Daily Pfennig : Recession

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

Heeeeeeee's Baaaaaacccckkkkk...

Chuck Butler — Mon, 03 Aug 2009 16:25:15 GMT

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In This Issue..

* A strong currency move on Friday...
* Data Cupboard gets a work out this week...
* U.K. and ECB meet this week...
* RBA to move to neutral tonight?

And Now... Today's Pfennig!

Heeeeeeee's Baaaaaacccckkkkk...

Good day... And a Marvelous Monday to you! Heeeeeeee's Baaaaaacccckkkkk... Oh no! Just when you thought it was safe to open the Daily Pfennig and not get lectured on deficit spending... He's back! Oh well, It's been over two weeks, first to Vancouver, then on vacation. We've got a lot of catching up to do, eh? Mike and Chris did a Fantastico job of taking the conn on the Pfennig in my absence... So thanks to them... But it's back to me, and besides a couple of days in San Francisco later this month, I'm all yours! (I bet that just makes you smile like a Cheshire Cat... NOT!)

OK... Rather than beat around the bush this morning, Chris left me this note from Friday's price action, so let's go to the Friday round up and then onto today! Here's Chris!

The currency markets were fairly calm Friday morning, but at around 9:00 the dollar index fell off a cliff! The big data released this morning was 2nd Quarter GDP which showed only a 1% contraction vs. an expected 1.5% contraction. But the 1st quarters number was revised down to 6.4% from the original report of 5.5%. I guess traders needed some time to digest the information, as the report came out at 7:30 but the dollar didn't start its freefall until just after 9:00. But when they finally decided to take the dollar lower, the move was pretty dramatic with the Euro moving up a 1.5 cents in about 2 1/2 hours. The markets settled down around noon, and traded sideways until the close.

So... My time away was much like the "old days" that you could almost make trades on the trading pattern of when Chuck was away, the currencies rallied...

OK... So as I turn on the currency screens this morning, I see that the euro is trading up towards 1.43, and the Aussie dollar is trading with an 84-cent handle! So, those are some good looking numbers for the currencies. The GDP data that Chris talks about above, was interesting in that it gives the risk takers some rope... Yes, that old saying about getting enough rope to hang yourself, comes to mind here. Not that the risk takers will hang themselves, but to illustrate that they have some room to take risk assets higher.

When you look at the proxy currency for commodities and global growth, the Aussie dollar, and it's trading at the highest level we've seen this year, you've got to think that the traders, and others are thinking that the worst of the global recession is in the rear view mirror. Now, I think that's putting a little like putting the horse before the cart, as we just don't have enough data that hasn't been massaged and cooked to prove that we're coming out of the global recession... But hey! If the traders, hedge funds dudes, and currency participants want to play Sly Stone, and take currencies higher, then I suggest we not stand in front of that bus!

One of my fave economists, Nouriel Roubini, believes that "there is now potentially light a the end of the tunnel." And... That "Commodity prices may extend their rally into 2010 as the global recession abates."

Now... That's a horse of a different color, eh? When someone like Nouriel Roubini, who was one of the first to call out the collapse of the global economies, sees a potential light, then the markets sit up and take notes... And begin to buy at cheaper levels, just in case that light is the sun... And not the light of a run-away train heading straight for us!

Well... Somehow, U.S. stocks essentially made it through the earnings reports season unscathed. Pretty amazing if you ask me, but I never claimed to be a stock jockey, so that pretty much explains my inaccurate prognostications that 2nd QTR earnings would be a real drag on stock values... Which scared the bejeebers out of me, for stocks, currencies and commodities have been all rolled up in a great big "risk assets" ball for months now, and if stock values were going to get taken to the woodshed then so would currencies and commodities... But that didn't happen... Hmmmm....

OK, with the earnings season basically over, we can get back to watching regular data that makes more sense to me... And this WILL be a week that's cock-full-o-data, beginning with the ISM Index (manufacturing) for July today, along with Vehicle Sales. Tomorrow we'll see the color of two of my faves, Personal Income and Spending. Wednesday is the ADP Challenger employment report for July... Thursday, we'll get Central Banks meetings in the U.K. and Eurozone. And Friday is the BIG KAHUNA, as the Jobs Jamboree for July gets printed. Right now, the economists surveyed are looking for a HUGE drop in job losses for July. June's BLS massaged number of 467,000 job losses is being forecast to drop to 325,000..

I'll believe that when I see it, although it would be nice if that was the "real" number, eh?

If job losses drop by that much in July, it would certainly keep the fire burning for thought that the global recession is recovering, and that would certainly keep the fire burning for currencies and commodities!

Well... Don't look now (made you look, made you look! HA) but pound sterling is the best performing currency overnight! The pound is 1.6840, with a bullet! (yes, it had a good beat, and was easy to dance to) Stranger things have happened in currencies over the years, but this is one that really moves to the top 10... The U.K. with all their problems, and sterling posting a better than 15% gain VS the dollar in 2009... Like I said, stranger things have happened, but this one really is a puzzle... Riddle me this Batman... How can a currency from a country that is deep in debt, has interest rates near zero, has a housing problem not unlike that in the U.S., has political problems, and has implemented Quantitative Easing, post a +15% gain?

Ours is not to question why or how... Just know that the calls for the greater use of SDR's (Special Drawing Rights) by China is probably a good reason, for the SDR's would contain sterling....

Speaking of SDR's, and the IMF issuing them... And recall when the current President called for greater authority for the IMF? Well, I'm reading a book right now, that will put shivers down your spine regarding all of this, and it was written about 10 years ago! The name of the book is: The Creature From Jekyll Island... The Creature is the Federal Reserve System, and what it was created to do... Not the stuff you learn in economics 101... What it was "really" created to do... This book is over 500 pages, so it's a long one... But well worth the read, especially to those that don't believe we're being driven to socialism...

OK... Enough of that! I'm really trying to steer clear of that stuff, for I've had to deal with quite a few people that just want to shove stuff in front of me that I'm not going to read! Of course this in response to my direction before I went on vacation... But that's all behind me now... It's on to the perils of Deficit Spending, and... How to protect yourself from the eventual devaluing of the dollar due to the Deficit Spending!

Back to Australia... The Reserve Bank of Australia (RBA) meets tonight, and while I don't expect the RBA to raise rates... I do expect them to move from an easing bias to neutral, which in essence would be very much like a rate hike! And... Would really stoke the fire burning for the A$... Especially if in their Monetary Policy statement, the RBA upgrades their growth forecasts... For if they do that, that's just like telling the markets that rates are going higher here before they go back down...

I heard, but did not see obviously since I was not around any TV's, laptops, or cell phones last week, that there was a woman that finally took the media to the wood shed for their mamby pamby ways of dealing with the news, and playing patsy with the politicians, etc. Michelle Malkin is her name... And I give her kudos for calling into question the credibility of the media and in this case NBC... (yes, I hold a grudge, BIG TIME, and NBC / CNBC)

I saw the euro hit 1.43 a minute or so ago, but immediately fall back below the figure... I would suspect this to repeat itself a few times before finally moving over 1.43... If not, then look for a fall back... But right now, the bias seems to be to sell dollars...

Currencies today 8/3/09: A$ .8390, kiwi .6655, C$ .9340, euro 1.4290, sterling 1.6826, Swiss .9375, rand 7.7415, krone 6.0825, SEK 7.20, forint 185.60, zloty 2.8725, koruna 17.93, yen 95, sing 1.4340, HKD 7.75, INR 47.67, China 6.8308, pesos 13.18, BRL 1.8645, dollar index 78.12, Oil $70.81, 10-year 3.55%, Silver $14.31, and Gold... $956.60

That's it for today... Vancouver was great... The Agora Financial Wealth Symposium was very well attended, and I thought my presentation to them went quite well. The attendees were so kind to me, coming up and asking how my health was... And then asking to see a picture of Delaney Grace! Then on to vacation! A great time was had by all, but especially me, as I was surrounded by my kids all week. I know it will be difficult for me to not have little Delaney Grace around me all day this week! I just loved when I would ask, where's Delaney, and she would pat her chest and say "I right here!" So cute! We dropped my little buddy, Alex, off at Camp where he'll be the next two weeks. His Camp is just across the lake from our campsite! This will be a long week, settling back into the saddle and all, so I had better get this out the door and to your computer screens! I hope you have a Marvelous Monday!

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

Home sales improve...

Chuck Butler — Fri, 24 Jul 2009 14:29:00 GMT

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In This Issue..

* Home sales improve...
* Are we there yet...
* Intervention talks...
* Buying on dips...

And Now... Today's Pfennig!

Good day...and a Fabulous Friday to you. As I was sitting here this morning collecting my thoughts, it just hit me like a ton of bricks that we're already towards the end of July and next weekend brings us into August...where's the pause button when you need it. Anyway, yesterday started out like any other quiet morning so far this week but we did see a nice little run in the currencies only to see profit taking as we moved into the late afternoon. As I turned the computer screens on this morning, I see where the overnight markets brought us right back up to the levels we began with this time yesterday. The big story that moved the markets was the better than expected housing numbers that, again, gave investors that warm and fuzzy feeling that I touched on yesterday. Since I already let the cat out of the bag, I'll jump right in...

Sales of existing homes rose for a third consecutive month in June to an annual rate of 4.89 million, which was better than the forecast of 4.84 million that most economists were expecting. May's figure was actually revised down to 4.72 million from the original posting of 4.77, so the month on month rise came in much higher at 3.6% than the expected 1.5% increase. June is traditionally seen as one of the busiest months in the real estate market as families try to make the adjustment in between school years so it wasn't exactly a surprise to see better than expected numbers.

Lower borrowing costs, foreclosure driven price declines, and tax incentives also contributed to these higher numbers. This is certainly good news to hear and I hope the bottom has already passed us by or is near, but as I mentioned yesterday, I won't get too excited until unemployment gets back to a supportive level and the full backing of the consumer underpins this move. If anything, this may end up being a protracted bottom and a slow road to normalized levels.

We also had the weekly initial jobless and continuing claims released yesterday but was overshadowed by the positive housing numbers that came out. The initial jobless figure came in 30,000 higher than last week to 554k but continuing claims backed off a bit to 6.23 million from last week's revision up to 6.31 million. Bernanke said earlier this week that job insecurity, together with declines in home values and tight credit, is likely to limit gains in consumer spending. With that being said, it still looks like we have plenty of breakers to get through before we reach the safety of calmer waters.

