to go back to their previous ways, but should instead be trying to use the funds to educate and train consumers and to encourage new and innovative companies. Use this downturn to correct some of the bad habits which we had gotten into. Yes, it will be painful, but breaking an addiction is always hard and painful. US consumers need to break our addiction to easy credit and massive debt. This recession/depression has given consumers a much needed wake up call, hopefully the administration won't be able to push consumers back into their old habits.

I went running with my wife and her friends over the weekend (trying to take it easy on the back) and got into a discussion about the US economy. One of my wife's friends had heard an interview on MSNBC in which an economist stated we were in a classic V shaped recovery. I let her know that I think the economist was one letter off, and that instead we will see the recovery shaped more like a W. The green shoots and recovery we are seeing right now will die out as government stimulus slows. High unemployment, a long slow housing recovery, commercial real estate woes, and rising personal bankruptcies will force the economy into another dramatic downturn. Central banks who have 'juiced' their economies with unlimited credit will have to decide whether to continue juicing, or pull back from the table.

Nouriel Roubini wrote a commentary in today's Financial Times which agrees with my thoughts. Roubini said the chance of a double dip recession is increasing because of risks related to ending global monetary and fiscal stimulus. He believes the global economy still has further to fall, and will bottom out sometime during the second half of 2009. While some economies such as China, Germany, Australia, and France will likely recover; others such as the US and UK will double dip with another leg down. "There are risks associated with exit strategies from the massive monetary and fiscal easing," Roubini wrote. "Policy makers are damned if they do and damned if they don't."

Oil traded up to a 10 month high over the weekend, and carried the commodity based currencies of Canada, Mexico, Norway, and Australia with it. Oil will continue to run up as confidence in a global recovery strengthens. Another factor which has helped boost demand for Australian dollar investments was a move by the Aussie govt. which removed interest withholding tax on federal government securities. This made these investments more attractive and spurred additional demand for the currency.

The Hungarian central bank will meet today and is expected to cut their benchmark interest rate. Rates in Hungary are the highest in the European Union, and lower growth combined with low inflation will spur the cut. The Hungarian forint weakened from the strongest level in a week on the interest cut speculation.

The dollar's role as the world's reserve currency has been a continued topic among scholars and was undoubtedly discussed out in Jackson hole last week. China and Russia have both been adamant about discussing the possibility of moving toward a new reserve system to replace the greenback. Since no single currency is strong enough to replace the dollar in today's global economy, most discussion has centered around the idea of creating a 'reserve currency' which is comprised of a basket of the world's largest currencies. This idea is supported by Joseph Stiglitz, a Nobel Prize winning economist and Columbia University economics professor. "The dollar's role as a good store of value is questionable and the currency has a high degree of risk," Stiglitz said at a conference last Friday. "There is a need for a global reserve system. The currency reserve system is in the process of fraying," Stiglitz said. "The dollar is not a good store of value."

Frank Trotter was thinking about the same thing as he sat and watched a musical over the weekend. Frank is a real thinker, and I really enjoy it when I get a chance to have a good economic discussion with him. Luckily for all of you Pfennig readers, he decided to send me a note on his thoughts during the performance. So here they are:

