Daily Pfennig : Reserve Bank of Australia

Silence Is Always Golden...

Chuck Butler — Wed, 18 Nov 2009 20:17:38 GMT

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In This Issue..

* It's a Risk On day!
* Commodity Currencies have the "stuff"!
* Gold's one-day window slams shut!
* RBA to not wait 2 months to hike rates!

And Now... Today's Pfennig!

Silence Is Golden...

Good day... And a Wonderful Wednesday to you! We're stuck in the mud with the rain again, but according to the weather people it should end tomorrow... Geez Louise, I guess it could be snow, which would have crippled this city by now!

Well... The currencies gave back all that ground they gained the day before on Mr. Toad's Wild Ride, yesterday... But, have turned around this morning in the European session as Eurozone stocks are up, and whenever equities trade with some zip in their step, it has been good for the Big Dog, euro...

Someone asked me yesterday a question about the euro... He said, "Chuck, I know you like the euro, but couldn't the Aussie dollar be a better choice going forward?" And I answered like this... The euro is the offset currency to the dollar... But that doesn't mean it is the best performer when the dollar moves down. The Aussie dollar (A$) has outperformed the euro since 2002, and will probably continue outperform the euro... But so has the Norwegian krone, and the New Zealand dollar, and the South African rand, and the Canadian dollar... Hmmm... Does that list ring a bell?

Why, yes, Chuck, it does! For these are all "Commodity Currencies"... You've Gotta Love 'Em!

Countries that have "stuff" to sell to other countries, that either don't have the "stuff" or are too lazy to deal with it!

Hey! Did you see my bit on Bernanke that I wrote yesterday made the "5-Minute Forecast"? WOW! My friend Ian Mathias, does such a great job on the "5", and I get a HUGE kick out of him putting stuff I write in his great letter! You should see the two of us standing side by side in Vancouver, where we meet up each year... The old kids song about fat and skinny went to bed, fat rolled over and skinny was dead... HAHAHAHAHAHAHA!

OK... Chuck, quit the back slapping of yourself, and get back to the task at hand!

Yesterday, my fat fingers made an appearance in the Pfennig, as I mis-typed the price of Gold, in the currency round-up... I had just talked about how those people waiting for a pull-back of Gold's price, might still be waiting when the cows come home... And then I type the price of Gold $100 cheaper than it was selling for! What a fat fingered dolt! Oh well, not many people pointed it out to me, as always letting me know that "Chuck made a mistake"...

Speaking of Gold... Well, you had a 1-day window to buy it cheaper, for the overnight sessions has the shiny metal hitting on all 8, and soaring once again to $1,148!!!!! Don't you just hate those 1-day windows? I mean, you wanted to pull the trigger and buy, but thought, what if Gold drops more today, that would mean I could buy it cheaper tomorrow... Don't be fooled! It's like this folks... If you want to buy something, buy it! Trying to time a purchase will leave you sitting the sidelines with a baseball cap turned backward on your head and holding a clipboard!

I used to tell people that if you're standing at the bus stop waiting for the bust to take you downtown, and the bus pulls up, but it's an old bus, and the rumor is going around that a brand spankin' new bus is on the way, you decide to not get on the old bus, but wait for the new bus... Then the new bus arrives, and there's a rumor that an even newer, updated bus is on the way, and you decide to wait for that one... If you never get on the freakin' bus, you'll never get downtown!

OK... So... Remember when I questioned the current administration's claims that instead of "creating jobs" they were "saving jobs"? I pointed out that claiming that jobs were saved, would be difficult to prove... Well, guess what? Proving that the jobs saved don't exist, has been pretty easy... And the people claiming that the stimulus "saved jobs" have egg all over their collective faces...

Speaking of Jobs... One of my fave economists, Nouriel Roubini, had this to say about jobs...

"Think the worst is over? Wrong. Conditions in the U.S. labor markets are awful and worsening. While the official unemployment rate is already 10.2% and another 200,000 jobs were lost in October, when you include discouraged workers and partially employed workers the figure is a whopping 17.5%.

While losing 200,000 jobs per month is better than the 700,000 jobs lost in January, current job losses still average more than the per month rate of 150,000 during the last recession.

Also, remember: The last recession ended in November 2001, but job losses continued for more than a year and half until June of 2003; ditto for the 1990-91 recession.

So we can expect that job losses will continue until the end of 2010 at the earliest. In other words, if you are unemployed and looking for work and just waiting for the economy to turn the corner, you had better hunker down. All the economic numbers suggest this will take a while. The jobs just are not coming back."

Chuck again... And you think the recession / depression is going to end with the unemployment problem in this country? Not when the consumer is needed to generate nearly 70% of the GDP...

And all that tells me that the cartel / Fed (Fartel!) is going to believe that they need to keep rates near zero for some time to come...

So... It's Risk On today! It was Risk Off yesterday! Don't ask me why... Tell me why, you cry, and no wait! Don't go singing songs, Chuck! This is serious stuff!

Yesterday's data cupboard was a mixed bag of economic data for the U.S. PPI wasn't as strong as forecast, Industrial Production slowed in October, but Capacity Utilization bumped higher, and the TIC Flows for September were $40.7 Billion, which was more than the $34.2 Billion in August. The report showed that Japan, China and the U.K. all increased their holdings of Treasuries. September's TIC Flows were probably the best report of the day, and the best report that this series has printed in a long, long time... Does this mean that the all-clear horn is blaring, telling us not to worry any more about whether we finance our deficit or not? Well... It might be, but I'm not listening to it!

Well... The President ended his visit to China, with a call for a more flexible Chinese currency (renminbi)... And... The Chinese said... Nothing! They met the President's words with silence... I used to date a girl that would say to me when I wasn't talking... "Silence is Golden, Chuck" and I would say... "Then shut up and we'll make a million!" HA!

Now, while it would nice if the Chinese played ball with us... I understand their dilemma... The IMF still believes that China's currency is about 25-40% undervalued... China could not deal with a floating currency that went up 40% overnight!

Did you know that America's trade deficit with China widened to a 10-month high in September? Well... It did, thus raising concern that the combination of a recovering U.S. economy and a fixed renminbi exchange rate against the dollar will worsen global imbalances. But... As I've said at least 100 times before this... The Chinese will do what they believe is best for their country, and that's not floating the renminbi at this time, no matter who the U.S. sends to visit them to persuade them to do so!

Moving further south in the Pacific, we land in Australia... I thought about this next Reserve Bank of Australia (RBA) quite a bit the past couple of days... And have come to the conclusion that the Dec 1st meeting of the RBA will net another 25 BPS rate hike... The reason I think this, is the fact that there will be no meeting in January, thus leaving a 2-month gap, which in these economic times could be devastating... So... Look for another rate hike in Australia on December 1st... Which would be their 3rd consecutive meeting rate hike, and could be the harbinger to parity for the A$... Could be... I didn't say it "would be"!

I know that yesterday morning, I talked about how the RBA meeting minutes had been perceived as "dovish", and that spooked the markets into thinking that the RBA would NOT hike rates in December... But upon further review, the meeting minutes were really pretty vague, and while they didn't sound outright hawkish, they also didn't sound "dovish" either... After reading the minutes, I got the feeling that overall, the minutes support the idea of "steady rate hikes"... I don't think the RBA will stop until they reach an internal rate of 4.25% early next year...

I was giving an interview last week with a writer from Business Week... And he asked me when this dollar weakness all started... I told him that, "Over the past nine years congress and two administrations have instituted fiscal policies that have undermined the value of the U.S. dollar, and the deficit spending has gone from $350 Billion Budget Deficits to $2 Trillion (annualized) Budget Deficits in a wink of an eye... So... The dollar made brief comebacks in 2005 and in the financial meltdown of August 2008 through Feb 2009, but other than that, the dollar continues to decline, and I just don't see anything on the horizon that will stop this decline."

Well... As I look across the desk, where the light only comes from the computer screens, yes, I like it dark here while I'm writing, it keeps me focused! HA! Any way, as I look across the desk at the currency screens, I notice that every currency that supposed to lighting up green (going up) is doing so, and every currency that supposed to be lighting up red (going down, but that's what you want in a European style currency) is doing so... We've got it all going on today... One of these days, we'll quit this stupid game of street hockey, you know, Risk On, Risk Off... Or the Mr. Myagi, with the wax on, wax off, bit! But until then we have to deal with this stupid game of street hockey, or karate training!

OK... To recap... The currencies have gained back the ground they lost in yesterday's Risk Off trading sessions. Gold is back to soaring after a 1-day stall... Data yesterday in the U.S. was a mixed bag. Chuck expects the RBA to hike rates in December, and China responds to the U.S. President's request to allow greater flexibility in the renminbi, with... Silence...

Currencies today 11/18/09: American Style: A$ .9325, kiwi .7490, C$ .9550, euro 1.4960, sterling 1.6810, Swiss .99, European Style: rand 7.4290, krone 5.58, SEK 6.8275, forint 177.50, zloty 2.7370, koruna 17.0130, RUB 28.67, yen 89.10, sing 1.3830, HKD 7.75, INR 46.22, China 6.8270, pesos 12.99, BRL 1.7080, dollar index 74.97, Oil $80.03, 10-year 3.34%, Silver $18.75, and Gold... $1,148.30

That's it for today... Chris will have the conn on the Pfennig tomorrow morning, as I report to the retina institute at the Center for Advanced Medicine. God willing, I'll be back on Friday morning! My younger sister, Terri, was just diagnosed with breast cancer. I'm waiting to hear what the game plan is for her... I picked up my son Alex's electric guitar last night, and played it a little... I've played acoustic guitars for so long, that his electric guitar felt very strange.. I played a song, and little Delaney Grace, who had sat still listening to me play, cheered, and then got up and left... Cracked me up! Every day it's something with her! Time to get this out the door, folks... I hope you have a Wonderful Wednesday!

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

RBA Raises Rates Again!

Chuck Butler — Tue, 03 Nov 2009 15:44:43 GMT

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

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

* Risk Aversion boosts dollar...
* U.S. manufacturing is strong...
* More stimulus? Please say it ain't so Joe!
* Thoughts from the Big Boss!

And Now... Today's Pfennig!

RBA Raises Rates Again!

Good day... And a Terrific Tuesday to you! Well, I'm here! Just when you thought I would be gone for the week, and you would get away from my rants, and get the calm Chris Gaffney, the rug gets pulled out from you! I am so bummed! I was told that I could not travel to Cabo for the Sovereign Society's Offshore Advantage Conference, and I was to remain at home, with my leg up, blah, blah, blah... What a crock!

OK, now that we've got that out of the way... Front and Center this morning, we have a very strong dollar rally going on... It began yesterday mid-morning, when things turned on one thin dime. First, we had the U.S. Manufacturing Index rise in September and the Trading Theme kicked in with the dollar getting sold on the good news for the economy... But then a strange thing happened on the way to the forum. Everyone began to fear what's been going on in Banking... Friday, the 115th bank failed this year, and suddenly, traders, investors, hedge fund dudes, and everyone else, got a case of the flu... Not the "pandemic" H1N1 flu... This is the "chicken flu"... Chicken to continue to takes risks in the face of a banking problems... Well, to think of it, maybe, just maybe, it's not the "chicken flu" but the "prudent flu"!

So... The dollar's losses were reversed by mid-day, and the non-dollar currencies were taken to the woodshed... Shoot Rudy, even a rate hike by the Reserve Bank of Australia (RBA) couldn't reverse the Risk Aversion trading... I'll get back to the rate hike by the RBA in just a minute... But first I need to talk about this shift to Risk Aversion once again... We saw this briefly last week, and it faded into the wind... I hope this shift to Risk Aversion is soon a small item in our rear view mirrors!