Today doesn't bring us much in the way of reporting as the only data due out is the final printing of the U. of Michigan consumer confidence number for July. The preliminary figure was released a couple of weeks ago and fell more than forecast to 64.6 from June's 70.8 reading. This generally isn't a big market mover but its expected to settle in a tad higher at 65. This one is a tough call as the stock market has risen quite a bit in that time period but we'll see if job and income concerns keep this month's number grounded. Since this is all we get today, it will be interesting to see how much attention the markets give this report.

Just as we saw the Dow hit the 9000 mark for the first time since January and the euphoria of the housing market has gained momentum, well respected economist Nouriel Roubini, had a different take on things. In a report released today, concern was expressed that a perfect storm of fiscal deficits, rising bond yields, soaring oil prices, weak profits, and a stagnant labor market could blow the recovering world economy back into a double dip recession. He went on the to say that its getting more likely unless a clear exit strategy from the massive monetary and fiscal stimulus is outlined even before it is implemented. I guess the moral of the story here is to proceed with caution and buckle your seat belt because the ride could get bumpy.

Moving on to currencies, the Swedish krona and the Canadian dollar both posted 1% gains yesterday while the Japanese yen, New Zealand dollar, and Swiss franc rounded out the bottom. The two currencies at the top of the list had much different reasons for ending the day where they did as the krona traded higher primarily on the back of risk appetite. As investors feel more comfortable with buying riskier assets, the thinner traded currencies like the krona, benefit even though Sweden's unemployment rate rose for a second month in June to 9.8%.

The Canadian dollar, on the other hand, rose to a 7 week high as the central bank said the recession is nearing an end brought on by higher commodity prices and consumer confidence. The central bank kept rates at the record low of .25% a couple of days ago and reiterated they will stay there for a while unless inflation becomes a problem. Since Chuck is across the border in Canada right now, it's a perfect time to get our daily dose:

"I was reading the local paper the other day, and the business section had a big story on the Bank of Canada's (BOC) Gov. Carney and how he vows he will intervene to keep the loonie from going higher... In the last two days since that story appeared, the loonie has done nothing but gain vs. the green/peachback... 91-cents it traded through yesterday! I can't help but think that traders are beginning to believe that Central Bankers are imitating the boy who cried wolf... We had the Brazilian Central Bank, the Swiss National Bank, and now the BOC... They all are giving verbal warnings about traders taking their currencies higher...

The Central Bankers do this under the disguise of "we don't want deflation in our economy" opting for the weaker currency to introduce inflation... I think this is all a smokescreen! I think this is a coordinated effort to keep their currencies from going hog-wild VS the dollar... The Central Bankers all know that the dollar is teetering, and without speed bumps we could see a mad exit for the door for dollar holders... Just what I think... Nothing more, nothing less... Just my thoughts... "

Thanks again Chuck, its always great to get your insight. Since we're already talking about central bank intervention, I saw a report today that has some looking for the Swiss National Bank getting back into the game. According to the Big Mac index, which is a purchasing power parity figure using the cost of a Big Mac as the measure, the Swiss franc is the second most expensive in Europe. Its just a fun little tid bit I thought would be good to break the monotony. Anyway, the Swiss franc is largely influenced by the euro and risk appetite so while the SNB may step in, there's really no way to stop the moving train. As Chuck has said many times before, the markets have much deeper pockets than a central bank.

As I got to the office yesterday, the euro was hovering around 1.42 and climbed just shy of 1.43 to 1.4291 before we saw the profit taking drag it down to 1.4150 on my out the door. I saw a report where the euro had established a base at 1.4050 and calls to buy on dips, which is certainly a strategy that would be consistent with our views. As I touched on above, the Asian and overnight markets have run things right back to the levels from yesterday but as the European traders hand the books to those in New York before heading out for the weekend, the dollar is still getting sold. Don't look now, but I see the euro at 1.4250...hopefully we can hold on to this and finish the week on a positive note. It looks like the euro is also getting some help from within as reports showed the contraction in European manufacturing and services slowed more than expected and German business confidence improved.

While I'm talking about Europe, we had some positive new come out of the UK as retail sales quadrupled the estimate and surprised the markets with a June gain of 1.2%. Year over year sales are actually up 2.9% and has economists looking for a near zero GDP figure in the second quarter. HSBC actually raised their forecast for the pound from 1.60 to 1.75 by year end 2010 and justified the call by saying the likelihood of an interruption in the asset buying program from the BOE could be as soon as next month. They also feel rates will rise before the Fed but this is a long way off and a lot can happen. Just like the US, I don't see enough at this point to be comfortable buying this currency, but hey, we've been early on some calls too.

One of our newest multi-currency CDs, the Global Power Shift CD, has also been keeping the phones busy lately. With commodities and commodity based currencies leading the charge, it seems like we talk about at least one of them everyday, so I thought I would give it a mention. This CD combines the Australian dollar, the Brazilian real, the Canadian dollar, and the Norwegian krone into one instrument and just provides you with a little bit of everything...not a bad way to provide that hedge against a weakening dollar and gain exposure to commodities at the same time. Well, its about that time and I need to wrap it up so on to the big finish...

Currencies today 7/24/2009: A$ .8170, kiwi .6573, C$ .9214, euro 1.4230, sterling 1.6462, Swiss .9353, rand 7.7236, krone 6.2308, SEK 7.4710, forint 188.04, zloty 2.9538, koruna 17.9280, yen 94.86, sing 1.4407, HKD 7.7500, INR 48.2750, China 6.8316, pesos 13.1903, BRL 1.8991, dollar index 78.686, Oil $67.25, Silver $13.7850, and Gold... 952.86

That's it for today...its your Friday!! I just wanted to send congrats toward St. Louis native Mark Buehrle, pitcher for the Chicago White Sox, as he became the 18th player to throw a perfect game...truly a remarkable feat. Our office has a team in a local kickball league so I wonder if our pitcher, Tim Smith, was able to match that performance...lol. It was a rough go this morning as the words just didn't come all that easy for me but hopefully I was able to make some sense of it all. Alright, its really getting late so I need to get going here. Have a great Friday and a wonderful weekend...Until next time
Mike Meyer
Assistant Vice President
EverBank World Markets
1-800-926-4922
1-314-647-3837

A Dollar Roadblock!

Chuck Butler — Tue, 02 Jun 2009 15:43:11 GMT

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

In This Issue..

* Euro goes back and forth over 1.42...
* Geithner make another promise to China...
* RBA leaves rates unchanged...
* The Mogambo on a Tuesday!

And Now... Today's Pfennig!

A Dollar Roadblock!

Good day... And a Terrific Tuesday to you! Well... The currencies, led by the euro, ran into a dollar road block yesterday, not once, not twice, but three times... The first two times the euro traded over the 1.42 figure, it fell back, but recovered to again try to remain over 1.42... It was a classic case of profit taking at a line of resistance... But the third time, was no charm for the euro, and thus it ended the day and night sessions below 1.42... But hey! Has this run from 1.2578 on March 1st, been something or what?

I see where UBS believes this is it for the euro... Sort of like the thought that a star burns the brightest right before it burns out... Hmmm... I guess they believe that the U.S. deficit problems are going to go away... Apparently, they drank the kool-aid from U.S. Treasury Sec. Geithner, who told the Chinese that the U.S. was going to shrink the deficit... He also told them that their assets were "safe"... Ty sent me something on this that he found yesterday...

"Chinese assets are very safe," Geithner said in response to a question after a speech at Peking University, where he studied Chinese as a student in the 1980s.

His answer drew loud laughter from his student audience, reflecting skepticism in China about the wisdom of a developing country accumulating a vast stockpile of foreign reserves instead of spending the money to raise living standards at home.

I guess I have more in common with a Chinese student than you would have thought, because I would have been laughing out loud too!

There's a story running on the news wires this morning that the U.S. recession ended in May... Wait a minute! Did the ISM Manufacturing Index soar back to the expansion number of 50 in May? No... How does 42.8 sound? Now... We have to go back to January of 2008, when I kept writing about how the U.S. had entered a recession, although the Gov. officials (read dolts), and the NBER, the official recession caller, said otherwise... The reason I was so adamant about the recession at that time is that the ISM Manufacturing Index number slipped below 45, for the second consecutive month... My research over the years showed that any time that happened, the NBER would follow it up months later with a call that we had entered a recession!

So... "is this time going to be different?" I think NOT! And... By the by... That saying really gets my blood boiling, as it reminds of the dolts that kept saying that about 8 years ago!

And here's how I view this manufacturing thing... First of all you have to deal with delays and such, but in a simplistic view... The dollar was strong through February, and the ISM Manufacturing Index was in a free fall... That makes sense, right? The cost of exports was increased, thus it affects manufacturing... But... The dollar began its current decline on March 1st... And by May, the ISM is recovering... Dollar down, manufacturing up... Want to have manufacturing a part of an economic recovery? Guess what needs to happen... Awww... You know the answer!

OK... Back to "other stuff"... My friend, Ian Mathias over at the 5-minute Forecast, which I've told you numerous times is an excellent read each day, said two things yesterday that really caught my attention...
1. Your family's share of the government debt is now over half a million dollars. A record $546,668, to be exact.

That cheery Monday stat comes courtesy of a USA Today study, which claims that each American family's share rose 12% in 2008. That's $55,000 in new government debt last year for every US household - thousands more than the median household annual income.

And 2. He quoted me in the "5" and introduced me as "Chuck Butler, the man, the myth, the legend."

That Ian... What a guy!

OK, now that you've stopped laughing hysterically, I'll get back to the task at hand! But... Is that debt number not staggering? And just wait folks... Just wait until the baby boomers begin to retire in huge numbers, and begin drawing on Social Security and Medicare...

U.S. stocks were up 221 points yesterday, and the euro and other currencies backed off... Hmmm, another sign that the link has been broken? I would say yes... But I think today could be a real indicator, in that stock futures are down right now... But the euro is rising, at least it's higher than it was when I first came in this morning. (over an hour ago!) In fact, the single unit just touched 1.42 once again, after sitting at 1.4123 when I came in!