"Went to the touring musical Mary Poppins Saturday night; it's always great to see a play about a run on a bank. While the books were written in the 1930's and beyond most of you will remember the Disney film set in 1910 - before the Great War when England ruled the waves and empire was returning untold dividends to the mother country. At that time of course there was no questioning the power, status and earning capacity of the British Empire. As George Banks replies to Admiral Boom in the movie, "Credit rates are moving up, up, up. And the British pound is the admiration of the world."
Well that was then and this is now. Soon after, in 1914 England suspended the conversion of Bank of England notes to gold for the period surrounding World War I, and the on again off again slide into today's fiat currency world began. Over the next 100 years England has leaned the lesson of empires that came before. That extending the resources of a country in non-producing capacity leads to the decline of the currency and a fall in the economic power of the country and the economic wellbeing of it's population. In 1910 it took 4.25 pounds to buy an ounce of gold, and 0.2056 pounds to buy a US dollar. Today of course the price of gold has risen 13,447% for British buyers, while the price of a greenback is only up 195%. We are uncomfortably comfortable in feeling that the carabineers have given way for the good old USA in a parallel fashion.
We'll freely admit that there has been a slow motion slide going on in the US dollar since establishment, and especially since the removal from the gold standard and the Bretton Woods Agreement in 1971. But we feel even more strongly that the fiscal and monetary policies put in place starting in 2001, accelerating through the 2000's, and now amplified since January 20th have left us with no legs for our stool. Fiscal policy has been and continues to be out of control. The Federal Reserve policy of the 2000's created the credit bubble and now stands to create the largest monetary inflation experienced in a first world nation. Both political parties have determined that no one can be an adult in government by slashing spending or raising taxes to cover our exploding gap (mathematically the only two options), and instead are hiding behind the invisible tax of currency depreciation. For a country we conclude that a strong currency is essential to long term well being, and by extension that our government has given up on the dream in exchange for election and reelection.
So what's to be done? If you are a believer that the political process can sort things out and return our wonderful nation to fiscal prudence and steady governance go ahead and stay the course. For the rest of us who like Margaret Thatcher believe that "the problem with socialism is that eventually you run our of other people's money", we'll be letting our "tuppance safely invested in the bank" seek diversification across the globe in countries and markets with more opportunity and prudence. We couldn't agree more with the Mary Poppins conclusion, re-written for modern times that "Where stands the banks of [the USA], America stand. Oh, oh, oh, oh! When falls the banks of [the USA], America falls!"

Leave it to Frank to use Mary Poppins to give an economics lesson! And with that, I will close this out and head to the currency roundup.

Currencies today 8/24/09: A$ .8400, kiwi .6845, C$ .9251, euro 1.4308, sterling 1.6492, Swiss .9424, rand 7.7805, krone 6.045, SEK 7.0496, forint 187.60, zloty 2.8755, koruna 17.775, yen 94.86, sing 1.4396, HKD 7.7505, INR 48.5575, China 6.8314, pesos 12.7805, BRL 1.8299, dollar index 78.17, Oil $73.98, 10-year 3.56%, Silver $14.42, and Gold... $953.85

That's it for today... Thanks to both Chuck and Frank for giving me so much good stuff to include in today's Pfennig! Kristin Kuchem sent me a note and told me she got stranded in the Chicago airport on her way back from San Fran last night. It is her son Jack's first day of Kindergarten so she was pretty bummed out that she couldn't get home to send him off. Flying just isn't much fun anymore, as the airlines overbook most flights and any kind of weather can royally screw up your best laid plans. Hopefully Kristin can make it back down from Chicago in time to pick Jack up from school. John Smoltz had an impressive first outing for the Cardinals yesterday, setting a club record with 7 strikeouts in a row! Sure looks like this is going to be a fun October here in St. Louis. Hope everyone has a Marvelous Monday and a great start to your week!

Chris Gaffney, CFA
Vice 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

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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

U. of Michigan Spoils The Party...

Chuck Butler — Mon, 17 Aug 2009 14:57:26 GMT

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In This Issue..

* Risk Aversion comes back strong!
* Risk assets get sold...
* What games will be played with TIC's?
* 40 years since Woodstock!

And Now... Today's Pfennig!

U. of Michigan Spoils The Party...

Good day... And a Marvelous Monday to you! A great weekend that was filled with watching my little buddy, Alex, play football, hosting a surprise 30th birthday party for my little girl, Dawn, and a sweep of the Padres by the Cardinals! This week gets cut short with me a the helm, as I head to San Francisco on Thursday. Chris will have the conn on the Pfennig Thursday through Monday.

Well... Who'd a thunk it? Yes, who would have thought that the U. of Michigan Consumer Confidence could turn the markets upside down and spoil the party? Well... It happened on Friday! The U. of Michigan Confidence Survey for Aug unexpectedly dropped to 63.2, from the previous month's 66 level. The real drop though was from the forecast for this month which was 69! The drop brought the index to a five-month low.

CPI printed at 0%, Industrial Production rose and so did Capacity Utilization in July... But none of it could get the taste of the U. of Michigan Consumer Confidence out of the markets mouths. It was the Humpty Dumpty economy once again... All the king's men couldn't erase the drop of Consumer Confidence.