Now... The ISM Manufacturing Index rose to 55.7 from the prior month's 52.6 reading. This marks the strongest reading for the index since the April 2006 reading of 56.0. Let me explain something to you, that I've explained before, but this really illustrates what I'm talking about... And that is... This Manufacturing renaissance here in the U.S. comes as a benefit of the weak dollar that's been in place for over 6 months now. It's that simple folks... You want Manufacturing in the U.S. to be robust? Then you need a discounted clearing mechanism... And that is the dollar...

For, the Asians are learning to trade among themselves without the U.S., and the Eurozone already has 80% of their trade among themselves, with out the U.S. that doesn't bode well for U.S. exports unless... Unless there is a discount... And that discount comes in the price they have to pay / convert their currency for the dollars that are needed to buy the export... So... Why shoot the goose that lays the golden eggs?

OK... As I mentioned above... The RBA raised rates 25 BPS (1/4%) last night, as I expected them to, and had told you they would! The A$ got sold though after rallying briefly... Traders go spooked when the RBA Gov said that "it was prudent to lessen gradually" the stimulus to the economy provided by lower borrowing costs... OK... Folks, that's Central Bank parlance for: The interest rate hikes are going to slow down from here on out... So don't expect a rate hike at every subsequent meeting!

Oh come on A$ Traders! The A$ yield differential to the U.S. is now staggering! As it is to Japan, Europe, and Canada! Only New Zealand and Brazil can play on the same team as Australia when it comes to significant yield differentials! But NOOOOOOOOO OOOO! You get spooked! Have you no intestinal fortitude? HEY! The good news is that it gives late comers a chance to buy at cheaper levels, or... Those that already own, a chance to pick up more at a cheaper level! Courtesy of the Chicken Little A$ traders!

Well... I guess I can't blame them too much, with the Risk Aversion campers taking over the campground... Here's another thing that I saw last night that has the Risk Aversion campers spreading like wildfire... A long time reader of the Pfennig and Bloomberg TV personality, Pimm Fox reported last night that: President Barack Obama's advisers are "seriously" considering proposing a second stimulus measure to boost the economy, Commerce Secretary Gary Locke said in an interview. Locke said another stimulus would be "very targeted and specific and we need to be mindful of the deficit as well."

Hmmm... OK... How many times have I said in the past 8 months that the Gov't was going to see the need for more stimulus? The answer? MANY! I've got a question... If the GDP was "so robust" as the Gov't officials claimed it to be, then why are they discussing more stimulus? BECAUSE THE GDP WAS A FRAUD! We all know that... I explained it all to you yesterday! But the announcement that more stimulus is being "seriously considered" is what we used to call as kids as "cheaters proof"!

What does "very targeted and specific" mean? It means the Gov't is going to get deeper and deeper into the private sector... That's what it means!

I have a question for the Gov't... You told us the $787 Billion stimulus package last February was going to keep unemployment from reaching 10%... Guess what? That didn't work! So, what makes you think whatever taxpayer money you spend now is going to work? Oh, and don't give me that barrel of baloney that you've "saved" 650,000 jobs... Saved Jobs CAN NOT BE PROVED! So why not say you saved 1 Million or 2 Million jobs? I mean, what difference does it make... It's not true, and can't be proved!

Whoa, there big boy... You had better stop before the Pfennig gets sent to the White House to shut me down! Yeah, like it hasn't been sent there before now!

OK... Did you hear about the IMF Gold Sale? The IMF sold 200 tons of Gold... Not to worry though, the Reserve Bank of India stepped to the plate and bought the Gold... Gold revisited $1,060 after this announcement, but in reality it should have been a wash, and the price of Gold has backed off a few dollars overnight... But still pretty well bid, given the Risk Aversion going on in the currencies.

And why not? Gold is a store of value... Of wealth... Whey wouldn't it buck the trend?

Speaking of which... The Big Boss, Frank Trotter, and I were talking last week about Gold, and we kicked around this thought of sharing a lesson of money with kids... And he sent me this...

The weather turned around here in about three weeks. Great fall, then 10 days of deluge, now the chill of late fall. And instead of Thanksgiving displays, the march of catalogues imploring us to turn away from savings and save the world through spending have begun to hit the door. In the past few years as our children have become young adults we have started to turn away from the quest for unneeded presents and zombie-like consumption and have started to implement a contribution concept: research and choose a cause that will appeal to the recipient, ensure that the cause is not acting like your average NGO running around in white land cruisers or and staying at five star hotels in the third world, and make a modest contribution. It isn't working perfectly and we certainly backslide enough but it's underway. We may turn it into a gift of a few shares of a good company but enough of this.

Something else that meets the need of a physical gift, but one with a message has been on my mind lately. It isn't easy to start a conversation with a young person, especially quite young about global economics and the transient value of money. In fact it's hard to start a conversation with almost anyone on the topic. So what's a better way to provide a gift box and a message? Readers of "A Pfennig for your Thoughts" will certainly be ahead of me ( the gift of real money of course ) gold coins.

With the gift of a coin, or a set of coins you can tell so many stories or impart values in a variety of ways. Coins are struck around the world providing a geography lesson and of course an insightful and cogent discussion of central bank attention to their country's money supply (well okay, you might want to skip that one). You can tell the story of gold in the history of the world, and if you are brave and the audience attentive, how gold has held its value over the centuries and will probably do so for centuries to come. Bringing things up to date you can cover the astounding fiscal and monetary policy that has become our new national pastime over the current and past administrations (but be sure to take your blood pressure medicine). Tell 'em "you are worth an ounce a year" (or more).

If you are buying for one or two friends or children or grandchildren head down to the local coin store and grab a couple bullion coins. If you have a good size list or have the capacity to do something substantial then give the team here at EverBank a call. In any event lets all be sure to teach our kids, grand-kids and generally people around us about the monetary value of gold.

WOW! That was great Frank! I love it when the Big Boss puts down his thoughts in writing and shares them with the rest of us!

OK... To recap... The dollar is enjoying a strong rally thanks to the Risk Aversion crowd, that is getting spooked about the banks, after the 115th U.S. Bank this year failed... The Reserve Bank of Australia raised rates again by 25 BPS, and the Reserve Bank of India bought 200 tons of Gold that the IMF felt it needed to sell, so a wash if you will. And then Chuck went on a rant about stimulus...

Currencies today 11/3/09: American style: A$ .8935, kiwi .7115, C$ .9235, euro 1.46540, sterling 1.6285, Swiss .9685, European style: rand 7.9210, krone 5.8325, SEK 7.1625, forint 191, zloty 2.94, koruna 18.03, RUB 29.42, yen 90.10, sing 1.4030, HKD 7.75, INR 47.41, China 6.8279, pesos 13.35, BRL 1.7725, Dollar Index 76.73, Oil $77.19, 10-year 3.38% (see the Risk Aversion with the drop in the 10-year yield fall from 3.62% yesterday!) Silver $16.36, and Gold... $1,057.70

That's it for today... A little long today with the Big Boss's thoughts, but well worth them I must say! For all of you that are heading out to Cabo to the Sovereign Society's Conference, specifically to see me, I apologize for not being there! HA! Yeah, like someone was going just to see me! HAHAHAHAHAHA! Seriously though... I feel real bad that I had to remain at home... UGH! OH well, this way I won't miss my little buddy Alex's last game this Saturday, or son Andrew's girlfriend Rachel's birthday on Sunday! Gotta go... I hope your Tuesday is Terrific!

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

RBA's Stevens Turns On The Green Light!

Chuck Butler — Fri, 16 Oct 2009 15:21:59 GMT

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

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

Don't miss this unique opportunity. Deadline to buy the BRIC MarketSafe CD is Nov. 5, 2009. Apply today or learn more at http://www.everbank.com/001CertificatesMSBRIC.aspx?referId=11808

In This Issue..

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

And Now... Today's Pfennig!

RBA's Stevens Turns On The Green Light!

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

RBA Raises Rates!

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

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

In This Issue..

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

And Now... Today's Pfennig!

RBA Raises Rates!

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

A New Carry Trade Currency?

Chuck Butler — Mon, 28 Sep 2009 14:17:00 GMT

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

In This Issue..

* A bias to buy dollars remains...
* The Fed was warned as far back as 1999!
* Fujii gets "the memo"!
* A ton o' data all around the globe this week!

And Now... Today's Pfennig!

A New Carry Trade Currency?

Good day... And a Marvelous Monday to you! My weekend turned out to be quite grand, as all the things I said that would make it special came to pass! My Cardinals clinched their division. My beloved Missouri Tigers won on Friday night, and my little buddy's 8th grade Flyers won their game against their arch rival... WOW!

Well... Here we go with the last 3 days of September... A month that saw Gold return to $1,000, and the non-dollar currencies all return to levels they held a year ago, having withstood the onslaught of flight to safety trades that benefitted the dollar after the Lehman Bros collapse.

We've seen the Fed Chairman sound the "all clear horn" and me question, why anyone would still be listening to this guy! And our country is becoming quite divided over the health care issue... So... There we have it... September all rolled up in a nice package, to take out the trash!

Ok, we're all caught up now... On Friday, the currencies gravitated toward weaker levels, as the dollar buying continued, with stocks leading the risk assets lower... But it hasn't been a "taken to the woodshed event" for the currencies yet... So, the question remains if this is the correction we've been waiting for or not...

Last week I gave you some quotes by Nassim Taleb, but forgot to tell you that he was the author of the book, "The Black Swan"... Nassim Taleb was talking to a group of business people in Hong Kong this weekend, and asked the same question I've been asking, as he wanted to know why Big Ben Bernanke, and Treasury Sec. Tim Geithner kept their posts after failing to foresee the collapse in global credit markets. Taleb said, "Bernanke, Geithner, and Summers didn't see the crisis coming so why are they still there? Bernanke is like a pilot who didn't see a hurricane."

Good stuff, eh? Especially, when you read the Washington Post and see that the Fed was ignoring pleas from Consumer Groups, as far back as 1999, that subprime lending was expanding... Turning a deaf ear on the Consumer Groups, the Fed left rates low, and accommodating... What the heck do we have these guys for any way! The Fed has been the root cause of every financial problem we've had in this country since they were created in 1913...

OK... Last week, the Financial Times ran a story regarding the dollar laying claims to being the top Carry Trade Currency... Let's read a bit from the FT... "For years, the yen was the currency of choice to fund international Carry Trades. Analysts say negligible U.S. interest rates, its quantitative easing measures and little sing that the country is set to withdraw from its ultra-lose monetary policy anytime soon leaves it in a similar position to Japan at the start of the decade."

Well... I had already told you all that, but when you see it in the FT, it obviously gives it more credence, eh?

But, let's talk about that for a minute... If the dollar begins to become the new funding currency of the Carry Trade, that means that people will be selling the dollar short, and using the proceeds to buy a higher yielding asset... Well, in today's markets, there aren't what we would traditionally consider to be "high yielding assets"... For the Carry Trade is quite risky, therefore you need to have some cushion from the "buy side" asset... The only "real interest differential" in the world resides with Brazil... But the real is traded on a non-deliverable forward, which means it's just as liquid as say Aussie or kiwi, which were the main beneficiaries when the yen was the funding currency.

So... This new Carry Trade, might have to wait a bit before getting into 4th gear. When the Reserve Bank of Australia (RBA) begins their rate hike cycle, probably by year-end, then it might begin to make sense... Which is just another thing in the gauntlet the dollar has to run through every day!

Speaking of the Japanese yen... The yen reached a 8-month high of 89.30 overnight. I told you last week that yen is getting a lot of love from Japanese exporters that are repatriating their profits in yen, ahead of the end of the month / quarter.

I had to laugh out loud when I read a story about the Japanese Finance Minister, Fujii, who apparently hadn't gotten the memo about how Finance Ministers are supposed to jawbone the yen lower... Recall, I had told you that he said over and over again that he supported a strong yen... Well... That all changed once he got the "memo"... Fujii said last night that, "people were mistakenly saying he supported a strong yen."

Hey Fujii, got the memo now? Is it clear?... Crystal... OK, now go out there and jawbone the yen weaker, or you'll be falling on a sword!