Down Under... The Reserve Bank of Australia (RBA) left rates unchanged (good for them!) and there was some good news for the economy too, so... The A$ has been underpinned, and poised for a renewed attack on the green/peachback! (for new readers, when I say green/peachback I'm talking about the U.S. dollar, who has changed its color to peach and you can't just refer to it as the greenback any longer... At least I can't! HA!)

Australia's Current Account Deficit narrowed in April to A$4.6 Billion, or 5% of GDP... Still too high for my liking, but, with China pushing the envelope on commodities, investors can look beyond just the deficit in Australia, as long as it keeps narrowing, which it has overall in the past year!

The RBA's statement following the meeting was a bit cautious, and leads me to believe they're leaving the door open to a rate cut in the future... I guess they wouldn't be prudent if they just closed the door! So... When this was first announced the A$ took a hit... But has recovered from that initial hit, and like I said above, poised for a renewed attack on the green/peachback...

The Canadian dollar / loonie continues to bask in the rising crude oil price, which reached $68 yesterday. But there's more to the loonie than crude oil... For instance, yesterday, the 1st QTR GDP printed and was pretty bad at -5.4%... However, it was widely expected that the number would be much worse...(-7.3%!!!!) Now, I know this doesn't sound like a huge endorsement for Canada, saying their GDP was a -5.4% in the 1st QTR, but... The economy WAS stronger than expected!

Yesterday, I talked about the commodity currencies of Australia, New Zealand and Canada, and unfortunately, I left out Brazil! UGH! How could I do that? In this month's Review and Focus newsletter (available to World Markets clients only) I spent about a full page on talking up Brazil... Remember though... Brazil is considered an Emerging Market, and therefore requires an additional disclosure to buy it... And... Just because I like Brazil, it doesn't mean it can't post losses! The markets will do what the markets want, folks...

Speaking of Emerging Markets... Recall last week I talked about the Emerging Markets soaring and the amount of money flowing into these markets? Well... Yesterday it was reported that in the past 4 weeks, over $12 Billion has flowed into Emerging Markets, pushing the MSCI Emerging Markets Index (that tracks Emerging Markets) to a 19-month high!

Yesterday, the data cupboard produced the ISM Index that we talked about earlier, and one of my faves... Personal Income and Spending... Remember when every month you could count on these two to show that U.S. consumers outspent what they made... But those are days gone past... These days, it's all about recovery for personal balance sheets... And while Income isn't going higher, spending is going down... Oh, and the rise in Personal Income in April showed a .5% rise (consensus was for a drop of -.2%)... Turns out to be nothing more than increased payments to unemployed workers... Spending did fall -.1% in April, and the deflation people are all over that... But deflation is going out the door folks... Inflation, while probably a little too early to call is now on everyone's minds...

Today's data is somewhat secondary with Pending Home Sales for April, and Vehicle Sales for May... Not much to draw from there... So... As they say in Star Wars... Nothing to see here, move along...

Gold lost some ground yesterday... I guess $985 was just too pricy, eh? Well, in my mind, that's nothing more than yet another opportunity to buy at cheaper levels! But... Remember last week when I told you about how Silver had it's best month (May) in 22 years? Well, Silver is still outperforming Gold... I saw in the Daily Reckoning (www.dailyreckoning) yesterday that Byron King said that he believed we would see $20 in Silver before we saw $1,200 in Gold... Hmmm... Hey! Either one or both is just peachy with me!

And then my friend, the Mogambo Guru, had this to say about owning Gold and Silver... "Of course, if you have gold, silver and oil, then the "we" in "we're freaking doomed," doesn't actually include "you" - as in "if you are the owner of gold, silver and oil, then you are indeed fortunate, as they are the only things upon which you can rely during the coming economic cataclysm which won't sell you out and stab you in the back, unlike your family and co-workers, which you always suspected, so don't act surprised."

Ahhh, the Mogambo on a Tuesday... Sure makes it Terrific!

Currencies today 6/2/09: A$ .8140, kiwi .6530, C$ .9210, euro 1.4220, sterling 1.6440, Swiss .94, rand 8.05, krone 6.17, SEK 7.47, forint 197.70, zloty 3.1510, koruna 18.83, yen 95.75, sing 1.4380, HKD 7.7520, INR 47.01, China 6.8307, pesos 13.25, BRL 1.9511, dollar index 78.79, Oil $67.85, Silver $15.67, and Gold... $977.02

That's it for today... A good game by little buddy Alex last night, as he got two hits, one of them a double... As slow as he runs, you have to understand how far he hit a ball to get him to second! (that's why he plays center in football!) But two hits... Good game! Too bad the Cardinals couldn't muster up enough hits to win! That was awful news wasn't it, about the Plane going down in the Atlantic? If there are no survivors found, it would be the biggest air disaster since 2001... The All-Star Game in baseball is going to be here in St. Louis this summer (next month)... What a huge deal for baseball's best fans! I can't wait! That's about all I can think of to talk about today... Unless... You want to hear my thoughts on how History recalls how great the fall can be...While everybody's sleeping...Nah, that would take too long! never mind! I hope you have a Terrific Tuesday!

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

He Said What?

Chuck Butler — Wed, 13 May 2009 15:58:37 GMT

.........But First, A Word From Our Sponsor..........
Now in Print: What You Need to Know About America's Economic Crisis

Based on the eye-opening film, IOUSA is your guide to America's enormous economic crisis. You won't find a more concise and complete evaluation of the global financial situation anywhere else.

Get your copy today: http://rcm.amazon.com/e/cm?t=dailyreckonin-20&o=1&p=8&l=as1&asins=0470222778&fc1=000000&IS2=1<1=_blank&m=amazon&lc1=0000FF&bc1=000000&bg1=FFFFFF&f=ifr
.................

In This Issue..

* Foreclosures rise...
* Green Shoots, no so green!
* getting on a bus...
* Losing a triple A rating?

And Now... Today's Pfennig!

He Said What?

Good day... And a Wonderful Wednesday to you! Not wanting to start the day off with bad news... But I just saw a flash on the TV that said, "foreclosures jumped 32% last month"... More Blood in the Streets, eh? That just happens to be the title of my presentation today... Blood in the Street: Bargain time or just a cease fire? Hey! I don't make these things up...

OK... Another day here in Sin City... This city is packed with people, everywhere we go, it's simply amazing... There's been no sign of a recession here... Of course, if you got out of the casinos, and shows, you would see some of the greatest devastation any where in the housing market here... So.. It's not a seashells and balloons in Vegas... I guess with the economy so rotten, people are hoping to strike it rich in the casinos though... Hmmm, have they not figured out that these ginormous buildings are here to make money?

The Currencies lost ground yesterday, most of the day, and then overnight too... Not major ground, but ground that had been previously won VS the dollar, not something a dollar bear wants to see. There's more rot on the economy's vine, this morning with Retail Sales, and all that euphoria that was in the markets last week, is dissipating, quickly... So, let's go to the tape on Retail Sales...

Retail Sales for April were down again (the BHI was wrong! YIKES). The .4% fall in April added to the .9% fall in March (revised to -1.1% today) tells me that after signs of consumers picking up spending again in the fist two months of the year, this is turning out to be an absolutely dreadful quarter for Retail Sales... Oh, and let's go back to the GDP print of about 2 weeks ago... There was hope in the GDP figure that "consumption" may pull the economy out of the recession, for consumption was up 2.2%... But with these Retail Sales figures so far in the 2nd QTR, you can kiss that hope good-bye!

This is the kind of stuff I was all worried about the other day in the Pfennig... Recessions are like that... You get a pop, but it has no legs, and then leads the economy right back to the depths of the recession... This is why I wanted to get the currencies back on the fundamentals of having different pricing mechanisms and low correlations to stocks... The diversification fundamentals that have been forgotten in the past 6 months....

And... Here's a good one for you... OK... Who said this... "Even though we have been having some fairly strong gains in home prices, it is our conclusion that it is UNLIKELY that we are confronting a housing bubble."

Give up? It was a quote in the 2002 Fannie Mae Annual Report... By our esteemed (NOT!) former Fed Chairman Big Al Greenspan! This guy's track record of forecasting going all the way back to his days as a consultant before he was brought on at the Fed, is absolutely horrible! Now... Why do I bring this up now? Well... Yesterday, Big Al Greenspan decided to give us a forecast that allowed stocks to recover on the day... What did he say this time? Greenspan said in an interview that "Housing May Have Bottomed and be a the verge of a recovery."

Oh boy, now that's something to hang your hat on, eh? I shake my head in total disgust... This man was at the root of the whole problem, and people still listen to him?

OK... Enough on that exercise... I could write for days about all the things he has done... But, better yet... Go to Amazon and buy Bill Fleckenstein's book on the Fed and Greenspan...

My friend, John Mauldin, wrote a great piece last Friday for his weekly newsletter regarding all the talk about Green Shoots... The Green Shoots were the thoughts that data prints were getting better (so they thought) and that the economy was getting better... John pointed out that he didn't believe the green shoots were for real, and said they probably were more like dandelions... I totally agree... Both he and I took the Jobs Jamboree data that was considered a Green Shoot, and tore it apart to expose it as the fraud it was... No Green Shoot here!

Here's another one... Import prices in the U.S. rose by 1.6%... That's HUGE folks! I saw something that said that in the last 100 prints of this data there have been only 12 larger prints! YIKES... Here's the skinny... Recall, that I've told you that China's stimulus was working and that they would be the first country to come out of the economic doldrums... Well, with their stimulus working, that means commodity prices will be rising, and if commodity prices rise, that means inflation will rise... No Green Shoot here!

OK, enough of that! Did you see where the Obama The Obama administration has begun serious talks about how it can change compensation practices across the financial-services industry, including at companies that did not receive federal bailout money?

See? I told you that you give the Gov't a foot in the door, and they will begin to push their way completely through the door... And with banks that's exactly what's happening... Isn't that sad? The Gov't wants to dictate how banks pay their employees, even if they didn't accept TARP money! How do you like being put on the train to socialism? And you can't get off?

I had better stop there, I might say something that would get me into trouble!

Well... There was another thing that showed up yesterday that could mean very bad things for the U.S. and their ability to attract financing... The Financial Times ran a story regarding the U.S.'s Triple A rating... Let's see what The FT had to say...