And, the return of the risk aversion campers swamped the markets. And all day Friday, we saw losses in value of stocks, commodities and currencies. In the overnight markets, the return of risk aversion got even stronger. From what I understand happened, it seems that China's largest steel makers announced that they were going to se iron ore prices at 35% below the benchmark. This sent shockwaves through the commodities, and that has carried over to further losses in the currencies...

The euro has just fallen through the 1.41 handle, and is taking all the other currencies with it to the woodshed... That is, except of course, Japanese yen. I've gone through this so many times in the past, I think you all know exactly what I'm going to say, before I say it... But, for those of you new to class, when the risk aversion crowds fill the markets, investors head for the hills, thus selling their "risk assets" of which currencies are a part of. However, there are two currencies that the mental giants believe to be "safe havens"... One pick is ridiculous, and the other one is even more ridiculous as "safe havens"... But you can't fight the markets, and they deem Japanese yen and U.S. dollars as "safe havens"... Me? Personally? I deem one to be a currency that should be circling the bowl! And the other? It's iffy for sure... I don't think you need me to tell you which one is which!

Of course, the Japanese yen has its moments... And one of those came last night in the form of their 2nd QTR GDP. The Japanese economy grew 3.7% in the 2nd QTR, thus ending their recession... But just like the Australian economy that we talked about last week, and needing to see if it can maintain this growth after the removal of "fiscal candy", the same is true for Japan. But Hey! 3.7% growth is still pretty impressive, for Japan!

This morning, as I look over the headlines on the Bloomie, I see one story that says the euro will fall to 1.30 VS the dollar, and two other stories that say the opposite, with one saying it will reach 1.45 in the coming days, and the other saying the euro is a "buying opportunity"... Confused? Well, that's the stuff that markets are made of folks... People with differing opinions...

Which brings me to what I will call "Pfennig etiquette" Just because you have a "different opinion" on things that I say, does not give you the right to flood my email box with what you believe is proof that you are correct! Nor does it give you the right to get nasty with me... It's this simple folks... If something is on TV that offends you, what do you do? You change the channel... Carry that over to your FREE subscription to the Pfennig...

OK... Enough of that! Later this morning we'll see German Trade Balance numbers, and... The June TIC Flows data from the U.S. These TIC flows just don't get the attention I believe they should. So, I carry on despite the mental giants in the markets that place importance on data prints! TIC Flows are simply, the net security purchases by foreigners. The U.S. has to sell its Treasuries to finance the ever expanding deficit... And supposedly, these TIC Flows tell us whether that's happening or not. But given the games that people (the Fed and Treasury) play these days, who knows what is real or not? Only the shadow knows!

Don't ask Big Ben Bernanke, he'll tell you he doesn't know, like he did when he was asked by a Senator where $500 Billion that left the Fed's books went... Big Ben said... "I don't know"... Ahem... Big Ben? IF YOU DON'T KNOW... WHO THE )*&(&*)( SHOULD WE ASK?

OK, that was a tangent I didn't plan on going to... But I did... So let's finish the TIC Flows talk, eh Chuck? So... Last month, for instance, the data showed a negative figure, which meant that we did NOT finance our deficit in May! June's data prints today... Let's hope it prints better than the May report!

Speaking of the cartel, I mean the Fed Reserve... I saw this quote by Bill Bonner the other day, and just knew it would fit nicely in with any discussion of the cartel, I mean the Fed, and Big Ben Bernanke... Here's Bill... "And remember, too, the feds don't really have any money to hand out. They can only get money by taking it from its rightful owners - either in taxation or loans. Or, they can print it up themselves. In any case, the money adds nothing real or extra to the economy. It merely distorts the economy...twists it...misleads it...and makes it a bigger mess than it was already."

Yes, that's exactly right, Bill! And something that I've tried to tell my dear readers for some time now... A lot of people don't agree with that... And that's all fine and dandy with me... But I believe that the things that I've researched tells me otherwise... Quite a bit otherwise!

All the good that the Norwegian krone built up last week, has been wiped out by the sell off of Oil prices. And when the Norwegian krone backs off it takes the Swedish version of the crown the krona with it!

The Aussie and kiwi versions of dollars saw their recent lofty levels melt away with the commodities damage from the Chinese steelmakers announcement. These two are still way above their winter of this year's levels, so, it's not all bad...