This week is chock-full-o-data all over the globe... In the U.S. we'll end the week with the Jobs Jamboree, while Japan will print their latest Tankan report (which checks the pulse of the economy), Canada will print their latest GDP, China will print their latest Manufacturing Index, and Australia will report on Retail Sales...

In the Eurozone, Germany re-elected Angela Merkel as chancellor... Now, she just needs to figure out how to deliver those tax-cuts she promised during the campaign!

The euro had climbed back to 1.4720, but the election results were not taken as "euro friendly"... Remember, I told you that there could be tax-cuts coming in Germany, which is the Eurozone's largest economy. Tax-cuts are great, if you are in a fiscal position to do so... Germany has a nascent recovery at best going on right now, so the timing is not what traders are happy with... Therefore the euro dropped like a stone to 1.4570, but then bounced off that is back to 1.4635 as I write...

And the Reserve Bank of Australia, (RBA) which I mentioned earlier was in the news overnight, as the RBA Gov. Stevens gave a speech, that was hawkish... Stevens mentioned that the interest rates needed to move off their "unusually low levels". He also pointed out something that should be quite recognizable by all Central Bankers now, but apparently not here in the U.S.... And that is that "imbalances build up when rates are left too low for too long."

Well... The highly touted G-20 meeting last week ended not with a bang, but with some newfound strength as a group... Recall on Friday I told you that they would replace G-8 as the watchdog for the economies of the world. That news was announced later on Friday... G-20 ended with leaders from the G-20 nations saying that they plan to cooperate on an overhaul of financial regulations to prevent arbitrage in the global system. By the end of next year, banks will be required to hold more capital, and compensation policies will need to be linked to longer-term performance.

You know... When the media reports "Bankers compensation" they're not talking about real Bankers, per se... They're referring to the Merrills and Goldmans of the world that pay out Billions in bonuses, or did at least... Just thought I would clarify that point...

And then there was the British Pound sterling, which I kept saying over and over again, that this dance is gonna be a drag, no wait! I kept saying over and over again, that the pound sterling strength was a house of cards... Well, that house of cards is collapsing under the pound sterling... Even the speculators that were buying it because it was a part of the mix of currencies that made up the IMF's SDR's (Special Drawing Rights), are backing out now...

Data in the U.S. besides the Jobs Jamboree at the end of the week, include the S&P/ CaseShiller Home Price Index for July which will print tomorrow, along with Consumer Confidence, which is expected to be stronger... I guess the people they surveyed haven't seen the Bernanke video collection of his statements that couldn't be more wrong, and still believe him when he says it's all OK! Wednesday brings us the final print of 2nd QTR GDP. Thursday has two of my faves, Personal Income and Spending, and then Friday's Jobs Jamboree...

So, if the data continues to show some strength, but nothing to speak about... I would think that the risk takers will remain confused, and it could lead to further selling in stocks, and other risk assets... Don't really know... Just an opinion on what might happen...

OK, to recap... The dollar has rebounded, but nothing too strong to speak of as of this morning. G-20 is the new world economic watchdog, there's a ton o' data to print this week, all over the globe, and Japanese yen continues to outperform the other currencies VS the dollar.

Currencies today 9/28/09: A$ .8665, kiwi .7135, C$ .9135, euro 1.4650, sterling 1.5870, Swiss .9695, rand 7.44, krone 5.82, SEK 6.9750, forint 184.20, zloty 2.88, koruna 17.22, RUB 30.11, yen 89.30, sing 1.4190, HKD 7.75, INR 47.98, China 6.8274, pesos 13.57, BRL 1.7890, dollar index 76.90, Oil $65.77, 10-year 3.32%, Silver $15.99, and Gold... $992.10

That's it for today... A great weekend, even with the rain on Saturday! It rained so hard that Alex's football game was stopped, and they had to pick it up and finish it yesterday... When I played football, back in the dark ages, we played in any kid of weather... That was a long time ago! It cleared up for a wonderful Saturday night block party with neighbors... Cards are Central Division Champions! (they were picked to finish 4th in this division) Now, it's onto the playoffs... Got to find some way of getting playoff tickets! I'm a month away from heading to Los Cabos, Mexico for the Sovereign Society's Offshore Advantage Academy. 11-4 through 11-7... You can go to www.soveignsociety.com to find out more! I'm flying solo today with the currencies this morning, as Jen is out, so I've got to get working! I hope your Monday is Marvelous!

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

German ZEW Underpins The Euro...

Chuck Butler — Tue, 15 Sep 2009 14:29:18 GMT

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

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

In This Issue..

* Currencies rally on tariff news...
* Norway's election doesn't move krone...
* Canada's Gov't problems to hurt loonies?
* 1-year since Lehman Bros...

And Now... Today's Pfennig!

German ZEW Underpins The Euro...

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Cash For Clunkers Is A Clunker!

Chuck Butler — Fri, 14 Aug 2009 15:13:00 GMT

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In This Issue..

* Currencies trade in a tight range again...
* U.S. Retail Sales are a clunker!
* RBA's Stevens is upbeat!
* Thoughts on Brazil...

And Now... Today's Pfennig!

Cash For Clunkers Is A Clunker!

Good day... And a Happy Friday to one and all! The end of the week... It's been a tough week for yours truly, as I've hobble around in pain all week. But, as I recall, I promised 2 years ago that I would not complain about these things in the future... So! I carry on!

Well... Front and center this morning... The currencies are trading near levels they were when I signed off yesterday morning. They did have a brief rally, after the U.S. Retail Sales data showed some real rot on the "recover is here" vine... But that rally was snuffed out, as the risk aversion campers came back to the markets...

Overnight, the Reserve Bank of Australia's (RBA) Gov. Stevens, game his semi-annual report on the Australian economy to Parliament, and he was quite upbeat... And not just about the Australian economy. Stevens was quite upbeat about most of Asia, including Australia's largest export country... Japan. I bet you thought I was going to say China! I thought that Stevens did a fantastic job of putting his thoughts out there for all to hear. Like, talking about how future quarters could show softer growth as the RBA removes "fiscal candy"... Good Show!

One thing is clear, at least to me, from this upbeat report, and that is I believe we can look for the RBA to hike rates aggressively in the first QTR of next year... And, if the future quarters are stronger than Stevens now forecasts, we could very well see a rate hike before we turn the calendar page on 2009!

Speaking of future rate hikes... Since Norway's Norges Bank moved to a tightening bias on Wednesday morning the Norwegian krone has gained 3.2%! Go krone, Go krone... I'm dancing in my seat. Carlos Santana is playing, dance, sister dance on the radio... It's all good... OK, I'm sure that's a sight you didn't want flashing before your eyes!

OK... So... Here in the U.S. we saw Retail Sales for July, which I told you yesterday was expected to be stronger because of the Gov't's cash for clunkers program... U.S. retail sales unexpectedly fell -.1% in July despite the debut of the government's "cash for clunkers" program meant to jump-start the auto business and help turn around the economy. So... Here we go again... The Gov't promises something, and it falls short of expectations... Looks like "cash for clunkers" is a Clunker!

That Retail Sales shocker yesterday really makes one stop to think about all the euphoria being exhibited about the end of the recession... So... When Retail Sales printed, you can understand the return of the risk aversion campers, eh? I wonder how this report fits into the Fed's view that the economy is "leveling"?

Today, we'll see the stupid CPI report... Just what we need on a Friday! A reminder of how the Gov't cheats those that are on fixed payments, and those that buy TIPS... Don't know what I'm talking about here? That's OK... You must be new to class! No worries! You see the Gov't began making changes to the way we calculate consumer inflation back in the mid 90's, and it's been a huge mess ever since! I'll just say this... Consumer inflation in this country has been grossly understated for 15 years... It was all done as part of a plan to allow interest rates to remain low, so that housing would become affordable for everyone... Now, that plan sure worked out well, eh? NOT!

So, enough of that! Let's talk about Brazil! Before I get into this, I must make this perfectly clear... Brazil is an emerging market, and with that moniker, they should be viewed as a speculation investment only, that is unless it's got principal protection like our BRIC MarketSafe CD! WOW, did you see how I segued right into that? Man... I are so smart!

OK, back to Brazil... I was reading a story on the Bloomie this morning about how a currency strategist at Standard Chartered Bank in New York, has forecast a level of 1.80 for the real by the end of this year, and 155 by the end of 2010... WOW! That would mean that on top of this year's already top performance of +27%, the real would add another 15% next year... That's all nice and sweet... But it is just a forecast by someone I've never hear of, so take that with how ever many grains of salt you wish!

Now that I have you all pumped up... OK, for a second there the old Hans and Franz Saturday Night skit, "were going to pump you up" flashed before my eyes... OK, were was I? Oh, now that you're all pumped up, I will remind you of what I said on Wednesday of this week... And that is, that I'm becoming very scared of this stock market run, and if it runs out of steam, the resulting sell off of stocks could adversely affect the currencies, since these two asset classes are being hog tied together, along with commodities!

Oh, and this just in this morning... Brazilian Retail Sales rose 1.7% in June beating the forecasts of a 1.2% gain. You would have to think that given the strength of this report that Brazilian domestic demand is growing and will contribute further to the thoughts that the Brazilian economy is going to rebound faster than most other countries. And when you have some of the highest yields in the world, and an economy rebounding faster than others, you get a ton of foreign investment into the country, which... Will drive up the value of a currency, which in this case is the real!

It's been a while since I last talked about Gold & Silver... And then I was reading a report written Sean Hyman about Gold, and decided to share with you some of Sean's thoughts... Sean believes that we'll see $1,300 Gold by the end of this year, and $2,500 Gold in 2010... He bases this on a number of things, but mostly on the fact that the IMF announced sales of Gold made earlier this year, is being completely offset by Chinese buying. With all the demand for Gold, having this huge IMF selling of Gold offset by the Chinese if HUGE! So... I thank Sean for his thoughts here...

Sean is a regular contributor to the FX University Daily newsletter that the Sovereign Society publishes... I'm a part of FX University, along with Sean. Speaking of FX University... Many of you know how the FX University did what we called "currency tours" last year, visiting 8 different cities to hold one-day classes on Foreign Exchange (FX)... That format is going to change... In February 2010, we'll hold a 3-day event in Scottsdale Arizona... So... The number of people able to attend these classes will be greatly reduced! I suggest that you visit http://www.worldcurrencywatchfxu.com/main/

OK... Thanks for all the positive notes about abolishing the Fed yesterday... I did receive a few that thought I had lost my marbles, and didn't have any problem telling me so! But that's OK... I didn't think it was going to be met with 100% approval / participation! Quite a few told me to join Ron Paul's bandwagon... I've been on his bandwagon for some time now! But for those skeptics to my call to abolish the cartel, I mean the Fed, I simply suggest you read the book: The Creature From Jekyll Island... But for an appetizer, I suggest you first read William Fleckenstein's book, The Age of Ignorance at the Fed, Greenspan's Bubbles...

And... Let me make something perfectly clear... This letter is Chuck's letter... And therefore it is Chuck's opinions, not those of the Bank! While I'm sure that I'm loved by one and all at EverBank, they do not influence my opinions, this is all me, folks... Just imagine what my poor beautiful bride has had to put up with for 33 years!

OK... We had some housecleaning to do this morning, I sorry about that, but just some things to get off my chest and out the door...

Before I head to the Big Finish, I wanted to talk a bit about Canada... While the U.S. was posting an increase in their Trade Deficit, Canada printed a narrowing Trade Deficit! Rising exports and falling imports resulted in a HUGE narrowing in Canada's trade deficit in June which came in at C$55 million, which was much smaller than May's revised C$1.1 billion trade shortfall... This is a nice piece of data for Canada, and I would love to see this deficit narrow further next month, and get back to the days of surpluses in Canada!

One would think this data to be a feather in the loonies' cap!