"Long before the current financial crisis, nearly two years ago, a little-noticed cloud darkened the horizon for the US government. It was ignored. But now that shadow, in the form of a warning from a top credit rating agency that the nation risked losing its triple A rating if it did not start putting its finances in order, is coming back to haunt us.

That warning from Moody's focused on the exploding healthcare and Social Security costs that threaten to engulf the federal government in debt over coming decades. The facts show we're in even worse shape now, and there are signs that confidence in America's ability to control its finances is eroding."

Hmmm... That's scary folks... And... To add to that, an attendee came up to me yesterday after my first presentation, and said, "Chuck, great talk, but you didn't mention the debt that the U.S. will have to deal with in the future." Yes, he's right... I don't do that very often because I don't want people going outside and throwing up, or even worse things. What I'm talking about here is the debt that the U.S. will be under when all the Baby Boomers are drawing Social Security and Medicare... If you are not aware of these figures, and how bad they will become... Go to Amazon and buy the I.O.U.S.A. book by Addison Wiggin and Kate Incontrerra...

OK... Time to go to the Big Finish, I've got to go through my presentation once more before I head down to the Show...

Currencies today 5/13/09: A$ .76, kiwi .5970, C$ .8590, euro 1.3610, sterling 1.5165, Swiss .9045, rand 8.4950, krone 6.5150, SEK 7.8710, forint 208.15, zloty 3.2575, koruna 19.7090, yen 96.17, sing 1.4630, HKD 7.75, INR 49.71, China 6.8230, pesos 13.34, BRL 2.0960, dollar index 82.61, Oil $59.09, Silver $14.09, and Gold... $926.90

That's it for today... A very long day for yours truly yesterday... Hopefully today will be a bit shorter! An old friend stopped by my morning presentation to say hi yesterday... Thom Calandra, who started CBS MarketWatch stopped by... I hadn't seen Thom in years! He was huge for us years ago, when we were trying to get the word out about our products... I get a lot of people stopping by the booth each day just to see if I'm doing OK... They want to know if I'm feeling well, and to let me know that they are still praying for me... WOW! Pretty amazing, I'm so blessed! And Thanks to a real "star" my travel organizer supreme... Gena, you are a star! And... Today, we have two birthdays to celebrate... Our newest person on the trade desk Aaron Stevenson... And the young lady that is the engineer for my video projects, Lori Mucho... Happy Birthday! Time to go... I hope your Wednesday is Wonderful!

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

A Jobs Jamboree for Friday, May 8th!

Chuck Butler — Fri, 08 May 2009 15:10:24 GMT

.........But First, A Word From Our Sponsor..........
Now in Print: What You Need to Know About America's Economic Crisis

Based on the eye-opening film, IOUSA is your guide to America's enormous economic crisis. You won't find a more concise and complete evaluation of the global financial situation anywhere else.

Get your copy today: http://rcm.amazon.com/e/cm?t=dailyreckonin-20&o=1&p=8&l=as1&asins=0470222778&fc1=000000&IS2=1<1=_blank&m=amazon&lc1=0000FF&bc1=000000&bg1=FFFFFF&f=ifr
.................

In This Issue..

* Stress tests finally print!
* The Gov't wants you to "feel good"...
* Job losses decline on a weekly basis...
* Happy Mother's Day!

And Now... Today's Pfennig!

A Jobs Jamboree Friday!

Good day... And a Happy Friday to one and all! Let's make it a Fantastico Friday, eh? Why not! It's the Friday to kick off Mother's Day weekend! More on that later, but first, let's talk about the Stress Tests. Personally I could just as easily forget about them, because as I've said over and over again, The Gov't wasn't going to "spook" the markets with "true results"... This whole "exercise" is a just another effort to make us all "feel good"...

OK, the rumor mill has finally been shut down, and the facts, as the Gov't would let us know them to be, are out... Let's take a gander at the results!

The Wall Street Journal (WSJ) reported it like this: 10 of the 19 largest U.S. Financial Institutions will be required to raise a combined $75 Billion in new capital.

The Washington Post (WP) reported it like this: Nine of the 19 banks do not need any new capital at all.

It's all in the way you word it... Both of them are correct... The WSJ tells it like I think most people would want to hear it, while the WP, is for the Polly Annas of the world!

When it's all said and done... This feel good circus is now over, and we can get back to dealing with the financial meltdown, deficit spending, China, and other things that are easier for us to deal with, like the story that came across the screens yesterday regarding credit card charge offs, than a feel good circus! Yes, the credit card charge offs are up 44% VS last year... Now, isn't that one of those things that make you go, oooooooohhhhhh nooooooooo!

The currencies drifted most of the day yesterday waiting for the stress tests results, and then rallied at the end of the day with the euro pushing past 1.34 once again. The euro has fallen back below that figure again this morning, but remains close to the 1.34 figure.

Yesterday, the European Central Bank (ECB) did what I said would be the prudent thing to do, if you "had" to do it, and cut rates only 25 BPS, instead of the 50 BPS the markets were expecting. The euro had to deal with the dolts that think larger rate cuts are what values a currency... But, as I said before, the ECB wants to be able to come back to the rate cut table, if needed, and cut rates again.

Unfortunately for the euro going forward is the fact that ECB President Trichet, finally gave in to the "weak links" in the European Union, and announced that the ECB would begin to buy bonds to support the credit markets. This move was fiercely opposed by Germany's Central Bank, the Bundesbank and it's President, Axel Weber. I'm with the Bundesbank on this one... To bad Trichet "gave in"... This move now throws the European Union on the roster of nations employing Quantitative Easing... And you know where I stand with that!

Well... Today is the Jobs Jamboree for April... Yesterday, the Initial Jobless Claims fell from 635K the previous week to 601K... And, just like I said they would... The media was all over this move, pointing out that this is mostly likely an indication that the recession is coming to an end. Well... Today's Jobs Jamboree is expected to show a fall in jobs lost too... I guess they haven't polled Chrysler and GM workers... But any way, the "experts" believe April's figure will be right at 600,000, down from last month's 663,000... That's quite a ride down the slippery slope don't you think? I'm going to say that 600,000 is too "pie in the sky" and actual number will be disappointing compared to 600K. But, if it shows a figure below last month's 663K, then again, we'll hear about how all is right on the night, and happy days are here again...

That should boost risk assets... Should...

OK... About two months ago, I wrote to you all, and said I wanted to hear from the people that owned or worked at businesses that were doing well... I called them feel good stories, and this time "feel good" had a good connotation! First I was gone for March, then in April I kept forgetting to deal with it on a Friday... But not today! Today, I give you the first feel good story during this recession... A company that's doing well, despite all the rot on the vine in the economy...

So, here's how it will work... After the currency round-up, and final sign off, I'll tell you about this week's choice... So... Let's go to the Big Finish, and get this Fantastico Friday started!

Currencies today 5/8/09: A$ .7590, kiwi .5965, C$ .8610, euro 1.3405, sterling 1.5050, Swiss .8860, rand 8.4075, krone 6.4675, SEK 7.85, forint 208, zloty 3.25, koruna 19.88, yen 99.40, sing 1.4650, HKD 7.75, INR 49.34, China 6.8217, pesos 13.10, BRL 2.110, dollar index 83.78, Oil $57.71, Silver $13.96, and Gold... $916.80

That's it for today... An absolutely beautiful day at the ballpark yesterday, blue skies, bright sun, green grass, and a sea of red in the stands... If you don't know what I'm talking about, come to a game in St. Louis, everyone attending the game is in their Cardinals gear! Our munchkin... St. Louis' own Mickey Carroll who was a munchkin in my all time fave movie, The Wizard of Oz, died yesterday... And then finally, Sunday is Mother's Day... If you can, give your mother a great big hug, because... She's YOUR Mother! I lost my mom on New Year's Eve 1997, and miss her greatly, as she was always there for me when I was a youngster, and young adult... Always... And I mean Always... OK... I'll start getting sentimental here, so I'll just say, HAPPY MOTHER'S DAY to all the mothers out there... You are special! OK, let's have a Fantastico Friday, and don't forget the recessions feel good story follows! BYE!

>>>>>> St. Louis based Coolfire Media (www.coolfiremedia.com <http://www.coolfiremedia.com> ) has survived and even prospered in the recession. Companies are now looking for new outlets to reach potential clients - it is here where we have found our niche. From late 2007 to 2009, we have doubled in size and expanded our list of services to better serve our clients. We produce ideas, strategy, commercials, branded videos, websites, branded applications, radio spots, meetings and more. We have become an integrated digital media company. We collaborate with advertising agencies, corporations, organizations and entrepreneurs. Our work garners results, and when our clients do well we collaborate on future projects. We have a fun job and we have a good time doing it.

We are optimistic about the prospects for the US and for our place in the economy. With a steady stream of new clients, the addition of some new team members, and beginning the construction of our studio expansion, we feel fortunate and confident knowing things are moving in the right direction.

>>>>> hope you liked it!

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

A shrinking US economy puts pressure on the US$...

Chuck Butler — Thu, 30 Apr 2009 14:54:18 GMT

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In This Issue..

* US GDP falls more than expected...
* FOMC holds course...
* Canadian dollar has a great week...
* Oil helps commodity currencies...

And Now... Today's Pfennig!

A shrinking US economy puts pressure on the US$...

Good day... Yesterday was a big day in St. Louis as President Obama came to visit on his 100th day in office. I can't believe it has been 100 days since the inauguration. Time sure does fly! I'm sure Obama and the rest of his administration would like the calendar to move even faster as this recession will likely last through the end of 2009. While the government has thrown trillions of dollars at the markets in an attempt to turn them around, the key ingredient for recessionary cycles to reverse is time. There is now 'quick fix' for the problems we are in, and the policies the administration has begun will take time to have an impact on our shrinking economy. Obama said as much in his nationally televised press conference last night.

Speaking of shrinking economies, US GDP showed an even steeper contraction in the first quarter than that predicted by economists. US GDP fell 6.1% compared to the 6.3% fall during the last quarter of 2008. This drop confirms that we are now in the worst recession since the Great Depression. There report showed a record slump in inventories and further declines in housing. But another report released by the Commerce Department showed a surprising 2.2% gain in consumer spending in the first quarter, the most in two years. So we have consumers who increased their spending and confidence, while the US economy was contracting at near record pace.