So... These risk aversion outbreaks have been relatively short in recent months, and not like the risk aversion of last fall and winter... So, we can look to see what might shake the risk aversion campers... As I look over the data calendar for this week, I really don't see anything that "might" scare the risk aversion campers... However, the week is dominated by several reports on Housing & Building... Maybe, just maybe, these reports might show that the Housing market has bottomed, that sales are picking up, and that home prices have stopped falling.... Who knows? Maybe that would be enough to shake up the risk aversion campers!

I was thinking about this while I was typing that previous paragraph... And that is... Even if Home prices show a bottom, how long will it be before they are on the upside of 2 years in the red? Unfortunately, it will be a very long time before that happens! Long Time readers will remember when I used to (what many believed me to be doing, crying wolf), warn about the housing bubble... Shoot, I had people in the mortgage industry that just wouldn't / couldn't come to agree with me... Of course when it all melted down eventually, they admitted to me that they had been drinking the kool-aid, but now see what I had been trying to tell them...

So... When I say that I believe it will be a very long time before that happens, I've got a track record here...

I also was one of the first people to say in 2001 that the dollar was about to go into a secular long term weak trend... You should have seen the emails I got then! Oh, but look at us now... The dollar index has given up over 40% of its value since then! And some individual currencies were doing even better at one point during the trend...

So, with that note... I'll head to the Big Finish!

Currencies today 8/17/09: A$ .8175, kiwi .6665, C$ .90, euro 1.4065, sterling 1.63, Swiss .9250, rand 8.20, krone 6.20, SEK 7.32, forint 194.85, zloty 2.98, koruna 18.33, yen 94.50, sing 1.4520, HKD 7.7505, INR 48.96, China 6.8360, pesos 13.03, BRL 1.8475, dollar index 79.50, Oil $65.80, 10-yr 3.47%, Silver $14.18, and Gold... $936

That's it for today... Well, this past week was the 40th anniversary of Woodstock... From what I understand, the entire music performances of the concert are being put on CD, and will be sold as a box set, as opposed to the original 3 album set, that only included selections of the music... I remember as young man watching this movie, and being blown away by the music. I used to have the movie on VHS, and whenever a new person started working for me, I would give them the tape and tell them to watch it, and report back! HA! So... Getting back to something I said above... We hosted a 30th birthday for my darling daughter, Dawn, on Saturday night. Friends, and family successfully pulled off a surprise for her! Dawn's actual birthday is this Thursday, but I'll be flying to San Francisco, and I wanted to be able to celebrate with her! I'm taking this a little strangely, having a daughter that's 30! WOW! OK... Gotta go... I hope your Monday is Marvelous!

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

Frightened investors move back into US treasuries.....

Chuck Butler — Fri, 10 Jul 2009 14:46:50 GMT

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

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

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

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

In This Issue..

* Jobs data skewed by 'seasonal adjustments'...
* BOE surprises the market...
* Oil falls below $60...
* China's reserves continue to grow...

And Now... Today's Pfennig!

Frightened investors move back into US treasuries.....

Good day...Chuck has a bevy of doctor's appointments today, so he decided to let me take over the Pfennig. Unfortunately it will go out a little later than usual, as I always struggle to get all of my thoughts together so early in the morning. Its not that I come in late (I was here two hours before everyone else) but it just takes me much longer than Chuck to get it all on paper. But enough of the excuses, I've got to get writing.

Weekly jobless claims released in the US yesterday morning fell below 600k for the first time since January but the continuing claims continue to rise, hitting another record. The slight improvement in the weekly numbers was distorted by the automotive sector. Car companies typically shut down plants in early July in order to change over to the new model year. Bankruptcy forced many of these plants to shut down much earlier than normal, and some temporarily started up production again during the past few weeks.

Chuck would have a field day with the jobless claims, as the government economists were hard at work 'massaging' the numbers to give everyone a more 'clear' picture of the data (why can't they just report the actual number of people filing for unemployment?). As Chuck has pointed out, the Labor Department adjusts the figures using seasonal and demographic trends, creating 'ghost jobs'. Since automobile plants typically shut down in the first weeks of July, the labor department expected a large increase in claims during this time. In order to offset these 'seasonal factors', the brain trust at the Labor Department added back a number of jobs in order to balance out the expected temporary layoffs in the auto sector. You would think the Labor Department would realize that most of these automobile workers were already idled, and therefore keep the adjustments to a minimum. But that would be too logical, so they just went ahead and 'seasonally adjusted' the claims as if this was a typical July for the auto sector.