Currencies today 8/14/09: A$ .8435, kiwi .6820, C$ .9205, euro 1.4290, sterling 1.6565, Swiss .9360, rand 8.0550, krone 6.0250, SEK 7.1250, forint 188.50, zloty 2.8875, koruna 18.51, yen 95, sing 1.4425, HKD 7.7505, INR 48.25, China 6.8344, pesos 12.84, BRL 1.8230, dollar index 78.35, Oil $70.75, 10-yr 3.60%, Silver $15.10, and Gold... $958.70

That's it for today... I'm late, I'm late... It took me the longest time to write this today... My friend David Galland told me to use this voice system to write. I'll have to look into that, with all the writing that I do! Hey! I forgot to mention to Chicagoans that Chris is in Chicago to speak to the Chicago Investment Seminar sponsored by Taipan publishing... I just booked my flight to Williamsburg VA to speak at a private meeting of investors... I fly on Sept 11... That's kind of creepy to me, but I'll get over it! Next week it's the San Francisco Money Show on the weekend... Yes, I give up a lot of weekends, but, when I retire, every day will be a weekend! OK... The knee doctor says there's nothing major, and I go back for a shot relieve the pain and swelling on Monday... That's all good! I have to get going now, hope you have a Happy Friday!

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

Another Jobs Jamboree!

Chuck Butler — Fri, 07 Aug 2009 14:37:39 GMT

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

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

In This Issue..

* Currencies trade in a tight range... Again!
* Continuing Claims rise...
* Bank of England adds to QE! UGH!
* Swiss franc posts 5 weeks of gains...

And Now... Today's Pfennig!

A Jobs Jamboree Friday!

Good day... And a Happy Friday to one and all! I'm going to go out on a limb and say it will be a Fantastico Friday! This has been a long week for yours truly, coming off a week of relaxation, and getting right back in the saddle... But... It's Friday... YAHOO!

OK... There are a few things to discuss this morning, but none so important as the Jobs Jamboree that will happen in a couple of hours from now. I told you yesterday that the economists surveyed believe that the jobs lost number will make a big move downward from 476,000 in June to 325,000 in July... That's a HUGE jump folks! Ty Keough responded to that note in the Pfennig yesterday by saying, "That's because there are no more jobs to cut!" Now, that's one way of looking at it... We have to hope that it's not that, but instead be a reflection of jobs being added... Come on! We can hope!

Yesterday, the Weekly Initial Jobless Claims printed, what I think is a worse than expected number... The media however, looked at it differently... Here's the skinny... The Claims filed last week hit 550,000, and were expected to be as bad as 580,000, which is why the media began firing off headlines about Jobless Claims falling... And that's fine... But the thing that caught my eye was the rot on the Continuing Claims part of the data... This is the number of people who are unemployed and are currently receiving unemployment benefits, and that number jumped to 6,310,000... That's over 6 million people that are still receiving unemployment benefits, it does not count those that have had their benefits expire... It's not a pretty picture, folks...

And... This might give you an idea of the total unemployed... The number of Americans receiving food stamps pushed to a new record-high in May... 34.4 million people, or one in nine Americans received food stamps, and this was the 6th consecutive month on increases, so we have June and July to catch up with here... UGH!

OK... Enough of that labor talk! The currencies once again traded in a tight range yesterday, but this time the bias was to buy dollars, for the first time this week. But like I said, the trading range was tight... The euro, for instance, popped up to 1.4425, then down to 1.4335, then back to 1.44, only to spend the rest of the day in the 1.43 handle.

Pound Sterling was knocked off its perch as the star performer currency yesterday when the Bank of England (BOE) decided to EXPAND their bond buying. Recall, I had told you earlier this week that the recent stronger economic data had the market participants thinking the BOE would call off the bond buying / Quantitative Easing (QE)... But the BOE had other plans! And the currency got taken to the woodshed, and rightly so! QE is bad... Say that out loud... QE is bad... And more QE is even worse!

In the overnight market I noticed something that I'm sure most people will not even take the time to read... Here's the skinny... I'll give you the headline, and then you try to figure out how this plays well with what I've been writing about... "Australia to Resume Sales of Inflation-Indexed Bonds"

OK... If you said... Australian officials must see inflation pressures in the future, which plays well with what Chuck told us earlier this week about how the Reserve Bank of Australia (RBA) raised their bias for interest rates from accommodating to neutral. If you said that, then you get a Gold Star today! You've been paying attention in class! To the Head of the Class you go!

Seriously though... This is the first time in 6 years that Australia will issue inflation-indexed bonds... That's a warning signal we just heard folks...

Did you happen to see the BIG BOSS, Frank Trotter on CNBC yesterday? Our PR people sent out a note last week and asked both Frank and myself if we wanted to do a shot on CNBC... Having been ambushed there twice in the past two years, I pleaded with Frank to do it, and he graciously accepted the mission. And he executed the mission to a "T"! He told people that they needed to diversify with currencies, and talked about Norway and Australia as key components of a diversified portfolio, and then added in Brazil for those with a speculative axe to grind. He even mentioned our new 100% principal protected MarketSafe BRIC CD! Way to go Boss! As it turns out, I should have done the piece, as no ambush took place, but who knew?

Speaking of Brazil... Our newest guy on the desk, Aaron, sent me a note yesterday afternoon, with Martin Weiss's latest letter... It seems that even Martin Weiss believes that Brazil will be one of the first countries to recover from the global recession, and that it is a good place to invest... At least that's what I got from the letter... When someone as well read and respected as Martin Weiss talks about Brazil, then we should take notice, eh?

In the Eurozone this morning, German industrial orders increased for the second consecutive month, rising 4.5% in June. The forecasts were for a 1% gain, so this move was unexpected to say the least! The data is old though, and did not give the euro any reason to move higher...

And the Swiss franc continues to move higher despite warning and warning about these moves by the Central Bank... I find this to be funny... Like funny , HA, HA... The Swiss Central Bank began warning the markets to not take the franc higher and for 5 consecutive weeks the franc has moved higher VS the dollar... You see, if the Central Bank doesn't make the money talk, then their verbal warnings don't amount to a hill of beans! My dad used to tell me... Money talks... B.S. walks... I think that plays well here in Switzerland!

Hmmm... Did you see the retailers' sales data yesterday? The ICSC Chain Store Sales for July fell 5%... I guess the real problems for retailers will come this month, for if they are unable to push higher with the back-to-school sales, then I think the pundits and economists that are calling for an end of the recession now, will have to go back to their drawing boards!

And... You knew I would eventually get around to this... But the Cash for Clunkers or CARS program got $2 Billion more yesterday... This is being hailed as a great program to get Americans buying more fuel efficient cars, while euthanizing their old cars, and stimulating the economy... Apparently, dealers are running out of inventory... That sure seems to be strange to me... Here's what I think is going on... People trade in cars for new cars all the time... According to Edmunds.com, Americans would have traded in about 200,000 clunker-type vehicles in a typical three-month period. So... Have we just taken that 3-month period and crammed it into two weeks to take advantage of the CARS program? For an industry that was expecting to sell about 10 million cars and trucks this year, that's a 0.5 percent sales boost. I don't see the euphoria... But then I'm not trading in a car right now!

Hey! Did you know that my friends, Addison Wiggin, and Bill Bonner have new books out? They have done updates to the best sellers, Financial Reckoning Day, and Empire of Debt. Addison sent me a note the other day to let me know that these brand spanking new updates are now available at Barnes & Noble, and Amazon... Financial Reckoning Day was a real eye-opening book, I can't wait to get my hands on the 2nd edition! And Empire of Debt, is the book that spurred the I.O.U.S.A. movie and book... If you haven't read the originals yet, here's your chance to do that and get the 2nd edition at the same time! Everyone knows how to get books at Amazon... So what are you waiting for?

Currencies today 8/7/09: A$ .8360, kiwi .6725, C$ .9225, euro 1.4355, sterling 1.6740, Swiss .9390, rand 8.1420, krone 6.0750, SEK 7.1750, forint 190.10, zloty 2.90, koruna 18.06, yen 95.20, sing 1.4370, HKD 7.75, INR 47.90, China 6.8318, pesos 13.06, BRL 1.8415, dollar index 78.06, Oil $71.35, 10-yr 3.74%, Silver $14.68, and Gold... $961.55

That's it for today... A great time was had by all at the Cool-Fire Pinewood Derby fundraiser last night... I left early, so I don't know who won the best designed car and pit crew, but our people here at EverBank certainly should have won! My currency guys and girls were the Flintstones. You should have seen Christine as Betty Rubble, and Kristin as Wilma! The Operations people were The Addams Family. My old latte' buddy, Michelle was Gomez, and she looked incredible! The Projects people did a Michael Jackson thing... A very good showing by the EverBank people! We're two weeks away from the San Francisco Money Show... I'm planning on being there, so if you're in the neighborhood, stop by to see us! Time to go now... I sure hope this Friday is Fantastico for you, and you enjoy your weekend!

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

Spending More Than We (the U.S.) Make...

Chuck Butler — Thu, 06 Aug 2009 14:49:00 GMT

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

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

In This Issue..

* Currencies trade in a tight range
* Pesos, loonies and reals in the spotlight...
* The Mogambo on a Thursday! YAHOO!
* Jobs reports dominate today & tomorrow...

And Now... Today's Pfennig!

Spending More Than We (the U.S.) Make...

Good day... And a Tub Thumpin' Thursday to you! Once again yesterday, we traded all day in a very tight range with the currencies. The ADP/Challenger data didn't give anyone a warm and fuzzy about the labor picture, and tax receipts are in the news... So, let's go to the tape!

OK, front and center this morning, I have to talk about this deal with tax receipts in this country. So, I've chronicled the April and June debacles for tax receipts, but just in case someone is new to class, and missed that, let's review... The U.S. used to count on the months of April and June for HUGE cash receipts from tax returns, but this year, both April and June's tax receipts were so bad, the expenditures were greater than the receipts! I highlight these two months because, they should have been positive months for the budget balance... If we can't post a positive balance in April and June, what's the rest of the year going to look like?

Well... Just for starters, tax receipts in the U.S. are the worst since the Great Depression, and if they continue on this path, could pass that awful period of time for the top spot! My friend, the Mogambo Guru, had this to say, in that "special" Mogambo way of describing something... Let's listen in...

"In fact, speaking of taxes, it makes your hat fly up comically off your head in astonishment when you realize that total income and corporate taxes are less than this year's federal budget deficit alone! And then you really start screaming your guts out in anger when you then realize that the total federal budget is 400% of total federal revenues! They are spending four times as much as they take in! Four times as much!"

You can read the Mogambo Guru on the Daily Reckoning... www.dailyreckoning.com

OK... Now that I've sufficiently raised my blood pressure talking about the fact that in a time when tax receipts are down because of the depression, the Gov't is spending more and more and more and more. I'll stop there, even though the Gov't isn't stopping their spending! And just like I used to bang on consumers for spending more than they made... The U.S. Gov't continues to do so... Consumers have gone to saving (YAY!), but the Gov't has not! As we all found out, you can't continue to spend more than you make forever... I wonder when the Gov't will figure this out... (probably when foreigners say "no mas" on financing the deficit spending!)

Well... The currencies, like I said at the top, remain in a very tight trading range... Three currencies stick out above the others though in the overnight trading...
1. Mexican pesos... Moodys affirmed Mexico's credit rating, which was thought might be revised lower, and the peso rallied on the news...
2. Canadian dollars/ loonies... After a day of consolidation trades due to the Central Bank Gov. once again threatening the markets if they take the loonie higher, the loonie went higher! Look for the Bank of Canada (BOC) to come out and make a statement, something to the tune of they are going to extend their interest rate pledge for a longer period. They will do this to once again attempt to keep a lid on the loonie...
3. Brazilian real... Oh brother! Somebody put a leash on this puppy! The real continues to edge higher and higher, and now is close to move past the 1.80 level.. The real has posted a better than 27% gain VS the dollar this year, with most of that move coming in the past 3 months!