Another report which didn't get much press was the GDP Price Index and the Core PCE which are measures of price inflation. These numbers rose more than expected, with the GDP price index rising 2.9%, nearly doubling economists predictions of a 1.8% increase, and substantially higher than last quarters .5% rise. This sets up the possibility that we could see what many consider the worst case scenario, falling GDP with rising inflation (STAGFLATION). With inventories at very low levels, a slight increase in consumption can lead to a very quick rise in prices. But the Fed doesn't seem to be bothered too much by that scenario, as they continue to focus on efforts to get the economy growing, with no apparent concern about inflation.

The Fed's Open Market Committee voted unanimously yesterday to leave its target interest rate unchanged at between 0 and .25% (they really can't go much lower!!). They also voted to continue to their purchases of long-term Treasuries and housing debt which they began last month. The FOMC statement said the contraction has slowed and the outlook "improved modestly" but the economy may "remain weak". Job losses and a very tight credit market will likely inhibit consumer spending in the coming quarters.

As I said earlier, there was no mention whatsoever of an exit strategy on how the Fed plans to pull in the record amount of money supply it has unleashed on the economy. The Fed said they will continue to monetize the debt at an unbelievable pace: as much as $1.25 trillion of mortgage-backed securities, $200 billion of federal agency debt, and $300 billion of Treasuries. They are making these purchases in an attempt to keep interest rates at below market levels to fabricate a refinancing boom. While they have been somewhat successful in keeping rates lower than they would be under normal market conditions, these purchases are extremely inflationary and won't be easily reversed. But the FOMC believes they will have plenty of time to worry about inflation and have decided to basically ignore it for now. Problem is, inflation can spike pretty quickly, and the FOMC will be hard pressed to raise interest rates just as the economy is starting to pull out of recession. I just don't believe they will have the guts to be proactive with inflation, and will probably see a major spike in prices on the other side of this recession.

Inflationary concerns are at the forefront of the ECB as they prepare for next weeks policy meeting. ECB President Jean-Claude Trichet has imposed a gag order on council members as they argue over what to do next to rescue the European economy. Some members had been taking their cases to the media recently in an attempt to push the ECB into following the UK, US, and Japan down the quantitative easing path. But more conservative members don't believe the ECB should use these untested methods, and are worried about the eventual inflationary impact of them. The ECB cut rates less than expected in April, and pushed a decision to use other methods off to next week's meeting. Germany's Axel Weber wants to make 1% the floor for the benchmark rates, and is against buying debt to pump additional money into the economy, while other council members want to begin asset purchases to force rates lower.

Data released this morning show Europe's unemployment rate rose to the highest in more than three years, and inflation held at a record low, which will increase pressure for the ECB to continue to cut rates. The March unemployment rate jumped to 8.9% in the Euro area, and inflation held steady at .6% in April. Other reports released this week suggested confidence in Europe is stabilizing which could counter some of the pressure to take additional measures. Chuck will bring you the details of the ECB meeting, which will occur a week from today.

The dollar sold off on safe haven reversals, but then moved back up in European trading. So after a bit of a roller coaster ride, we are pretty much right where we started yesterday morning. But the overall market sentiment seems to be shifting back to dollar negative. Two separate reports released by currency trading desks yesterday revised their currency forecasts down for the US$. Bank of America - Merrill Lynch revised their forecasts for the dollar, yen, euro, and pound on the 'rising probability' the global recession has passed its lowest point. Their report stated the euro would recover faster than previously predicted as the global economy turns. A separate report by Citigroup said the dollar would fall if/when the 10 year Treasury note yields rise above 3.06%. Technical analysts at Citigroup wrote that past trading patterns look like they are repeating. "Buying the dollar and US Treasuries was the trade of choice toward the end of 2008 and is now unraveling," they said.

Global deleveraging pushed investors back into US$, but as the global economy recovers (led by an increase in consumption in China), investors will move these funds out of this safe haven. Yield differentials will again determine investment direction, and growing economies will be able to attract more speculative capital. The US$, which has benefitted from the global downturn, will be sold. In order to protect your portfolio, investors should have some exposure to the currencies and metals.

One currency which has turned in one of the best performances vs. the US$ this week has been the Canadian dollar. The loonie touched the strongest level in two weeks on a move up in the price of oil. Equity markets are up, as investors have become much more confident regarding a global turn around. This confidence has carried over to the commodity markets, where oil and some of the industrial metals have been rising again. Canada relies on shipments of raw materials including oil, natural gas, copper, and lumber for more than half of its export revenues.

A report released by TD Securities, a large Canadian trading desk, predicted the Canadian dollar would appreciate by as much as 14 percent by November if it breaks through a key technical level. If the US dollar breaks below 1.1764 CAD$/$ (or above .85 UScents/CAD$) the upside opens up hugely over the next few months. The report puts a target of 1.04 CAD$/US$ (or .9615 US$/CAD$) for the loonie, a 14% increase from today's levels.

As I touched on above, the commodity currencies turned in one of their best performances in weeks as the price of oil shot back above $50. Both Norway's krone and the Australian dollar rallied along with the Canadian dollar. The AUD$ actually rose to the highest level in more than six months against the US$. The Norwegian krone, Australian dollar, and Canadian dollar are three of the best four currencies vs. the US$ on a YTD basis. The top performer vs. the US$ in 2009 has been the South African Rand, but recent rate cuts there may start eating into its recent strength.

South Africa cut its benchmark rate a full percentage point, the fourth reduction since December to help spur their economy. New Zealand's central bank also cut rates to a record low yesterday. Reserve Bank Governor Alan Bollard reduced the overnight rate by 50 basis points to counter the nation's worst recession in more than three decades. He indicated that rates may go lower, and will stay down for the foreseeable future. The kiwi sold off after the announcement.

Good economic news out of Japan has been rare, so yesterdays report that Japan's factory output rose for the first time in six months was a surprise. And even more surprising was the fact that the pace of the output rise was nearly double that predicted by economists. Factory production climbed 1.6% in March from February, when it dropped 9.4%. In a separate report, the Bank of Japan said the world's second largest economy will resume growth in 2010 after shrinking 3.1% this fiscal year. But I still caution investors regarding investments into the yen. The Japanese yen benefitted from the reversal of the carry trade, but global markets seem to be substantially less leveraged than before. The Japanese yen is not going to be able to benefit from another large push by additional deleveraging.

Got to go now, as we have our quarterly officers meeting in a few minutes. Sounds like it will be all good news, as EverBank continues to hit on all cylinders. It really is another Great Day at EverBank!!

Currencies today 4/30/09: A$ .7289, kiwi .5666, C$ .8383, euro 1.3263, sterling 1.4812, Swiss .8790, rand 8.4585, krone 6.5931, SEK 8.0664, forint 218.38, zloty 3.323, koruna 20.125, yen 98.15, sing 1.4775, HKD 7.75, INR 50.035, China 6.8210, pesos 13.74, BRL 2.1796, dollar index 84.49, Oil $51.81, Silver $12.62, and Gold... $889.20

That's it for today... more rain is predicted for today, and the rain is expected to continue all the way through the weekend. Typical spring weather here in St. Louis. The big positive on the rain is that it washes away most of the pollen, and provides some relief for my allergies. Had a great run through a local park with my wife last night, its kind of nice having company on my runs (I can never get her to wake up as early as I do during the week!). Hope everyone has a great day today, as it is Tub Thumpin Thursday!!

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

Dollar falls as US consumer confidence increases...

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

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In This Issue..

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

And Now... Today's Pfennig!

Dollar falls as US consumer confidence increases...

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Throwing A Cat Among The Pigeons...

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

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

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

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

In This Issue..

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

And Now... Today's Pfennig!

Throwing A Cat Among The Pigeons...

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

A "Stock Tip From The Top Guy!"

Chuck Butler — Wed, 04 Mar 2009 13:51:47 GMT

...But First, A Word From Our Sponsor...
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In This Issue..

* Australia's economy contracts....
* Bank of Canada cuts rates to .50%
* Meeting margin calls...
* TALF...

And Now... Today's Pfennig!

A "Stock Tip From The Top Guy!"

Good day... And a Wonderful Wednesday to you! My beautiful bride is getting ready to leave this morning. I'm not used to "talking" to someone when I get up at my usual early hour! She'll be gone in a few, as I write, and then it will be my little buddy, Alex, and your Pfennig writer on their own for 5 days! YAHOO!

Well... After a day of waxing eloquently about the how well the Aussie economy was doing compared to the rest of the world, they go and post a contraction in their economic growth! UGH! That's the way to show me up! The Aussie economy shrank in the 4th QTR by .5% VS the forecast of .2% growth... The news scared the markets into believing the Asian problem will be worse off than previously thought. Oh Come On! Australia is STILL doing better than most countries, especially those that I listed in yesterday's Pfennig!

Hey! It must be "time to buy stocks", as the President made his statement yesterday that "buying stocks may be a "Good Deal". So... There you have it! The Obama endorsement... I wonder if they guy that said he "hated me" because I said I thought there would be an Obama bounce and one didn't occur, will send off a "hate mail" to the Prez, if stocks continue to melt away, as I suspect they will!

The "Obama bounce" never materialized, and in fact this showing in the first two months has been atrocious! On Jan. 2, 2009, the DOW stood at 9034, since that time the Dow has seen an overall decline of 25%! I would say that instead of an Obama bounce, we're getting clear signals that the markets don't like our "new" direction...

This all plays into what my friend Bill Bonner of the Daily Reckoning, www.dailyreckoning.com calls the "meddlers" getting in there and interfering with what should, and let me repeat that so you get the full meaning of this... WHAT SHOULD be a normal process of cleaning out the excesses of the previous boom... A recession... Where some businesses die, and those remain standing are stronger... I have a saying that I use in all kinds of situations... "What doesn't kill you, makes you stronger"...

I'm going to stop there, otherwise I'll get a mail box full of emails telling me that I'm being too "hard on the Beaver" so early in the process... I'm not being "hard on the Beaver" I'm just reporting what's happening!