The continuing claims illustrate a much clearer picture of the US job market, with unemployment spiking up to 9.5% in the US. The news from the retail sector was also gloomy, as the ICSC Chain Store Sales fell another 5.1% YOY during the month of June. Inventories also continued to shrink for a ninth month in a row in May to just over $400 billion. This is the lowest level since August of 2007, and raises some longer term inflationary concerns. Some of you are probably questioning this last statement, so I will explain.

Lower retail sales have forced stores to keep inventories down. I was in a local Walmart store the other day and noticed the shelves were emptier than what I have seen in the past, items weren't stacked 5 deep and didn't reach toward the ceiling. US consumers have been buying less and saving more, a very good thing! But stores have reacted by dropping the amount of inventory they are carrying (again a smart thing for retailers). Against this backdrop, the US government continues to flood the economy with cash, trying to get consumers to start spending again to jumpstart the economy. For now, the cash has been hoarded by banks and used by consumers to pay down some of their massive debt. Eventually the 'all clear' horn will sound, and consumers will start looking to make purchases again, but will find empty shelves. Inflation will follow, as too much cash will be chasing too few goods.

But our government has a much shorter term view, and continues to pump money into our economy with no real regard for future inflationary concerns. And some very smart economists seem to agree with the administration. Both Nouriel Roubini and Robert Shiller, respected economists, are calling for additional stimulus. In a radio interview yesterday, Roubini predicted the US recession will last another six months and be followed by a 'shallow' recovery. On the same radio show, Shiller said the economic crisis would continue despite the $12.8 trillion pledged by the US government and Federal Reserve.

The BOE shook up the markets with a surprise announcement not to increase its quantitative easing program. The Bank's Monetary Policy Committee put the program designed to pump extra cash into the markets by purchasing its own debt on hold after announcing it would also keep interest rates steady at .5%. The move was a major surprise to the markets, and sent the price of gilts (the UK's treasury bonds) falling and the price of the Pound Sterling higher. The BOE was the first of the western central banks to begin the controversial program in which it monetizes its debt; hitting the overdrive button on the printing presses by monetizing its debt. We've never been a fan of the Quantitative Easing programs, as they are short sighted with total disregard for the future inflationary pressures the exert on the economy. But several other central banks, desperate for a way to get cash into their economies have followed the BOE's lead.

The move by the BOE was even more surprising given the fact that the Chancellor has authorized another 25 billion pounds to be added to the program. Perhaps the Bank's Monetary Policy Committee is finally starting to realize all of the QE which it has done hasn't really had the desired impact. Much of the extra cash being created by the program is simply being hoarded by banks and is not making its way out into the economy via loans. Sound familiar? We have a similar situation occurring here in the US, with banks sitting on a majority of the stimulus monies which they have received. They have used the funds to shore up their balance sheets, a good thing long term, but not what the central banks intended with the introduction of the QE programs.

But enough of the economic talk, I need to let you know what happened to the currency markets overnight!! In spite of the Labor departments attempts to 'adjust' the weekly jobless claims, the economic data released here in the US yesterday was generally poor. This raised further concerns regarding the global economic recovery, and forced investors back into the US treasury market. As typical during these periods of uncertainty, the Japanese yen was the best performing currency. This is due to a general deleveraging as investors purchase yen to pay down debts used to invest into higher yielding assets.

We have seen this pattern repeat several times over the past year. As investors start to see some signs of recovery in the global economy, they invest into the higher yielding currencies, and borrow funds at lower rates available in Japan. But as soon as they begin to question the recovery, they move back out of the higher yielders and pay back these loans in the Japanese yen. Morgan Stanley believes the recent move by the yen is just the beginning of another big move, predicting a move to 85 yen/dollar. The foreign exchange strategists at Morgan Stanley predict the yen will continue to rally through the end of the year as doubts about the global recovery intensify. But their longer term predictions are less enthusiastic, as they feel the yen will weaken throughout 2010.

The commodity currencies took a hit over the past few days as the price of oil and metals continued to fall. Oil fell below $60 per barrel for the first time in a couple of months. Concerns over the global recovery, along with some slight calming of tensions in the gulf states have caused the price to drop. One commodity currency which has been able to hold steady during the recent selloff is the Brazilian real. A report that car sales in China surged bolstered the outlook for the commodity rich country. China's passenger-vehicle sales rose 48% in June, pushing China past the US as the world's largest auto market.