Yesterday, there was a story in China Daily, that China was going to switch from Australian Iron Ore to Brazilian Iron Ore... Now... On the outside this looks bad for A$'s and good fro reals, right? Well... As I told the boys and girls on the trading desk yesterday, I think this is more posturing by China, after some of their businessmen were arrested in Australia and charged with espionage. We'll have to keep an eye on this, to see if there's more to this than posturing...

The news didn't hurt the A$ yesterday... In fact the A$ is trading near a 10-month high this morning, after posting a surprising jobs report for July last night... Australian employers added jobs in July. Once again, the jobs markets sparks the A$ higher, just like in the go-go days before the deleveraging meltdown last year.

I'll tell you what this report does do more than anything... It gives the markets the idea that the Reserve Bank of Australia (RBA) is definitely on track to raise interest rates next year... And some traders are now thinking that the RBA moves rates higher before we turn the calendar page on 2009! WOW! Now that's aggressive thinking! So, you can see why the A$ took the news in China Daily, and let it roll off its back like water on a duck's back!

In the U.S. yesterday... The ISM Index for Services (non-manufacturing) printed, and fell unexpectedly in July... The ISM Services Index printed at 46.4 following the prior month's 47.0 reading. The weakening was broad-based amongst the sub-indices. New orders declined to 48.1 from 48.6, business activity fell to 46.1 from 49.8 and employment softened to 41.5 from 43.4.

But... To offset the ISM we saw Factory Orders rise, but that data was for June... I really don't understand why it takes two months to get data like this to the markets!

Today, we'll see the Weekly Initial Jobless Claims, which have fallen below 600,000 each week, but remain very high at 580,000, so nothing to get the "recovery is here campers" all excited... Today's report is just an appetizer for tomorrow's Big Jobs Jamboree...

Economists are expected a HUGE drop in the jobs lost figure for July, dropping to 327,000 from June's 467,000 (after BLS adjustments, of course!) I really don't know where they think the jobs came from, but if they're right, then good for the U.S. worker! And, that kind of number, although it will seem strange to say this, and for you to hear it when you read it, but... A good Jobs Jamboree number will be negative for the dollar...

Why? Because... As I've been telling you over and over again, like a broken record, or for you youngsters, a scratched CD... The dollar was a safe haven last fall and winter with U.S. Treasury purchases... As the losses mount on those "safe haven" purchases of Treasuries, and things begin to look brighter those "safe haven" trades are reversed, and than means the dollar gets sold...

You know for some time now I've written about the Treasury Bubble popping... And those darn Fed Reserve purchases of Treasuries kept a lid on the losses mounting... But, it appears that the cartel, I mean Fed Reserve has backed off their purchases... And Treasury yields are once again on the rise... And for those of you new to bonds, they work like this... As a bond's yield goes up, the price goes down, and vice versa... So... In January this year, the 10-yr Treasury yield was 2%... In June it reached 3.80%, then the cartel, I mean Fed Reserve bought Treasuries, and the yield on the 10-yr fell to 3.12%... But in the past three weeks, those yields have risen once again to 3.73%... Looks like the Bubble popping is once again on the table, eh?

You've got the U.S. issuing more and more Treasuries to finance their deficit spending, and on the other side you've got Treasury holders unloading them on the markets... That looks like a perfect storm brewing, folks...

The Bank of England (BOE) and The European Central Bank (ECB) are meeting as I write... Don't expect anything earth shattering from either meeting... There is hope that the BOE will announce an end to their Quantitative Easing (QE), which I talked about yesterday. Now that would be earth shattering, but... There's no guarantee that the BOE sees things the way the markets want them to be seen!

Gold backed off yesterday as it saw profit taking. The shiny metal had traded over $670 yesterday before seeing the profit taking. I would think that the inflation hedging buying of Gold would really be strong for the remainder of this year, as my inflation fears really begin to grow stronger every day, you know I'm alright now... HA!

Currencies today 8/6/09: A$ .8410, kiwi .6705, C$ .9320, euro 1.4390, sterling 1.6975, Swiss .94, rand 8.05, krone 6.02, SEK 7.1350, forint 187, zloty 2.8825, koruna 18.04, yen 95.50, sing 1.4350, HKD 7.75, INR 47.73, China 6.8312, pesos 13.04, BRL 1.8130, dollar index 77.79, Oil $71.56, 10-year 3.73%, Silver $14.69, and Gold... $961.05

That's it for today... The boys and girls in the office here are participating in a huge fund raiser tonight, and I have to say I'm impressed with their attention to detail. You see, the fund raiser is around a pinewood derby. Last year, they won all the trophies for designing their car like the one in Animal House, and dressing in togas... This year, they designed a car to look just like the one in the Flintstones, and they are all dressing like the characters from the cartoon! I bet they win again! Can you believe that NFL teams are in training camps? WOW! OK... Time to get this Tub Thumpin' Thursday going!
Chuck Butler
President
EverBank World Markets
1-800-926-4922
1-314-647-3837

U.S. Manufacturing Is Recovering...

Chuck Butler — Tue, 04 Aug 2009 14:35:04 GMT

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In This Issue..

* A strong currency move Monday...
* RBA leaves rates unchanged...
* And moves bias to neutral...
* Central Bank warnings have no teeth!

And Now... Today's Pfennig!

U.S. Manufacturing Is Recovering...

Good day... And a Terrific Tuesday to you! First day back yesterday was a killer for yours truly... Went home, and went to sleep... But, I'm back today, and feeling good. I did something to my left knee on vacation that left me hobbling, and leaning on my cane more than I usually do. But today, it seems a bit better, so I've got that going for me!

Yesterday, I left you with the euro popping back and forth over the 1.43 level... But in a wink of an eye, the 1.43 level was gone, and the euro was trading with a 1.44 level, and remained there the rest of the day, reaching 1.4420 for the high... As I turn on the screens this morning, I see that the single unit has gone to popping back and forth over the 1.44 level... You don't think it will get another sling-shot higher today do you?

I don't... I was actually shocked to see that move yesterday... But then, I did say that the bias to sell dollars had really picked up steam lately. The piece of data that really pushed the dollar lower yesterday, was actually a "good piece of data" for the U.S. economy... The ISM Index (manufacturing) came in higher than expected and has reached a pre-Lehman Bros collapse level of 48.9... This was a BIG move from the previous month's 44.8... It's still below the "line in the sand figure" of 50, which is the indicator of contraction or expansion... I would say given the move from 44.8 to near 49, that expansion is already happening...

And why would that be given the rot on the U.S. economy's vine? Ahhh grasshopper... Here's a key ingredient, that I've pointed out to you for years now... The dollar... The dollar, measured by the dollar index has lost 13.4%... The dollar index, in case your new to class or have forgotten a previous lesson, is a basket of U.S. trading partner's currencies. It is heavily weighted toward euros though... And therefore you have one of the reasons I always talk about the euro being the Big Dog... That, and the fact that the euro is the second most liquid trading currency in the world, and... It's the offset currency to the dollar!

And... So... Here's a note to the dollar bulls... Mess with this, and you'll see manufacturing go right back into the dumpster!

But, what about this ISM Index? Pretty strong, I would say, given all that's going on in not only the U.S. but the world. Going back to yesterday's discussion about the recession coming to an end. This is one of the key pieces of data that will indicate to me that we have hit bottom and the bounce is on... I know that I have been pretty cynical of the forecasters that were calling for the bounce 6 months ago and so on, but if we get more of this type of data in the coming weeks, I'll have to put a different cap on...

OK... The Reserve Bank of Australia (RBA) met last night, and as expected they left their internal interest rates unchanged. The RBA did move their bias for interest rates from easing to neutral, which is a natural progression to the next step of beginning a rate hike cycle. The RBA wasn't in the mood to go "all in" on the move to neutral though... They hedged their move by saying that, "the present accommodative setting of monetary policy is appropriate given the economy's circumstances." That's Central Bank parlance for "we're doing this now, but we're prepared to go back to easing should the economy's rebound falter"...

So, the A$ was not able to push higher, as would normally be expected if the Central Bank would have gone "all in" on the move higher in bias... The A$ is hovering around 84-cents these days, which isn't shabby considering that on March 1st of this year it was trading with a 63-cent handle! Still not the "go-go" days of summer 2008, when the A$ was knocking at the door of parity to the green/peachback.

The A$'s rise from the ashes of Feb 2008 is dragging kiwi along. The New Zealand dollar / kiwi saw the same kind of bloodletting the A$ did last fall, so any dragging higher is a welcome sight to kiwi holders. I'm still not sold on kiwi's ability to maintain the levels it reached last year, given their deficit position... For those of you new to class, the kiwi was able to rise in the fact of a HUGE deficit, because of their interest rate differential to the rest of the world. New Zealand had the highest interest rates in the industrialized world, and those interest rates kept the blinders on their deficit... But, I kept warning folks that once the rates began to drop the Deficit would be as obvious as a man with a hatchet in his forehead!

So... The any dragging is good news to the kiwi holders...

OK... Back in the U.S., the Treasury announced that they would need to borrow less than originally forecast in the 3rd QTR by $109 Billion... They'll still need to borrow over $400 Billion, and will keep the pace of the total borrowings through the end of the fiscal year (September) at $1.39 Trillion...

The Treasury is borrowing less, because a handful of Big Banks are repaying their TARP loans... That's a good thing, I guess... But I just can't get a warm and fuzzy about the stories I keep reading regarding this whole deal of loaning money and buying back their bad assets so they can repay the loans to the Treasury... It's all mish-mashed folks... But! I'm not going there! I'm keeping my nose to the task at hand, and not veering off course...

The thing to take from this is that the Treasury will still need to borrow $1.39 Trillion in the past year, with the borrowings gaining momentum in the past 6 months... And this total amount of borrowings is what's weighing on the appetite for Treasuries by foreigners...

Did you see where Wal-Mart just issued $1 Billion in bonds but denominated them in yen? Is there a message there? I believe there is a message there, folks... Now, if we begin to see more Corporations doing this, then the message will be loud and clear. These Corporations don't believe they can sell their debt denominated in dollars, as the world is choking on dollars right now... When and if other Corporations begin to do this, we'll see the dollar get sold like ponchos on a rainy day at Disney World!

OK... Let's not go down that road of gloom and doom... Instead let's talk about a currency that's moved higher while remaining in stealth mode... The Canadian dollar / loonie... Ever since the Bank of Canada's Gov. said earlier this month that he was going to do whatever he needed to do to keep the loonie weak... The loonie has taken off on a moons hot! In fact, the loonie just hit a 10-month high VS the green/peachback!

And, not meaning to place the Chuck's kiss of death on these currencies, but this scene has played out in other places too... In Canada, Switzerland, and Brazil, each respective country's Central Bank Gov. issued warnings about keeping their currency weak... In all three, the exact opposite has happened. And I have to smile about that, because... You may recall me calling out today's currency traders as not having the cojones to take on Central Banks, as opposed to the currency traders of yesteryear who would take it as a personal challenge to defeat a Central Banker that put down a line in the sand on a currency's level...

So... It may all be a coinquidink, that these three currencies are rallying after their Central Bank Governors said they would keep their respective currencies weak... But I doubt it!

I see that Gold and Silver are back on the rally tracks again... Gold is trading over $950 again... And the price of Oil has jumped too ($70.67)... Commodities are all on the rise, once again as risk appetite really begins to grow. The Chinese have ignited the fire on Commodities with their economic growth and demand for the raw materials, and with that thought, commodity traders are jumping on the bandwagon...

I suspect we'll see some profit taking today in the currencies and commodities though... But that's OK! Bring them back a bit, give everyone that was sitting on the sidelines waiting for an opportunity to buy, a chance to do so, and then move on to higher ground! That sounds like a plan! And you know what I like to say... I love it when a plan comes together!