Well... The dollar is stronger again this morning, with the Japanese yen pushing back toward 100 again. The euro is looking as though it will not hold on to the 1.25 handle, and everything else is just rotten looking. Even Gold got smacked for another $10 loss yesterday! I have this feeling regarding the Gold price in the past week... I have no confirmation of this, but we've seen this before when stocks get hammered like they have in the past week. And that is... Selling the one asset that's making them a profit (read Gold!) and using the proceeds to pay for margin calls... So... That's my story and I'm sticking to it!

I get asked all the time about "how long will this dollar strength last?" Hmmm... You know, I said some time ago that I believed that by late summer, early spring, the credit markets might be showing signs of unlocking, and that could bring the risk takers back out from under their respective rocks, and that a return to the "fundamentals" would bring about an end to the dollar strength... The end of July marks one year of dollar strength, when the you know what hit the fan with subprime loans, and this whole lockdown of credit and liquidity caused a huge deleveraging in the markets...

While I still believe this thought has merit, I also have to figure in the fact that the previous stimulus plans didn't work, the money was wasted on Wall Street buddies, and cronies... And now we need another one, but only this new one is centered on the wrong things... So, I'll be watching for signs... If none appear, then I'll have to go back to the drawing board...

So... In an environment when "bad news" rewards the dollar... And the "bad news" just keeps coming along that's not a good sign for a reversal of dollar strength right now. When what used to be called 100-year events, now happen almost weekly... You get my drift...

The Bank of Canada (BOC) did lower rates yesterday, as expected. The BOC cut 50 BPS down to .50%, just like their neighbors to the south, and talked about "quantitative easing" going forward. Hmmm.. That sounds like their neighbors to the south too! The BOC had to attempt to do something given the fact that the economy contracted by 3.4% in the 4th QTR!

Tomorrow, the European Central Bank (ECB) will meet, and most likely cut rates, after "pausing" at the last meeting. ECB President, Trichet, told us after the last meeting that the rate cut had been shifted to the March meeting. So... Now it's March, so expect the ECB to cut rates tomorrow.

The markets have been quite strange with their reactions to easings since this financial meltdown began, and I don't expect this time to be any different. What I'm talking about here is this environment where markets reward early policy easing with currency strength...

OK... Yesterday's data... Well... Some had thought (not me!) that the ISM Index (manufacturing) slight bump in February offered some hope that the worst for the manufacturing sector may be over. The jury's still out on that one... But, even if it is over, the economy won't improve until this housing meltdown gets corrected... And yesterday's data on Pending Home Sales did little to change someone's mind about the direction of the economy! The Pending Home Sales index fell 7.7% in January. The Pending Home Sales data is a good indicator of housing activity, and given the steep fall in January, you would have to believe that the housing meltdown is still occurring, and doesn't have any sign of correcting any time soon!

And Vehicle Sales for Jan were an awful looking 6.4 million... To give you an idea of just how deep the slide in Vehicle Sales has been... A year ago, the sales data showed 11.6 million Vehicle Sales for Jan 2008! OUCH!

In all the "speeches" that were going on yesterday, with Fed Head Lockhart, Fed Chairman Bernanke, and Treasury Sec. Geithner, one would have though that a good sound bite would have materialized... But NOOOOOOO! The only sound bit on the day was the Obama "stock tip"!

Treasury Sec. Geithner did report on TALF, and say that it would begin March 25th. So... I thought for class today, we would review what the heck TALF is!

TALF stands for Term Asset-Backed Securities Loan Facility... Basically, TALF will expand the Fed's balance sheet, and if the Fed wants to moderate that expansion, the Fed has to withdraw bank reserves from the system. The Fed usually does this by selling Treasury bills.

I guess the question would be... What happens if the Fed runs out of T-Bills to sell? Hmmmm... I guess we'll cross that bridge when we get there, eh?

I received quite a few responses to my call for "feel good stories" in today's environment from businesses doing well... That's a good sign! I hope these businesses will continue to do well! The Big Boss, Frank Trotter, and I will review all the entries, and probably print one each Friday, since I like to have Fantastico Fridays, and finish the week with a smile! So, if your note doesn't appear this Friday, don't despair, we've got quite a few Fridays left in 2009!

Currencies today 3/4/09: A$ .6395, kiwi .4995, C$ .7735, euro 1.2525, sterling 1.4110, Swiss .8470, rand 10.4950, krone 7.1650, SEK 9.2050, forint 247.50, zloty 3.78, koruna 22.18, yen 99.30, sing 1.5490, HKD 7.7590, INR 51.53, China 6.8430, pesos 15.30, BRL 2.4160, dollar index 89.20, Oil $43.30, Silver $12.75, and Gold... $910.50

That's it for today... I have to go upstairs and start some breakfast for my little buddy, Alex, as he'll be getting up soon, and his first words in the morning are, "I'm hungry"... Spoken like a true teenage boy! I was listening to him play his guitar yesterday, and he's getting soooooooo good! Writing from home this morning wasn't that bad, as long time readers know my dislike for writing away from my desk and in the saddle at work... I could get used to this... NOT! Well... It's 28 degrees outside, but by Friday, we're supposed to be getting warmer... I can only hope! Because I've told you many time before, I'm just like Jimmy Buffett in that "I've gotta go where it's warm"! I hope your Wednesday is Wonderful!

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

It’s a Jobs Jamboree Friday!

Chuck Butler — Fri, 06 Feb 2009 15:31:34 GMT

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In This Issue..

* BOE cuts 50 BPS...
* ECB keeps rates unchanged...
* Initial Jobless claims hit a record!
* Recession or Depression?

And Now... Today's Pfennig!

Jobs Jamboree Friday!

Good day... And a Happy Friday to one and all! A Fantastico Friday, and Jobs Jamboree Friday to boot! You should have seen the crowd that gathered for my second presentation yesterday... WOW! Jason tells me that he had to turn away about 50 people that couldn't jam into the room! I guess people are still interested in what I have to say... Either that or, no one else was speaking at that time! HA!

Another very tight trading range for the currencies yesterday, with a bias to buy dollars... And for once this bias to buy dollars didn't include buying Japanese yen, as yen fell 2 whole figures yesterday! You have to wonder if the words coming out of Capitol Hill that they will vote on the Stimulus package soon, has the risk takers dipping their toes back into Carry Trades, for yen is weaker and the Aussie dollar (a high yielder, even in today's zero rate environment) is stronger... It's not just a co-in-que-dink!

The Bank of England (BOE) did not aggressively cut rates, as I thought they would, and opted for a 50 BPS rate cut to 1%... I guess the BOE wanted to keep an arrow or two in their quiver, eh?

The European Central Bank (ECB) did keep rates unchanged as suspected... Look for the next move at their March 5th meeting.

Yesterday, the Weekly Initial Jobless Claims really showed some additional rot on labor's vine, as Jobless Claims surged, spiked, soared, and any other word you want to use to describe this move higher by 35K to a new 26-year high of 626K! UGH! The continuing rot shows that continuing claims moved to a new record of 4.78 million! This is really getting sad folks...

Today, we'll see the color of the latest Jobs Jamboree, the monthly labor report... The experts believe that we'll see another +500K month of unemployed individuals, with the consensus coming in at 524K... I think that once again this report will be even more disappointing, and that we'll see the unemployment rate tick up to 7.5% (from 7.2%)

I doubt that the rot on this vine will move the dollar lower though, as the markets have become comfortably numb with all this bad data in the U.S.

There was a rumor going 'round, that someone's underground, no wait, there's a rumor going around that the SEC is considering suspending mark-to-market accounting... OK, now we're really reaching into the bag of tricks aren't we? So... Then we would have even less a clue what's on the books of brokers, and investment bankers... Great, where do I sign up for this approval?

Speaking of changing reports... Did you hear that Wal-Mart has suspended their weekly sales reports, and has gone to a monthly reporting schedule... That's all fine and dandy, but you have to think that they did that to keep them from having to show weekly rot on the vine, don't you think?

The Wall Street Journal reported this: "Retailers reported another month of lower same-store sales in January. Target said its quarterly earnings won't meet analysts' expectations because of markdowns and account-receivables woes. Gap reported a 23% same-store sales slump, led by a 34% plunge at its ailing Old Navy brand. J.C. Penney same-store sales fell 16.4%."

Could it be that we have now moved from a recession to a depression? My friend, Bill Bonner, thinks so... He was also the first to put in writing the thoughts about the U.S. following Japan's decade of funk, with his book Financial Reckoning Day, that was published about 6 years ago! So... I stop to listen to what he has to say... I don't always agree, but I sure do listen, for his track record is good... Recall, he also coined the "Trade of the Decade" at the turn of the millennium... "sell the DOW, and buy Gold on the dips"... That's worked out quite nicely, eh?

Here's a snippet from the Daily Reckoning (www.dailyreckoning.com) where Bill does a great job of showing the difference between a recession and a depression... You can read the entire story by clicking on the link... But here's a snippet...

"In a recession, the basic plan or formula for the economy is still valid. The economy just needs a little time...and maybe a little monetary boost...before it continues growing. Typically, inventories are sold down...so a new burst of production can begin.

But in a depression, the problems are structural.

One way of understanding this is just to look at balance sheets. Whether you are a business or a family, you can only afford so much debt. When you get too much, you have stop and pay it down. And when it becomes so great you can't pay if off - because you don't have enough income - you have to declare bankruptcy. A depression is when a whole economy declares bankruptcy...or should. Because it can't pay its debts. Businesses, for example, have been built for a level of demand that no longer exists. It is not a question of waiting a few months. By the time consumers are ready to buy again, the whole economy will have moved on. Imagine, for example, a guy who built a nationwide chain of stores just to sell ipods to teenagers. The business may have been a great success - for a while. And he took out huge loans so he could expand...and take advantage of the demand. But then comes a depression. He says to himself: 'I'll just get some more financing...and wait it out.' But who's going to lend to him? By the time the kids begin buying again, ipods will be like vinyl LPs. His business is history. His lenders have lost money. The loans should be written off and the business should be destroyed, not mummified and preserved.

A depression is when the whole economy changes its business plan, in other words. And that takes time...and creative destruction.

How much time? Well, in the United States alone there is about $6 trillion too much private debt...$1 trillion too much output capacity...and millions of "excess" workers. How long will it take to retrain, retool, and re-absorb these excesses?