Increased automobile demand in China is another sign of their slow move away from an export based emerging market economy to that of a more balanced one. China's exports tumbled for an eighth month in June, but internal demand helped by the government's stimulus package is offsetting some of the impact of these falling exports. Imports also fell, but the size of the decrease was the least in eight months. This is good sign for the future of China, as imports are typically a leading indicator for exports in China.

China's foreign exchange reserves likely topped $2 trillion for the first time, climbing another $67.8 billion in the second quarter. The central bank is predicted to release the number sometime today. The increase in reserves certainly cause concern in the currency markets, as officials in China continue to call for the diversification of these reserves. According to a story in the Financial Times, China launched its highest profile criticism of the dominant role of the US dollar as a global reserve currency during the last day of the G8 meetings in Italy. "We should have a better system for reserve currency issuance and regulation, so that we can maintain relative stability of major reserve currencies exchange rates and promote a diversified and rational international reserve currency system," Chinese state Councilor Dai Bingguo was reported to say. Western leaders tried to play down the remarks, with Gordon Brown stating that he did not remember Mr. Dai making the remarks.

Separately, Joseph Yam, chief executive of the Hong Kong Monetary Authority, said Hong Kong might consider diversifying more of its $200 billion reserves away from the US dollar. I would expect China to keep the heat on the Obama administration in order to try and get them to reign in some of their 'quantitative easing' programs. The Chinese officials continue to be concerned about the future inflationary consequences of these programs. But at the same time, they have to be very careful about the diversification out of the dollar, as they still hold trillions of dollars and don't want to cause a sudden fall in their value. The big boss, Frank Trotter, constantly reminds us that China has a much longer term thought process, and has an extreme amount of patience. I would expect them to continue to slowly diversify their holdings, adding to the long slow decline of the US$.

With that I will move on to the currency roundup. Sorry to go so long this morning, but I felt like there was a lot of data to get through.

Currencies today 7/10/09: A$ .7760, kiwi .6263, C$ .8596, euro 1.3902, sterling 1.6198, Swiss .9172, rand 8.196, krone 6.5369, SEK 7.9021, forint 199.10, zloty 3.1440, koruna 18.708, yen 92.76, sing 1.4623, HKD 7.75, INR 48.97, China 6.8327, pesos 13.6408, BRL 2.009, dollar index 80.489, Oil $59.66, 10-year 3.337%, Silver $12.64, and Gold... $909.39

That's it for today... Everyone is limping into the office this morning, as we played a double-header in our kickball league last night. We ended up splitting the two games, but as my wife continues to tell me, kickball is a game for kids, not middle aged currency traders!! One of our team had to go to the hospital last night, as he injured his shoulder diving for a catch in the outfield; I hope Joe B's shoulder turns out to be ok!! St. Louis is getting ready for the All Star weekend, and I saw one of the blimps floating around last night. My son, Brendan and I are heading downtown to compete in the All Star Charity 5k run which begins at Busch Stadium. It will be fun to be downtown and around all of the All Star hoopla, even though we don't have a ticket to any of the events. 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

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

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

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

In This Issue..

* 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

A Turn Around Tuesday!

Chuck Butler — Wed, 10 Jun 2009 14:27:03 GMT

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In This Issue..

* Another Treasury auction today...
* Goldman says to buy euros!
* Oil fuels Commodity Currencies!
* RBNZ to meet tonight...

And Now... Today's Pfennig!

A Turn Around Tuesday!

Good day... And a Wonderful Wednesday to you! Well... Yesterday was "Turn Around Tuesday"! Add to that, the fact that there were a number of reasons for the euro to lead the charge for currencies VS the dollar yesterday. And... A word from one of the economists that I keep on my list of "to read"... So, let's get to the tape from Turn Around Tuesday!

I heard yesterday someone say "well, we sure turned around today in the currencies"... And I thought, Shoot Rudy, why not name it Turn Around Tuesday? Then I went back to the history page on my trusty Bloomberg, and saw that on 4 of the last 5 Tuesdays, the currencies did in fact "turn around" their performances from the day before! Not that this is something we can hand our hats on, and make trades accordingly on Monday nights / Tuesday mornings... But, it's an interesting fact nonetheless!