Currencies today 8/4/09: A$ .8395, kiwi .6665, C$ .9365, euro 1.4390, sterling 1.6935, Swiss .9410, rand 7.8325, krone 6.0475, SEK 7.1625, forint 185.70, zloty 2.86, koruna 17.95, yen 94.60, sing 1.4330, HKD 7.75, INR 47.71, China 6.8296, pesos 13.13, BRL 1.8250, dollar index 77.66, Oil $70.67, 10-year 3.62%, Silver $14.12, and Gold... $953.50

That's it for today... Well... Today is my granddaughter Delaney Grace's 2nd birthday! Delaney was born when I was still recovering from cancer surgeries, so I'll always know how old she is! Delaney talks all the time and when she's not talking she's singing songs, so she was a joy to be around on vacation... Happy Birthday! In a couple of weeks, my darling daughter Dawn (Delaney's mom) will be celebrating a birthday, that I'm having a hard time dealing with... Dawn won't be happy about this, but she will be 30... I can't believe that my little girl is going to be 30! I guess it happens to us all, but I'm taking her turning 30 worse than I took me turning 50! Oh well... Time moves on and waits for no one... All this birthday talk has me running a little late, so I'll sign, seal and deliver this... It's yours! I hope you have a Terrific Tuesday!

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

Feds Say NO To CIT...

Chuck Butler — Thu, 16 Jul 2009 14:40:18 GMT

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In This Issue..

* Currencies have strong day...
* What are the qualifications?
* JP Morgan posts 36% increase in earnings...
* RBA attempts to keep A$'s in check...

And Now... Today's Pfennig!

Feds Say NO To CIT...

Good day... And a Tub Thumpin' Thursday to you! The first day this week that I've gotten up and to work at my normal time. I hit the wall yesterday afternoon, went home, watched about 10 minutes of the Wizard of Oz (my all-time fave movie) with granddaughter Delaney Grace, and then went to sleep! Crazy, I know, but when you hit the wall, you hit the wall!

Yesterday was a strong day in the currencies. I wrote yesterday about how the euro was inching toward 1.41, but the level had been a tough row to hoe, with the euro giving back ground each time it went higher than 1.41... And... That was the case yesterday! The euro did trade higher than 1.41. It was 1.4120 when I left the office! But, as I turn on the screens this morning, the single unit has fallen below the 1.41 figure...

I think we'll probably see a day when the Risk Aversion campers come back out to play, given the news on CIT... The lender, CIT, was told that they would NOT receive any Federal assistance... (I guess they didn't have any ex-Goldman Sachs employees at CIT!) This news has pushed stock futures down this morning, and the "risk" of yet another bankruptcy that could shake the market is on the table. You know me... I would prefer that the Gov't was not involved in all this, so on one hand, I'm not sorry that CIT will not get assistance... On the other hand though, it really raises the question as to just what are the qualifications to receiving federal funds? Because Lehman Brothers, (Goldman's biggest competitor at the time) didn't qualify... But AIG did... Of course AIG owed Goldman a ton of money.. Maybe that's the qualification! Oh, I'm not going to get started on all this, I'm sure there are all kinds of stories going around for you all to read that would keep me out of the hot seat with the legal beagles!

So... If the Risk Aversion campers come back out to play today, that means we could see pressure on the currencies once again... Unless... Yes, unless we saw a break of the link with stocks and currencies... And then traders and investors would look at the fact that the "green shoots" are nothing but dandelions, and the U.S. fundamentals are rotten, which will cause more deficit spending, more dollar printing, more monetizing debt, and all the other things that should, fundamentally speaking, weigh heavily on the dollar!

All of the currencies, except yen, are off their highs of yesterday this morning. With Risk Aversion back on the table, Japanese yen is rallying again... This going back and forth from one day to the next is really beginning to give me rash! I'm tired of it! I'm also tired of writing about it!

OK, did you see the results of the FOMC's meeting minutes yesterday? In case you didn't, the minutes read like a book from the fiction section of the book store... The Fed revised up growth for the rest of this year and next year. Although the Fed raised their growth forecast... they raised the expected ranges for the unemployment rate through the forecast. So... What I took from the minutes is that the Fed doesn't believe the unemployment problem will begin to seriously reverse itself until 2011...

So... I just don't know where the growth will come from... And yes, I'm very well aware of the fact that labor is a lagging factor of growth... But with 1 in 5 people unemployed, I don't see where the growth will come from... Do you?

Oh... And U.S. Foreclosure filings hit a record in the first half of 2009... More than 1.5 Million properties received a default or auction notice or were seized by banks in the first 6 months of this year... That's a 15% increase from 2008's first half... One in 84 U.S. Households received a filing... But the Fed see's growth? Maybe if this data was showing a bottom... But from what I see, it is much like house prices still searching for a bottom...

Speaking of the Fed.. I read this in the Wall Street Journal...

"More than 175 prominent economists are warning that "the independence of U.S. monetary policy is at risk" because of attacks on the Fed. They are urging Congress and the president to "avoid compromising [the U.S. central bank's] ability to manage monetary policy as it sees fit" and to refrain from politicizing its decisions on emergency loans to financial institutions.

The move to publicly defend the Fed's role reflects growing unease among academic economists, former Fed officials and some investors that the vehemence of the criticism from Congress of the Fed's handling of the financial crisis suggests a readiness in Congress to weaken the freedom the Fed has to move interest rates as it see fits."

Hmmm... I would like a list of those 175 prominent economists so I can give them a piece of my mind! While the Fed is "supposed" to be independent, its mere existence is questionable at best! Why not let the markets decide what interest rates should be? Again, though, I won't get into all this deeper, because, it would take over the entire letter for weeks! I just thought I would throw it out there and see what it hit...

Ok... Remember last week when I told you how June is normally a "good month" for the Budget Statement here in the U.S.? Well... For the first time since 1991, June was a deficit for the Budget! The Budget Deficit was $94.3 Billion in June! OUCH! Hey! Don't we normally see quarterly tax returns to keep the Budget Balance from turning to a deficit in June? Why yes, Chuck, we do... Or... DID! Not this year, folks... And probably not next year either! Tax receipts fell 17% (year on year) in June... And for all of you keeping score at home... For the year so far... Revenues are down 17.9%, and expenditures are up 20.5%... Not a good formula, eh?

Have you seen the results of the first set of earnings reports this week? Goldman and now JP Morgan reported some nice earnings... That's nice, eh? I say that with my own style of facetious tone!

I'll say this... You can scrap what I wrote about earlier that the Risk Aversion campers will come out to play today because of the CIT verdict... That's because JP Morgan just announced a 36% increase in 2nd QTR earnings! And you should have seen the currencies turn from red to green! The euro is back above 1.41... See how fickle these traders are? They can turn on you in a NY minute!

The JP Morgan earnings will have to hold fort on the markets forgetting about CIT, until more earnings announcements come out... So far, the "banks" have surprised me on their earnings...

I really do think that if we could put all this back and forth behind us the euro would move 3 to 4% higher, and then wait to see what happens then... But, that's a BIG IF...

Today, we'll see the Weekly Initial Jobless Claims, which really dropped last week... I had the thought when I saw the figure drop last week that maybe we've saturated the layoffs... In other words, maybe, Corporations are getting pretty close to not being able to cut any more jobs... It's a thought...

We'll also see the color of the TIC's data (Treasury International Capital) or... What used to be called the Net foreign Purchases report... The TIC's data will be May's print, and is expected to remain quite low, thus not covering the required amount of purchases to finance the Current Account Deficit... Which means, the financing gets shoved to next month... We keep shoving this all down the road... Just like everything else... We'll let someone else deal with it in the future... That's so sad! My friend, Bill Bonner, talks about this, in the award winning movie, I.O.U.S.A. Bonner recalls that Thomas Jefferson called it "immoral for one generation to load up the next generation with debt."

But, we go on about our lives each day, without worry about what we are doing to future generations... Again... I had better stop there before I go off on a tangent so long you could grow a beard while reading! HA!

I received an email yesterday responding to my discussing the increase in taxes on the wealthy... Just like I said in the Pfennig yesterday, where you stand on this all depends on what pain you'll receive... I did see that in most states, the taxes would go above 50% to pay for the health care...

And then there was this... I see where the Reserve Bank of Australia (RBA) sold A-dollars
(A$) in June... Hmmm... I said a few weeks ago that I didn't think the RBA was selling A$'s to keep a lid on the currency, but merely evening out the flows... But now, the June total was A$1.9 Billion of its own currency, sold...

I've now changed my mind on this... I believe the RBA is attempting to keep the A$ around 80-cents, given the global recession and everything else going on the financial markets, the RBA probably sees a real problem with a soaring A$ at this point. While I never like a Central Bank selling their own currency... I can't say that I blame the RBA here... They have one of the best stories going around regarding a currency, and if left untouched by the RBA, the currency could be soaring right now, which would in normal times be OK with the RBA, but in current times, is not OK with the RBA... So...

Until the markets decide they want to push the envelope with the RBA on keeping the A$ around 80-cents... That's where it will remain... But... Should the markets decide to push the envelope and test the RBA's mettle, then 80-cents will be left in the rear view mirror... Unfortunately, and I've talked about this before, today's currency traders don't have the cajones to fight Central Banks any more...

Currencies today 7/16/09: A$ .8015, kiwi .6460, C$ .8940, euro 1.4115, sterling 1.6450, Swiss .9325, rand 8.10, krone 6.3675, SEK 7.7770, forint 193.50, zloty 3.0350, koruna 18.3420, yen 93.90, sing 1.4510, HKD 7.75, INR 48.70, China 6.8311, pesos 13.57, BRL 1.9330, dollar index 79.38, Oil $60.95, 10-year 3.59%, Silver $13.27, and Gold... $939.50

That's it for today... And for me, for 2 weeks! Yes, I'll be gone, first to Vancouver, and then when I return, I'll be heading down the road on vacation with my family. Before I got sick two years ago, the Butler family would pack up our camper and head to Southwest Missouri for a vacation. My kids love camping! So, it's a week of relaxation for me. No cell phones, no laptops, no communication, as we are very deep in the Ozark Mountains! This will be the first time since I got sick two years ago, that we'll attempt camping again... Chris will be kind enough to take the conn on the Pfennig for me. I will send updates from Vancouver, but not from vacation... Speaking of Vancouver, getting there, and getting out are awful things to have to go through, but while I'm in Vancouver, it's an awesome city! Ok... Back to getting this out on time! YAHOO! It's time to make this a Tub Thumpin' Thursday!

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

China Is Back On The G-9 Docket...

Chuck Butler — Mon, 06 Jul 2009 15:10:19 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
.................

In This Issue..

* Risk Aversion is strong once again...
* Currencies get sold...
* What's China really up to?
* RBA to leave rates unchanged?

And Now... Today's Pfennig!

China Is Back On The G-9 Docket...

Good day... And a Marvelous Monday to you! Some people have the day off today, so we'll probably not be back in full force until tomorrow... Not that we've been in full force, as a workforce in the U.S. for some time... But that's another story for another day! Today is a new day, and new week!

Friday's thinned out markets were not what the currencies wanted to see, as the bias to Risk Aversion was magnified in the thinned out markets, only making the selling of the currencies even worse... Some "levels" were hit in the thinned out markets, and that caused even more selling in the overnight markets as Japan and Asia came on board.

I'm really kind of shocked at the Asian selling... You may recall that last week we had the wild swing Thursday, after there were reports that China had obtained approval to attend the G-8 meeting this week in Italy, and discuss replacing the dollar as the world's reserve currency. The dollar was sold like funnel cakes at a state fair, after that report hit the news wires... But it was quickly turned around when the Chinese denied they knew anything about the contents of the report...

But... This weekend, while the charcoal was burning everywhere, the splashing in the swimming pools, and the display of fireworks had everyone's attention, the Chinese admitted that they were going to G-8! Where's the selling now? Isn't this confirmed now? Has something changed?