We don't know. The last depression took about 20 years...and a major war (talk about creative destruction!) Then, the United States was making the structural shift from a Japan-like capital investment-led economy...to a post-WWII consumer-led economy."

>>>>> back to me... That's scary stuff folks...

Let's get on to a "Friday story" one that's uplifting and gets us in a good mood to head into the weekend!

Then there's Gold... A store of wealth... An inflation fighter... And it's shiny to boot! Kristin sent me these two stories... Here's the first one..

Legendary investor Eric Sprott, of Sprott Asset Management in Toronto, said the U.S. is at the beginning of an economic depression that will help gold prices more than double, exceeding $2,000 amid a series of financial catastrophes.

And then this... Of interest to coin fanciers will be stats from the U.S. Mint showing that it stamped out 94,500 gold Eagles in January. Well, if so, then where are they? That is not a small number, especially for January, but none of the several dealers we contacted has seen any, nor have they been informed as to when the 2009 Eagles will be available. Very peculiar, as they say .

Yes... The demand for physical Gold is still strong... And with the Gold ETF's growing, the demand for Gold increases daily....

Currencies today 2/6/09: A$ .6595, kiwi .5195, C$ .7990, euro 1.2815, sterling 1.4670, Swiss .8545, rand 9.9575, krone 6.8360, SEK 8.2340, forint 228.20, zloty 3.5865, koruna 21.82, yen 91.10, sing 1.5190, HKD 7.7550, INR 48.67, China 6.8344, pesos 14.32, BRL 2.2850, dollar index 86.08, Oil $40.83, Silver $12.86, and Gold... $918.20

That's it for today... I talk one more time today, late this afternoon. I call it my "Happy Hour" Talk! It's still cold here in Orlando! UGH! Had a great dinner last night with colleagues and guests, Mary Anne Aden, Erika Nolan and Kat Von Rohr... A good time was had by all! No big plans tonight, the last night here... Maybe we can get out of the bio-dome, which is what I call the Gaylord Palms here in Kissimmee, if you've ever been here, you know what I'm talking about! I've been on my feet and walking way too much here, I can see swelling again... No worries, when I get home, I'll get my feet up and rest! OK... The Jobs Jamboree will print in about 45 minutes... Hope it's not as bad as I think it will be... I hope it's warm where you are, but if it's cold here, it's probably cold just about everywhere! UGH! Oh well, nothing you can do about it, so you might as well, have a Fantastico Friday, and Wonderful weekend!

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

Talking Stimulus...

Chuck Butler — Tue, 03 Feb 2009 15:38:56 GMT

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In This Issue..

* A very tight range for currencies...
* RBA cuts rates to historic low!
* Spending that doesn't create jobs...
* Gold see profit taking...

And Now... Today's Pfennig!

Talking Stimulus...

Good day... And a Terrific Tuesday to you! On the road again, I just can't wait to get on the road again... Yes, all my bags are packed and I'm ready to go! Won't be back until late Saturday night, and back in the saddle next Monday. And I'm leaving just in time, as yet another cold front has moved into St. Louis! UGH!

Well... Let's see... What to talk about today? I could talk about the Aussie rate cut and stimulus package... I could talk about the "new and improved" stimulus package and all the "non-stimulus spending attached to it... I could talk about how it sure seems as though the euro, and then the other currencies, are taking their cues to rally from equities... Now, this is certainly a short term phenomenon because we all know that currencies have different pricing mechanisms than stocks, and a very low correlation to stocks, which is why they make excellent diversification assets, along with Gold and Silver.

Well... What's it going to be boy? Oh, Shoot Rudy, I'll just talk about all of them, and probably more, you never know what's going to come to me, as I start typing!

OK... Front and center this morning... The euro is a bit higher than yesterday, having climbed to 1.28 and change. But, actually, this figure is a bit lower than the high yesterday. At one point the euro was within spittin' distance of 1.29... The trading range has been tight, like Tupperware! That reminds me of... No... Not today, Chuck!

The Reserve Bank of Australia (RBA) did cut rates 100 BPS last night, to the lowest internal rate of all time... (3.25%) The RBA issued a statement that said something about future rate cuts not being as aggressive as those across the last 4 months. Now, that's a good sign, but it's also a bad sign, as it suggests that the RBA isn't finished cutting rates. Right before the rate announcement, the Gov't announced a stimulus package. Now, I don't like this, as it puts the RBA, which I've always held in high regard, in the same boat as all the other countries doing stimulus packages... birds do it, bees do it, Even educated fleas do it... And I'm not talking about falling in love... I'm talking about stimulus packages... The RBA believes that with a combination of fiscal and monetary stimulus, they can kick start their economy...

Memo to the RBA... While domestic demand is a good thing to have... You need China to grow again... Any way... The news of the combination of fiscal and monetary stimulus, has lifted the A$ up off the mat... But I doubt it will have much follow through... Not without a euro rally to 1.30 and higher...

OK, speaking of stimulus... I'm very upset with the "new and Improved" stimulus package. I'm sure you've figured this out already from previous rants. However, now... I'm even more ticked off! Oh, and the TV / Cable media are swallowing the propaganda from the White House, hook, line and sinker! Here's what I'm talking about folks...

The package has a "buy American" portion in the package... This is protectionism folks... And here's what gets my goat the most about protectionism at this stage of the recession... Fed Chairman, Big Ben Bernanke, is supposedly a "U.S. depression guru"... Well, Big Ben, wasn't the protectionism of the 1930's one of the reasons for the Great Depression? And is just so happens that now we've had "the cheater's" confirmation, calling China "currency manipulators", and that was followed up with the "buy American" portion of the package...

Look... There's nothing wrong with the slogan, Buy American... In fact, I think it would be a great thing to go around saying and doing, based on our manufacturing prowess... But, that's not what I'm talking about here... I'm talking about protectionism, at a time when the global economies are hurting and need to export to us... I'm really surprised that the currency traders haven't seen this and taken the dollar to the woodshed... But then, maybe they're getting the wool pulled over their eyes...

The other thing that ticks me off on the "new and improved" stimulus package is the fact that a very small piece of the $816 Billion (before the Senate adds their pork!), stimulus is for the infrastructure projects that have been billed as a "major piece" of this plan! HOGWASH! Now, I'm not going to sit here and pass judgment on all the "items" that are being allocated Billions of dollars, like $1 Billion to deal with the census problems, and $88 Billion to help move the Public Health Service into a new building next year, and $650 million for TV Converter boxes. The list of items like this goes on and on... And all worthy items, I'm sure... But none of these types of spending allocations, and I repeat this so you get the full force of this statement... None of these types of spending allocations are doing anything to create jobs. Oh... And just for those of you keeping score at home... $50 Billion is allocated to bricks and mortar... Infrastructure... Which has had "top billing" on this package... Well, the truth is out... I sure hope someone takes their lawmakers to the woodshed for this!

And... One more thing that's really ticking me off about how we're going about "attempting to stop the correction" , which in my mind should NEVER have been done in the first place, and that is this creation of a "bad bank"... Again... And I really want to stress this point... Why not focus on creating a "good bank"? Because creating a "bad bank" has all kinds of problems attached to it, and IT DOES NOTHING TO CREATE JOBS!

OK... Enough! You are quite full of you know what and vinegar this morning, Chuck... Yes, I know, maybe I'm excited about traveling to Orlando! And maybe not... Who knows?

The Trading Theme is back in place, big time, these days. And with the Trading Theme right now, and short-term I'm sure, is this connection between equities and currencies... And currencies had better break that connection in a New York Minute, because I don't see any good times ahead for stocks... I really thought they would experience an Obama bounce, but not so... The DOW sold off to the tune of -9.5% in January! OUCH! But you never know with these markets... If they are left alone, they will work through good times and bad times, based on fundamentals... If they have the Gov't sticking their hands in there, acting like they know what they're doing, messing with the fundamentals Gods... Then... We get bubbles...

But... Like I said above, currencies are a different bird than equities, and have different pricing mechanisms, so this association can't last too long...

I saw this story, and had to talk about it... Well, everyone knows how I have beaten the U.K. pound sterling around the head and shoulders for months now... And the currency has responded losing 27% in the past 6 months... Well... There's someone beating the drum for the pound sterling these days... Let's listen in... Jim O'Neill, chief economist at Goldman Sachs Group, Inc. had this to say... "the U.K. is no Reykjavik-on-Thames" (referring of course to the meltdown / collapse of the Iceland economy, Gov't, and currency) Mr. O'Neill, also had this to say... "The pound is very cheap for the first time in our professional history. You need to make sure that the U.K. is Reykjavik-on-Thames before you bet against the pound."

Hmmm... I guess he means now... Don't bet against it now... Because betting against it since August has been quite profitable!

The Swiss franc continues to get dragged through the mud by the bank scandal that I talked about last month, between UBS and Italian municipalities... There's been some new rot found on UBS's vine, and since UBS is such a large piece of Switzerland... The franc gets hammered... What the franc needs right now is a rally by the euro, so it can grab hold of the euro's coattails!

Oh... And before I head to the Big Finish... I want to tell you that next week, we get "the plan"... Treasury Secretary Timothy Geithner will give a speech next week in which he will outline the Obama administration's financial-rescue plans. Whew! I feel so much better now! NOT!

Oh, and one more thing... The count is now two tax cheaters found in the new administration... First we had "the cheater" Treasury Sec. Geithner, and now we have Tom Daschle... Oh brother! Now... Where's the change? Wouldn't it be a huge stance that this kind of scandal and bad press on his administration will not be tolerated, if Obama asked these two to fall on sword?

I know, I keep saying one more thing, but this time I really mean it! After talking up Gold yesterday, it sold off $20! UGH! Profit taking, I have to believe, as there's nothing to show me that Gold should have been sold!