So... The currencies, led by the euro, came back strong VS the dollar yesterday... There were quite a few things on the list of reasons for this rally... I could do this David Letterman style... But I don't have 10 reasons... So.. I'll start with Chuck's Top 5 Reasons the currencies rallied yesterday... (imagine me throwing the card away after reading each reason!)
#5 There were rumors that a Big Swinger Fund Manager was interested in some large chunks of Euros, Aussie and Gold...
#4 The supply thing again... $35 Billion in Treasury Notes had to be auctioned off...
#3 The Risk Traders were out in force, with the news that 10 Financial Institutions were going to be allowed to pay back their TARP funds.
#2 Goldman Sachs issued a "buy euro" recommendation to their clients...
And the number 1 reason the currencies rallied yesterday...

#1 The markets are celebrating the 345,000 job loss as reported by the BLS, last Friday, as proof the recession is coming to an end, and therefore there's no further reason to own the safe haven dollar!

To that... I have to say HOGWASH! Not that I'm going to say the markets are wrong, because that's something I learned many moons ago, that the markets are never wrong... Stupid... But never wrong! What I'm saying is that #1 I've proved that the BLS number was a farce, printed to make us feel good, and what a job it's doing, eh? And #2 Even if we accepted that the number was -345,000, why would that be a good thing?

On my list of economists that I often read, is Paul Kasriel of Northern Trust... Let's hear what he had to say about this... "The last thing Fed Chairman and Great Depression scholar Ben Bernanke wants to do is "abort the recovery by premature tightening," which is what his predecessors did in 1936 and 1937, says Paul Kasriel, chief economist at the Northern Trust Corp. in Chicago. "At what other time has a 345,000 job loss been a reason to celebrate?"

OK... Let's not look a gift horse in the mouth, eh? The euro rallied all the way to 1.41 and change... Right now, as I type it's 1.4090... As I left you yesterday morning, the euro was trading, according to the currency round-up, at 1.3890... I had my head down doing some reading before trading, and looked up to see the euro had skipped right through the 1.39 handle... I never saw it trade with a 1.39 handle! It was that quick!

You know, the number 2 reason for the currencies to rally yesterday was quite interesting... Goldman Sachs Group Inc. advised buying the euro versus the dollar as risk aversion eases, prices of commodities rebound and talk of alternative reserve currencies undermine confidence in the greenback.

And the number 3 reason for the currencies to rally yesterday has more "air time" today, as the U.S. will have to auction $19 Billion of 10-year Treasuries... Yesterday's 3-year auction was well bid... But think about this for a minute... The Chinese have shortened up their Treasury holdings to average 3-years... So, a 3-year note probably wasn't going to have that much trouble getting sold... But 10-years? Ahhhh grasshopper, this could be the cheese that binds... We'll have to see if this auction is as "well bid"...

The Commodity Currencies are watching the price of Oil rise to over $71 a barrel, and loving every minute of it... I'm not of course, as it will affect the price of the gas I put in my vehicle. But... This is the fuel the Commodity Currencies needed to get moving (get it? The fuel, oil? HAHAHAHA) Aussie, kiwi, loonies, real, and rands really got moving yesterday and overnight... Regarding the loonie... I've told you over and over again that the price of Oil could be the harbinger for a better loonie price... And voila!

I was talking to a very good / old friend, one that I've known since we were in the 2nd grade, the other day, and he asked me what was going on with the price of Oil, as he reasoned that with the recession going on, gas consumption was down, and thus the demand would be reduced... I agreed with him, but added... The difference here, I believe, is the fact that investors are looking ahead and believe they already see inflation, and are buying Oil contracts as a hedge VS that inflation they see in our future...

Loonie holders don't care where the move comes from, they are just rejoicing a move to 91-cents!

The "winner" for the day in performance VS the dollar, was... Drum roll please... The New Zealand dollar/ kiwi... I found this strange given the fact that the Reserve Bank of New Zealand (RBNZ) meets tonight to discuss rates... I take it that traders don't believe the RBNZ will cut rates. In the Pfennig on Monday I said that "I was on the fence with this one... I'm leaning toward leaving rates unchanged, but jawboning for further rate cuts... Which is about the same as actually cutting them! So... Just cut the darn things! Quit beating around the bush!"