The answer to the Has Something Changed question, is yes... Currency strategists have come to the conclusion that China won't get anywhere with their desires to replace the dollar with SDR's (special drawing rights). Even with France throwing their two-cents into the discussion, and having their Finance Minister (Lagarde), and Bank of France Gov. (Noyer) calling for an increased discussion of currency coordination, the Currency strategists just aren't budging... They believe there's no way China, even with the backing of Brazil, Russia, and India, will get any traction...

Hmmm... So... It's over? Not hardly folks! I think that the comments coming from the French officials says..."We need to give the emerging markets more say in how the world's economy is run"... A foot in the door, if you will... And... When you have the war chests like Brazil, Russia, India and China have, a foot in the door, is like having a wide enough space that you could drive a Mack Truck through!

Of course that's just my opinion... I could be wrong... But then, somewhere in the back of your mind, you're thinking... Hey, this Chuck guy may just be, because you never know... He might be right!

OK... Playing games with your mind isn't what I was trying to do there... I was simply crossing the T's for the legal beagles...

So... We begin the week with the currencies weaker than they were last week, and the euro about ready to lose the 1.39 handle. The High Yielders are taking it on the chin too, with the exception of Brazil, but once that market opens we could very well see the real play catch-up.

The data cupboard is relatively empty this week, with the Initial Jobless Claims on Thursday, and the Trade Deficit data on Friday, the only "real" data this week... So, the G-8 meeting on Wednesday will have center stage, and any comments from the "outsiders" (China, etc.) creating pressure points for the dollar this week.

One of the worst performing currencies in the past couple of weeks is the Canadian dollar / loonie. No wonder, with the price of Oil dropping and Gold stuck in a rut... Nothing to give the loonie a boost... And overnight, the price of Oil has "gapped" down to $64, putting even more pressure on the loonie.

Let me explain what I think we're seeing in the price of Oil... I think a large part of the run-up in the price of Oil was caused by investors taking positions to hedge VS inflation... And in recent days, those fears of inflation have been put on hold... And these investors have no patience... So, those positions are getting sold, and... That's what's pushed Oil down so much in the past week.

Tonight, the Reserve Bank of Australia (RBA) meets to discuss rates... I fully expect the RBA to keep rates unchanged at an internal level of 3%. But, I also expect them to muddy the euphoria of unchanged rates, by leaving their easing bias intact. Put yourself in the shoes of the RBA... You may want to say the end of rate cuts has been seen and the next move, whenever that is, will be higher... But! You don't want to open Pandora's Box of currency rallies... The RBA would be the only Central Bank in the world that had removed their easing bias, with an eye on higher rates... The flood gates of investors seeking a currency that will be raising interest rates, would be thrown open, and an unwanted at this time, run-up in the A$ would take place.

So... The RBA will be cautious with their words, and keep their rate hike cards in their back pockets for now... Waiting for the right time to pull them out and throw them on the table!

Did you hear about China and Hong Kong agreeing to settle cross-border trades in renminbi? I know, you're scratching your head and saying, but Chuck, isn't Hong Kong a part of China? I could swear I saw the U.K. hand it over to China years ago! Ahhh grasshopper, you are correct... But, Hong Kong retains their own currency, the Hong Kong dollar, or "honkers" as currency traders call them. And... Renminbi has never been allowed outside of the mainland China... But now Hong Kong Banks will be able to borrow or buy renminbi!

I know this sounds like small potatoes... But, these are baby steps for China and what I believe their goal is... And that is, to gain wider acceptance for their currency... It's how they will be able to spring the coup someday to replace the dollar as the reserve currency... I truly believe their call to use SDR's is just a smokescreen... These currency agreements that China has signed with Argentina, and the Southeast Asia countries, and have on the table with Brazil, is the real thing to watch... I see the SDR's as a sort of stalking horse for China's wish for wider acceptance for the renminbi...

And to round out our discussion today... Our old friend, Jim Rogers, was back in the news last night. Let's listen in to Jim Rogers, author of a few best selling books, and long considered an excellent investment mind...

"The government is printing lots of money and borrowing even more; that's not the basis for a sound currency. The idea that anybody would lend money to the U.S. government for 30 years at 3 or 4 or 5 or 6 percent interest is mind-boggling to me." Jim also said that he olds fewer dollar than a year ago, and plans to short U.S. government bonds someday."

Of course this is a reoccurring theme with yours truly... I have harped and harped about this since the beginning of this year. In fact, in February, the title of my Currency Capitalist letter was: U.S. Treasuries the next great bubble...

The number of bonds being issued... And the question of who's buying them? For instance, the U.S. had more than doubled bond issuance to $963 Billion in the first half of this year, with another $1.1 Trillion scheduled to be sold by then end of the year. U.S. debt issues have lost 4.46% in the first 6 months of this year, and I just don't see how that trend can be turned around, when $1.1 Trillion in new issuance will be forced down the throats of investors before we sing Auld Lang Syne for 2009!

The Bank of Japan believes that they are seeing signs of an end to their recession, saying that they are more optimistic about the economy since 2006... I wonder how many times since 1990 that Bank of Japan officials have said those words? Probably enough times to make you wealthy if you had a Gold coin for every time they said it!

Speaking of Gold... Another $10 off the price this morning, down to $922... Silver is in danger of losing the $13 handle! Did I hear someone say... Bargains? Well, only if they go up from here, eh?

Currencies today 7/6/09: A$ .79, kiwi .6265, C$ .8585, euro 1.39, sterling 1.6125, Swiss .9145, rand 8.0230, krone 6.5215, SEK 7.8560, forint 197.25, zloty 3.16, koruna 18.6750, yen 95.20, sing 1.4575, HKD 7.75, INR 48.47, China 6.8340, pesos 13.36, BRL 1.9530, dollar index 80.86, Oil $63.76, 10-year 3.51%, Silver $13.09, and Gold... $922.70

That's it for today... I hope you all had a grand 4th of July holiday! It was pretty low key at the Butler House, as my little buddy, Alex, was suffering from a case of swimmer's ear, and the weather did not cooperate, as it rained, and rained hard, all weekend. I did get to spend some time with good friends on Friday night before the rain came. The rain didn't stop me from putting my Weber grill to use all weekend! The Agora Financial Investment Symposium in Vancouver is only two weeks away. Last year, I go food poisoning while in Vancouver, and believe me... being on the road, is no place, to get sick like that! I have better memories of Vancouver though... I've actually written my presentation for the general session in Vancouver... WOW! That's a first for me! Now, that workshop thing... You should check out Vancouver, and the Agora Financial Investment Symposium at: http://www.agorafinancial.com/AFsymposium/ OK! Time to go, Mike's here! I hope your Monday is Marvelous! Tell yourself that today will be a Marvelous Monday!

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

German Investor Confidence Is On The Rise...

Chuck Butler — Tue, 16 Jun 2009 15:24:59 GMT

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In This Issue..

* Currencies stop the dollar's run...
* BRIC meeting could get ugly for the dollar...
* RBA meeting notes good for Aussie dollars...
* Depressing data / forecasts for housing...

And Now... Today's Pfennig!

German Investor Confidence Is On The Rise...

Good day... And a Terrific Tuesday to you! Thundering storms moved through here this morning, as I was preparing to leave home and drive to the office. As slow as I am with getting around these days, I got pretty wet from my car to the office building. But, I didn't melt, as most would have thought! HA! And, I'll dry out soon enough... Well before anyone else comes in!

OK... Well... When I left you yesterday, the dollar was on a rampage, from the comments by the Russian Finance Minister, Kudrin... Was it an overreaction, I asked? A resounding YES was my answer... I think the proof is in the pudding on that this morning, as the dollar buying has hit a roadblock, and reversed overnight, with the euro gaining back about 1%...

The euro also got a needed boost this morning, as German Investor Confidence jumped to a three-year high. Seems most investors believe the economic slump in Germany, the Eurozone's largest economy, is easing... Of course, we know that while Investors believe the economic slump may be easing, it may, in reality, not be easing... It's all about perception, right? Any old way, the currencies have rebounded from yesterday's bloodbath... And now the currencies have a bid tone, and not the dollar!

And now a news flash just came across that these countries are "considering buying each other's bonds, and swap currencies" to eliminate the dollar from those transactions... OK... Skip back to yesterday... Here's what I said... Pfennig 6/15/09: "I would have to think that the Finance Ministers of these countries would be interested in knowing how they can avoid another downward spiral caused by dollar buying... And... This... Would be the key, folks... I don't know what it would be, but if they did something like a currency swap / foreign exchange line between each other for trade, that would be colossal! Which is bigger than HUGE!"

The BRIC (Brazil, Russia, India, China) meeting I told you about yesterday, actually happens today. Sorry for the mix-up, as I thought it would happen later this week. There were already comments hitting the news wires that Russian President Medvedev, wants to talk about issue of the dollar as the reserve currency... Now, if he does, and I'm not saying that he will, but if he does talk about that, doesn't that wipe out the Finance Minister, Kudrin's, comments about Russia's belief in the dollar? And... If he does, and again, I'm not saying that he will, but if he does, my thoughts yesterday, that this would happen at the BRIC meeting, would come to fruition...

There's always been a clamoring for a basket of currencies consisting of the BRIC countries... The problem is that the Russian ruble just isn't liquid enough to get this done, like EverBank World Markets does their other CD's... So... How about dropping the "R" and doing a BIC? Well... Again, even though EverBank does offer these currencies of Brazil, India and China individually, it's not easy... In fact it's quite the ordeal to get them done... But, eventually, we'll think of something!

OK... Now back to the goings on in the markets... This BRIC meeting today seems to have quite a hold on the markets' attention today... And it is a BIG thing, IF they do discuss the alternative reserve currency talk... Talk the talk, and walk the walk... These countries can't keep complaining about the need for a new reserve currency, and not do anything about it...

Looks like all the stimulus and money supply in the U.K. is beginning to show up in the inflation data... U.K. May CPI jumped .6%, thus pushing the year-on-year (YOY) figure to 2.2%! Now, this is important for a couple of reasons, folks... 1. it could signal an end of the easy money in the U.K. IF they are prudent in removing the stimulus, as they and their friends over at the Fed claim they will be... And 2. and more importantly... Is... The U.S. has actually been behind the events surrounding the financial meltdown in the U.K.... So... If the U.K. is beginning to see inflation rise, it stands to reason that it won't be long before we see it happening here too...

Down Under... The currencies of Australia (A$) and New Zealand (kiwi) both fell flat on their respective faces with the dollar on the rampage yesterday... But were able to rebound a bit overnight. They were moved higher, when the minutes of the last Reserve Bank of Australia (RBA) hinted that the RBA was going to maintain their easing bias, but move to the sidelines for the foreseeable future... Folks... That's Central Bank parlance for... This is it! Unless the sky falls! This is the bottom as far as rate cuts go! But... It will be awhile until they move up...

Well, that's how I read their statement! And I've been reading Central Bank statement for 17 years now... I think the traders that cover A$'s think the same thing... And kiwi, just grabbed on to the coat tails of the A$...

Did you see the color of the TICs data yesterday? WOW! Or should I say, UGH? The net security purchases by foreigners for April showed a HUGE drop! The total net purchases were $11.2 Billion... VS $55 Billion in March! And... The ongoing holdings of Treasuries feel a net of $2.6 Billion... Now... Here's where I get all ticked off folks... We've had Japan, China and Russia all say publicly that they have full faith in U.S. dollar denominated assets (read Treasuries)... But when it came to backing up the talk with the walk... They failed to show that they have full faith in these assets, didn't they!

These countries and their Finance Ministers caused investors HUGE losses with their statements, but when it comes down to the cheese that binds, these Finance Ministers didn't have the intestinal fortitude to back up the statements... Well, at least in April they didn't!

And $11.2 Billion a month is not going to be enough to finance the Current Account Deficit... Which will print tomorrow, how convenient! But that's for April, and we won't get all that data for months! However...