Currencies today 2/3/09: A$ .6390, kiwi .5055, C$ .8040, euro 1.2875, sterling 1.4260, Swiss .8640, rand 10.13, krone 7.0425, SEK 8.35, forint 232.65, zloty 3.5425, koruna 22.07, yen 89.50, sing 1.5150, HKD 7.7535, INR 48.82, China 6.8402, pesos 14.48, BRL 2.3175, dollar index 85.89, Oil $40.20, Silver $12.37, and Gold... $906

That's it for today... I noticed the other day, as I passed by a gas station, that the price of gas had jumped 20-cents in one day, while the price of oil has remained constant, if not cheaper... Oh the games people play now, every night and every day now... This will be my first trip with Chris, since last May. He's a busy guy, and doesn't have time for me to be dragging him around the country! Hey! This is exciting too! We're currently working on a new way of bringing me to you! Each working day, (that I'm here, which won't be very often in March!) Kristin will sit down with me, and do a quick overview of the Pfennig, and ask me to further explain a couple of things I talked about in the Pfennig each day. This will all be a video (in our cool studio) and placed on our website... Now, how cool is that? We're practicing now, and hope to be "live from St. Louis" no, wait! That would "taped from St. Louis" on the website soon... I will, of course, let you know more, when we're ready! Well, people are arriving, I must be late! I hope your Tuesday is terrific!

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

Chock-Full-O-Data Week!

Chuck Butler — Mon, 26 Jan 2009 15:22:44 GMT

In This Issue..

* BNP Paribas weighs on the euro...
* China and Treasuries...
* Euro forming a base?
* Gold continues its rally...

And Now... Today's Pfennig!

Chock-Full-O-Data Week!

Good day... And a Marvelous Monday to you! And a new week... The last week of one of my least fave months too! A week for us, that's supposed to be snowy, icy and cold, all starting, supposedly, tonight. A fitting way for January to end! I don't have my currency screens again this morning, don't know what happened over the weekend here, but, once again, I could have remained at home to write this, if I "KNEW"!

OK... Enough! No whining to start the week, Chuck! There's so much economic happenings, and data this week, that should be enough to get your mind off of not having currency screens! OK, I'll try... Here's goes! OK, right out of the starters blocks this morning, we have the fear of such rotten data due this week, that the Trading Theme that rewards the dollar for this deep, dark, more dangerous data (strange thinking, I know, and against all that I've ever learned about what makes up a value of a currency, which leads me to believe this will end at some time), should be set in stone this week... The euro is trading below 1.30 this morning, but stronger than it was on Friday morning. Let me tell you about a story that hit the news wires (wires that I can't see this morning!) on Friday mid-morning...

A Chinese newspaper reported that Chinese officials are calling for Beijing to sell U.S. Treasuries... Whoa! This is completely different than people outside of China giving them their 2-cents worth of opinions on how they should run their economy (read, Schumer, Graham, Bernanke, Paulson, and now Geithner a.k.a "the cheater")... Let's go to the story...

"BEIJING (Nikkei)--Calls are growing in China for the government to reduce its holdings of U.S. Treasury securities, as some observers expect their prices to decline amid heavy issuance to fund U.S. economic stimulus plans.

Such sentiment -- in part motivated by indignation over recent American assertions that China is partially responsible for the global financial crisis
-- threatens to cast a cloud over relations between Beijing and the new U.S.
administration.

"China should sell some of its U.S. government bonds and increase its euro and yen assets," Yu Yongding, a former member of the People's Bank of China's policy board, wrote in a Chinese newspaper earlier this month. Yu warned that the supply of Treasuries may far exceed demand in the future.

Such remarks by Yu, who currently serves as director-general of the Chinese Academy of Social Sciences' Institute of World Economics and Politics, has sparked discussion within the government on how to manage its foreign reserves, according to a source familiar with the matter."

I told the boys and girls on the desk about the story, and Ty noted that the markets weren't really picking up on it... But by noon, you could tell something was going on, as the euro traded to 1.30 (+2 figures), Gold was up $40, and the Long Bond in Treasuries was down 2 whole points!

Now, I'm not saying that "this is finally the last shoe to drop" You see, just because a Chinese official calls for Beijing to sell their Treasuries, doesn't mean Beijing does. However, look at the damage done to the dollar, and Treasuries when we have a single individual within China calling for this!

So... Judging from the currency reaction overnight... There's been no follow up to the NIKKEI story... But what a performance from Gold! WOW! The shiny metal traded over $900 for a short time on Friday... I do see the Gold futures on the internet, and they are showing Gold will be over $900 today...

Pound sterling has bounced off its lows from last week, after Barclays announced they did NOT need Capital from the Government... This is the first "good" news from the U.K. in weeks, but I suspect it won't last too long, as this is just one Bank... There are plenty others in the U.K. that won't be able to make a statement like that!

And speaking of Banks... I see where BNP Paribas posted a huge loss in the 4th QTR on their investment banking woes... So, it's not just U.S. , and U.K. Investment Banks with losses... The key here is "investment" banks... The ones that got deep into the subprime bonds, credit default swaps, and didn't manage the "risks" correctly... Any way, this news from BNP Paribas is probably weighing heavily on the euro this morning, and one of the reasons the single unit has given up it's gains from Friday...

So... As I said above, the Trading Theme for the dollar is in place, which means... The euro gets sold along with the other alternative euro currencies like Norway, Sweden, Denmark, and Switzerland... But the High yielders, like Aussie, kiwi, Brazil, and South Africa, really take shots to the chin... On the other side of the coin, the Japanese yen rallies like there's no tomorrow...

The U.S. data cupboard is chock-full-o-data this week, and the Fed's FOMC meets tomorrow, but won't announce their rate decision until Wednesday. I've always wondered just what these Fed Heads do during these two-day meetings... I've always contended that they most likely played board games... Or Battleship! I can hear Kohn, telling, Bernanke, "Ben, by Joe, you've sunk my battleship!" (if you do it in an English accent it's funny)...

We begin the week with Existing Home Sales and Leading Indicators... I keep saying over and over again that if the markets had 1. read the Pfennig... Or more likely 2. paid attention to the Leading Indicators they would have not been blind sided by this recession! Leading Indicators have told us for months now that things were not going to be all seashells and balloons for the economy... And voila! Well... I think Leading Indicators will continue to tell us there are more problems ahead, as they are forecast to be negative -.3%... And Existing Home Sales? The rot on that vine has been exposed for over a year 1/2 now...

Tomorrow we get the Case-Shiller Home Price Index, and Consumer Confidence... Wednesday, we'll get the Fed's rate decision, which I told you last week, to forget about any more rate cuts, they are so close to zero, they are at zero... Thursday brings us the Weekly Initial Jobless Claims, which last week, got very close to 600K, Durable Goods Orders, and New Home Sales... And then finally on Friday, we get 4th QTR GDP... Which I told you, and a Huge crowd at the Wealth Masters Conference in November, that 4th QTR GDP would be a negative -5.0%...

Well, it looks as though it probably will be an even greater negative than I forecast back then...

OK... Let me give you a bit of a lesson on what's happening with the economy and this recession... You see... Every other time in the modern era that the U.S. economy has contracted more than 5% in a quarter, falling inventories have been a major reason, if not the single biggest factor. Unfortunately, the really bad recessions, like this one is going to turn out to be, get worse by the Companies getting rid of all their inventory, you know, stuff that isn't selling! Then... Once the inventories are sold off, the economy can grow quickly again, but at the cost of inflation, as the Companies sold off their stuff, and now there's demand for it again.

But so far in this recession, falling inventories haven't been the problem. Of course you have to forget about housing here... NO, this recession is a direct result of the Credit Crisis that was first exposed in August of 2007... Which, I'm afraid, doesn't bode well for a turn around in the recession, that a lot of economists are calling for in the 1st QTR of this year... The recession is deep rooted, and will be protracted until someone figures out how to get this credit crisis unlocked!

I'm still holding out hope that by summer, we see an unlocked Credit market... Then it would take a couple of months before the economy could get some "legs"... Then... We could see this spiral of demand again, and inflation rising, like in previous recoveries from recessions... And this is why I believe that in the 2nd half of 2009, we'll see a return to the fundamentals, and all this awful debt creation that was done to "stop" the correction, will be on display again, and a dollar sell off, along with U.S. Treasuries should be in store...

But, if the Chinese jump the gun, and begin selling ahead of that time, then the dollar sell off could obviously move forward on the calendar!

I think what the markets are looking for these days, and especially after the NIKKEI story on Friday, is some sort of hedge against Treasuries... All that safe haven buying, that I've been talking about for months now, has created what I call the last balloon / bubble in this cycle...

And then finally before we head to the Big Finish... There's this... A story that Ty found the other day, and sent to me... When I went to read it, I saw that the writer is a young man, that used to swim against and play water polo against my oldest son, Andrew! The lad's name is Jamie Saettele, and he's now the Senior Currency Stategist for DailyFX.com...

Jamie is a stategist, so he works with charts... And he believes that the euro is forming a base for a Large Rally... He points out that each time the euro rallies, and then drops, the drop is less than the previous drop... You may recall that I pointed this type of information on Gold a couple of weeks ago, and said that it looked like it would rebound to $900, and voila! Here it is... So... Let's see if the charts work for the euro, the same way, eh?

Currencies today 1/26/09: A$ .6570, kiwi .5290, C$ .8190, euro 1.2970, sterling 1.3870, Swiss .8625, rand 10.1820, krone 6.8750, SEK 8.1750, forint 222, zloty 3.3815, koruna 21.5920, yen
89.30, sing 1.4980, HKD 7.7580, INR 48.90, China 6.8465, pesos 13.93, BRL 2.3140, dollar index 85.69, Oil $45.90, Silver $12, and Gold... $898.30

That's it for today... I hope the IT people can figure out what happened to my currency screens by the time I get back from my radiation treatment... Only 5 more to go, still no improvement in my vision, but the doctor told me I had to be patient... A big Happy Birthday to my youngest sister, Joanie, today... Just heard on the radio that they're still calling for a dumping of snow tonight and tomorrow... I have to think hard about going out in the snow... I don't mind driving in it, no biggie... But attempting to walk in it... Hmmmm... I may be working from home tomorrow! OK... I had better get this tied up and sent out, it's time to leave for radiation! I hope your Monday is Marvelous!

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

A Jobs Disaster!

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

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In This Issue..

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

And Now... Today's Pfennig!

A Jobs Disaster!

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

A New Year!

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

.........But First, A Word From Our Sponsor..........
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Build for retirement your way, only at EverBank®. Visit http://www.everbank.com/002IRA.aspx.

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

In This Issue..

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

And Now... Today's Pfennig!

A New Year!

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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