So... Kiwi was the winner for the day! Now we need to wait-n-see what the RBNZ does tonight!

Kiwi's kissin' cousin across the Tasman, Australia, saw June Consumer Confidence rise sharply by over 12%, the biggest one-month rise since 1974... Ahhh, 1974... Grand Funk's The Loco-Motion was the number 1 song of the year... The Top Ten also included Sweet Home Alabama, Come and Get Your Love, and The Joker... 1974 wasn't a great year for Billboard hits... But the underground FM radio stations were hitting it big then, and the music was awesome! Oh boy, did I digress or what here? Geez Louise, somebody pinch me, I've gone completely off course!

OK... I'm back from 1974 now...

Gold and Silver also enjoyed the day on Tuesday, and overnight, with Gold moving to $960... Recall, yesterday, when Gold had dropped the previous 2 days that... "With Gold hovering around $950 and Silver around $15, it certainly provides an opportunity to buy at cheaper levels than last week's lofty figures, eh? I would use these dips to my advantage... But then that's just me... It doesn't mean that it's the right thing to do!"

As I've been talking about all week, the Trade Deficit and Budget Deficit both print today... The Trade Deficit is expected to grow to $29 Billion from $27.6 Billion because of the steady rise in the price of oil... The Budget Statement which couldn't even post a positive balance in the month April, will probably add $180 Billion to the deficit column... UGH!

This afternoon, the Fed's Beige Book will print, which gives us a glimpse of what the Fed Districts see going on... There's rarely something here to move the markets, so... These are not the droids you're looking for... Move along there's nothing here to see!

And finally... I wonder what's going to happen with this one... I'm talking about the House of Representatives issuing a subpoena to the Fed for the documents related to the Bank of America (BOA) purchase of Merrill Lynch... You may recall that BOA Chairman, Ken Lewis, told the lawmakers that the Fed and U.S. Treasury made him take on Merrill Lynch, and not disclose the losses on Merrill's books... There's more laws broken in that statement than you can shake a stick at... So... This will be interesting, to see if the lawmakers find anything there... I doubt they will, because they are all in cahoots with each other in this financial mess... But, to me... There's smoke here... And I always tell you that where there's smoke there's fire! And I believe that the fire is raging here... I'll tell you what we need here... We don't need no stinkin' lawmakers going through the records... We need old ironsides... Barnaby Jones... Or Mannix! Now, those guys would get to the bottom of this!

I did a 15-minute radio interview on True News yesterday... I got to speak my mind on some things, and the interviewer never interrupted me, told me "he was losing me", or made fun of anything I was talking about... Now... That was a good interview! I got to talk about things on my mind, our products here at Everbank, the website, the phone number and the Pfennig... And the listeners got 15 minutes of "Chuck speak"... I want to thank the people at True News...

I also had a production meeting for my "other" newsletter, which is always interesting... The editors sit around and ask me... "So, Chuck, what do you want to write about this month?" Hmmm... I always say, because... Since I write something every day, you can only imagine how difficult it is come up with something new for a monthly newsletter! But I always do, somehow! If you're interested in this letter, it does cost... But it's a value at any cost! You can click here... https://www.web-purchases.com/CUC/WCUCJ900/landing

Currencies today 6/10/09: A$ .8110, kiwi .6335, C$ .9080, euro 1.41, sterling 1.6390, Swiss .9290, rand 8.03, krone 6.2810, SEK 7.6425, forint 198.28, zloty 3.1750, koruna 18.99, yen 98, sing 1.4480, HKD 7.7510, INR 47.33, China 6.8332, pesos 13.53, BRL 1.9440, dollar index 79.74, Oil $71.31, 10-year 3.87%, Silver $15.42, and Gold... $961.35

That's it for today... Did you hear about the fisherman who reeled in a missile from an F-15 fighter jet? That's a pretty interesting story, eh? Not much else to talk about this morning, as my beloved Cardinals are in a major June Swoon... UGH! When do the Rams report to training camp? Nah... I can't be that thin skinned with the redbirds, they'll break out of this... Hopefully! So... With nothing more to say, I'll get this out of here, but not before telling you to hopefully have a Wonderful Wednesday!

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