Right now, the "experts" believe the Current Account Deficit, which consists of the Trade Deficit, and the Federal Direct Investment, will be a deficit of $85 Billion (recall that the Trade Deficit had come down in the 1st QTR) for the 1st QTR... And going back, which is exactly what the Gov. doesn't want anyone to do, I see that the total purchases in the 1st QTR were a mere $40.63 Billion... There's a $46 Billion gap there folks...

I've gone over this financing thing so many times in the past that it make my head spin (yes, you should see it spinning right now!) just thinking about explaining it again... But, for those new to class... When a country has a financing problem (like it looks we had one in the 1st QTR) the gap gets pushed to the next quarter and so on, until... The chickens come home to roost... And then, a country has only two choices... They can raise interest rates aggressively to make the assets more attractive to the foreigners, or... They can allow a general debasement / weakening of their currency, to make purchases of the assets cheaper by discounting the clearing mechanism... The dollar, in this case... So... Which one do you think a Gov., especially one like ours, will choose to use? Yeah, right, like they would choose number 1!

Ok... Some more depressing news about the housing sector came through yesterday in the National Association of Home Builders Home Price Index (NAHB) printed worse than expected yesterday... The "experts" forecast the NAHB would be a 17... And it printed at 15... Soon afterward, economist Robert Shiller, said that the housing downturn "was not over yet"... Economist Nouriel Roubini, said that "house prices will fall another 15-20%" and... Banking analyst Meredith Whitney said that "she is even more bearish than either Shiller or Roubini on housing."

That's not good news folks... Nouriel Roubini as been dubbed as a gloom and doomer by the media (I don't think so... He just tells it like it is, he can't help it that it's not all seashells and balloons for the economy, like the media would have you believe!) and when another analyst, as prominent as Meredith Whitney says she's even more bearish than Roubini, you've got to sit up and take notice!

I just can't end the day's letter with those two depressing stories back-to-back... Oh! Here's an interesting story... The Japanese Finance Minister, believes the recession in Japan is nearing an end... Yeah, right... If I had a 1-oz Gold American Eagle Coin for each time a Japanese Finance Minister has said those words since 1990, I would be quite the "rich man"! But, the markets swallowed his statement hook, line and sinker, which is good for the yen! Japanese yen outperformed all the currencies overnight, and is trading with a 96 handle once again!

Speaking of Gold... It has rebounded by $8 this morning, as the sentiment to buy dollars has faded...

Currencies today 6/16/09: A$ .8020, kiwi .64, C$ .89, euro 1.39, sterling 1.6440, Swiss .9220, rand 8.00, krone 6.42, SEK 7.8070, forint 201.50, zloty 3.2550, koruna 19.2780, yen 96.83, sing 1.4575, HKD 7.75, INR 47.75, China 6.8335, pesos 13.36, BRL 1.95, dollar index 80.55, Oil $72, 10-year 3.72%, Silver $14.35, and Gold... $937

That's it for today... The rain that came through this morning was very a "hard rain"... And no, I'm not going to go into Bob Dylan here... We've had our share of "hard rain" lately, and the low lying areas are seeing flooding. The river that runs through my little river town, is on the rise again... I thought I had a doctor's appt today, but my calendar tells me it's next Tuesday! Yahoo! OK... Not too much else to talk about this morning, so, I'll just end it here, and send you on your way to a Hopefully Terrific Tuesday!

Chuck Butler
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

Currencies Bounce Back!

Chuck Butler — Tue, 19 May 2009 15:12:34 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
.................

In This Issue..

* Risk Assets soar!
* German Investor Confidence surprises!
* High yielders kicking tail...
* Who's afraid of the SNB?

And Now... Today's Pfennig!

Currencies Bounce Back!

Good day... And a Terrific Tuesday to you! Finally! Spring has arrived and for more than one day at a time here in St. Louis! YAHOO! A very cold and wet spring for us, brought us to the middle of May before normal spring weather was upon us... Good things come to those who are patient, right?

OK... Speaking of patience... I think that's what we'll all have to possess a lot of going forward with these currencies and stocks... Here's what I'm talking about... Yesterday morning it looked as though the recent rally in stocks was over, complete, pack up the bags, get on the bus, Gus... And with the trading theme of throwing all risk assets in the same bag and trading them alike that's been in place since last July, this would seem to be a nail in the coffin of the currency rally we've seen going on since March 1st....

But, NOOOOOOOOO! Let me tell you all about it now... First, we had what I called the potential White Knight for risk assets yesterday, the Indian election results, which pushed the Indian stock market to levels it hadn't seen in some time. That carried over to the Japanese stocks, which carried over to Europe and finally the U.S. It took most of the day to really get things going, but by the time I was packing up to head home, the move was on... And risk assets all around, save for the safe haven Gold, kicked into gear, and were off to the races. And Currencies were in the pole position of this rally!

I just can't get my arms around this stock rally folks... What are they rallying for? Corporate earnings are awful... And the prospects of future earnings are awful... Why do I say that? Well... Have you seen the rot on the labor market's vine lately? "Real" unemployment is north of 16%... And with announcements like the one last night from American Express, where they say they will layoff 4,000 employees, hitting the news wires each day... There's just no way that consumers are going to have the "juice" to support corporate earnings... Those that do have the "juice" will probably squirrel it away, and those that don't, well... They don't have any to squirrel away or spend!

But... I always think of things logically, right? This is logical that stocks would suffer going forward... But will it play out this way? Who knows? I'm certainly not even your last choice for a stock jockey! But... It just seems to me that this is just the way it is... Some things will never change... It's just the way it is...

OK... The "other" news this morning that's fueling a huge currency move overnight... German Investor Confidence, as measured by the think tank ZEW, rose more than the "experts" were forecasting, and reached a 3-year high this month! WOW! OK, I hate to throw cold water on this, but this "investor confidence" is all tied to the rally in stocks... And what's good for the goose (the U.S.) in stocks, is good for the gander (EUROPE) in stocks...

But hey! Why step in front of this bus? If the stock jockeys want to take their assets higher, then I'm not going to throw myself under their bus! The ZEW report is "supposed" to predict economic developments 6 months ahead... Well... By the time we sit down to eat our Turkey on Thanksgiving, I'll look back and see if the ZEW think tank predicted correctly!

The Huge currency rally is across the board, including the once beaten and battered pound sterling, which has really mounted a strong performance in recent weeks... Yes, things in the U.K. are still teetering... But the pound sterling has seemed to have weathered the storm... At least for now!

Of course, in this crazy mixed up world we live in with currencies, a Huge rally currently means that Japanese yen is back on the selling blocks. And... The high yielders are soaring...

The Aussie dollar (A$) seemed to ignore the news from China overnight that the Chinese had ordered an immediate 30% Steel production cut by all mills to address 25-30% over-capacity. Then it seemed for certain the A$ would back off when Reserve Bank of Australia (RBA) Gov. Stevens' gave a speech and revealed his bias toward easing rates further. Watch... At some point in the near future, there will a story that hits the news wires that claims traders are selling the A$ because they believe the RBA will lower rates further... And they will all act as though they "just found this fact out!" But for now... The A$ is kicking tail and taking names later!

I keep seeing one story after another these days from people that claim they "know" the Bank Stress Tests were a "sham"... Well? Didn't I tell you that first? Didn't I tell you the Gov't would not tell us the "real facts" because if they did, they would spook the markets, and even more important spook our foreign buyers of U.S. debt! And we can't afford for that to happen!

But just for kicks... Here's a sample of the stories I'm talking about... Put away the sharp objects before reading, we don't want any injuries.... This is... Howard Davidowitz, Chairman of Davidowitz & Associates, talking... (NOT ME!) "The stress tests were a sham and part of a "con game to get private money to finance these institutions because [Treasury] can't get more money from Congress. It's the 'greater fool' theory. We're now in Barack Obama's world where money goes to those that should never receive a penny....we're bailing everyone out. The bailout money is in the sewer and gone."

OK... That's just a sample of the things I read each day and night... Of course last night I didn't do any reading, as I was glued to my TV for the final 2 hours of my fave show, 24!

And in a story that makes you wonder what the heck these people are thinking... Two economists, Gregory Mankiw, former White House advisor, and Ken Rogoff, former Chief Economist at the IMF, believe that the U.S. economy is in need of a dose of good old-fashioned inflation! WHAT? They believe the Fed should have a looser rein on inflation, to help debt-strapped consumers and governments to meet their obligations... Again... WHAT? I have to wonder just what else the Fed can do to create an inflationary environment! Come on! They've cut rates to near zero... The implemented Quantitative Easing... They've pushed Trillions into the system... And these two dunderheads want more? Did they stop, in the name of love, and think about what they were saying before they said it?

And... I can't understand why they believe that running 6% inflation for "at least a couple of years" is a good thing! Talk about "spooking our foreign investors"! And talk about sending the dollar to the woodshed! Let's hope these two go away... Don't go away mad, just go away...

And then... It sure looks like the Bank of Canada (BOC) is doing everything they can to put a 100 miles of desert between them and Quantitative Easing... There will be a speech today by BOC Gov. Murray titled: "Unconventional Monetary Policy Measures and the Zero-Bound, Differing International Approaches and Critical Considerations"... Now, that looks like a speech title that his marketing team came up with... Why not say... "the rest of the world is doing Quantitative Easing, and we're not!"

Of course... Should this be the "real" gist of his speech, the Canadian dollar / loonie should look to continue its recent strong performance!

The Swiss franc is nearing 90-cents again... Every time it gets to this level, the Swiss National Bank (SNB) makes a statement that "they are watching the currency gains closely" This is supposed to scare traders to not take the franc higher... Who's afraid of the SNB? Of course "real traders" like the ones that were around when I began to deal in currencies, would take this message as a challenge, and push the franc to the point that the SNB had to intervene or lose credibility... And then they would attempt to push the franc higher! But today's traders, are not your "father's traders"... They are wimps! Every time a Central Bank jawbones their currency lower, traders just put their tails between their legs and go home... Give up, quit... Hey! Quitters don't win, and winners don't quit! You can't quit here! When the Germans bombed Peal Harbor, did we quit? NO! (ok that's a line from Animal House, I don't want 100 emails telling me that the Germans didn't bomb Pearl Harbor! HA!)

Today, the data cupboard yields Housing Starts for April... I saw a news story on the TV yesterday that said "Home Builders were seeing a pick-up of new homes being built"... Well... That should be our indication that Housing Starts for April will be stronger! See how easy this stuff is? HAHAHAHAHA!

I always get a kick out of my friend, The Mogambo Guru, and the ending each week of his newsletter... Each week he ends his letter with some message about buying Gold and Silver... And then this line... "Whee! This investing stuff is easy!"

The Mogambo always puts a smile on my face!

Currencies today 5/19/09: A$ .7760, kiwi .6050, C$ .8640, euro 1.3635, sterling 1.5480, Swiss .8990, rand 8.4620, krone 6.42, SEK 7.6675, forint 203.85, zloty 3.20, koruna 19.5660, yen 96.20, sing 1.4610, HKD 7.7510, INR 47.79, China 6.846, pesos 12.91, BRL 2.07, dollar index 82.12, Oil $59.89, Silver $13.94, and Gold.... $922.80

That's it for today... It was good to get back in the saddle yesterday... I actually will be in the saddle for 2 months before travel begins again... WHEW! My beloved Cardinals' good start to the season has just about been turned completely around... They just got swept by the Brew Crew! UGH! And two HUGE Rivals come to town the Cubs and Royals... They need help! NOW! We have another birthday in the office today... Charlotte Reeves is celebrating a birthday... That does it for birthdays this month... Our office here has really added some people in the past couple of years... I don't even know all the people in the office these days! This coming weekend is Memorial Day weekend. Time to make plans! Oh! And don't forget what the day is all about! Time to go... I hope your Tuesday is Terrific!

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