Daily Pfennig : Swiss franc

More Baby Steps For A German Economic Recovery...

Chuck Butler — Tue, 01 Sep 2009 12:28:00 GMT

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In This Issue..

* German unemployment falls!
* RBA disappoints the markets...
* China to buy Canadian company...
* ISM to print positive?

And Now... Today's Pfennig!

More Baby Steps For A German Economic Recovery...

Good day... And a Terrific Tuesday to you! And Welcome to September! Well... Here's a thought to get our engines started this morning... Bill Bonner of the Daily Reckoning ( www.dailyreckoning.com )had this to add to my ranting about our National Debt going to over $20 Trillion in the next 10 years, due to deficit spending...

"The Obama administration, for example, expects to run $9 trillion in deficits over the next 10 years - and that number is based on a recovery! Imagine what will happen if the economy doesn't recover?"

Now, that's a nice comforting thought to start our day right? NOT! WAKE UP! Morning has broken, and the coffee is on... If you are still of the thought that this is all going to end up seashells and balloons, then you need to stop and smell that coffee!

Oh brother! Looks like I'm full of you know what and vinegar this morning! Let's try to calm down, Chuck, you've only just begun to write, you don't want to peak so soon!

OK... Yesterday, I told you that the Asian stocks had sold off and that risk assets were being taken off the table. But that didn't last long, and by mid-morning, I witnessed a nice currency rally, that wiped out the overnight selling. At one point during the morning a customer called to buy some euros, and when the sales person asked me for a price, I said, "you know, they may want to come back tomorrow morning, after the overnight markets beat the euro up, like we've so many times lately."

But wait! That did not happen last night! So, I was wrong! The euro is getting some real love this morning after German unemployment fell in August, which was totally unsuspected. Euros and Swiss francs are the only currencies I see that have gained on the news this morning. So the Big Dog, euro, must have told the other little dogs to "stay on the porch"... Stay Rex!

German unemployment fell by 1,000... OK, now I know that this has the same feeling as removing a bucket of sand from a beach, when unemployment in Germany is 3.46 million! But, I never said that Germany's economic recovery was a tidal wave! It's smoking embers, that are in need of stirring, some small twigs, and leaves... My beautiful bride is an "expert" and getting a fire started like that, I should send her over to Germany, that would really kick the domestic demand to another level! HA!

Baby steps... That's the way we're going here... So, we've had IFO and ZEW think tank reports on Confidence all print stronger... We had the GDP surprise on the upside... And there was something else last week, but it slips my mind right now. The point here is that the Eurozone's largest economy is waking up... We just have to hope it doesn't hit the "snooze" button, now!

A reader sent me a note yesterday asking if I thought there would be a collapse of the Eurozone and thus the euro... If I had $5 for each time these stories have hit the streets, I would be sipping on a multi-colored drink in a tall glass with one of those tiny umbrellas, in a tropical setting... The point I'm making here is that on the outside Spain and Italy have problems... But what's changed? These two had problems before they joined the Eurozone, and have had problems since joining the Eurozone... Me? I totally believe that these two get down on their knees each night and give thanks for being allowed to join the Eurozone!

So... In case you missed my answer in there... I don't see that happening, at least not in the near future...

OK... Enough of that! The Reserve Bank of Australia ( RBA )met last night, and left rates unchanged, as suspected they would, and the following statement regarding their thoughts on the economy was relatively upbeat... However, the markets were looking for an indication of "when" the RBA would hike rates, and that didn't happen... So... The markets were disappointed, and when they are disappointed with a Central Bank, they take it out on the currency! So the A$ got pounded overnight.

Now... Aussie GDP for the 2nd QTR is going to print tonight, I would have to think that the RBA maybe had a peek at the report, and thus their gearing down the interest rate hike talk... So... We could be looking at even weaker A$ prices tomorrow morning... Unless, that is, 2nd QTR GDP is as strong as it was once believed it would be!

Did you see where Canada printed a HUGE Deficit last week? Not a good thing... But, the Canadian balance position has teetered back and forth between Surplus and Deficit, but recently has remained in the red... You know me and deficits, so, I put a red mark next to the Canadian dollar / loonie... But then, you hear news like last night... Get this! PetroChina has agreed to pay C$ 1.9 Billion for a stake in a Canadian oil sands project. PetroChina will buy 60% of Athabasca Oil Sands Corp.'s MacKay River and Dover oil-sands projects.

That's 1.9 Billion Canadian dollars / loonies that will have to be purchased... And You would have to think that China will be spending the "few loose dollars" they have in their pockets, which would put pressure on the green/peachback!

Canada is still in a recession, here folks... But... Could these be cheaper levels given the merger and acquisition activity? Only the shadow knows!

OK... So, here I am, 1 hour from when I began writing this morning, and all that glossy and shiny talk about the euro's rally is fading... The Big Dog has lost 1/4 euro in the past hour... So... I wasn't wrong after all!

OK, you'll love this, or maybe you won't, but I do, and since I'm writing this letter, I get to talk about it! HA!

Here's the title of the story that flashed across the screen, and of course, caught my attention... "Goldman Sachs Wrong on Economic Recover, Macro Hedge Funds Say"

You've got me on this one! I've got to read on... "Paul Tudor Jones, the billionaire hedge-fund manager, who outperformed peers last year, is wagering that Goldman Sachs Group, Inc. and Morgan Stanley to it wrong in declaring the start of an economic recovery."

"If we have a recovery at all, it isn't sustainable." One Hedge Fund Manager said... Calling this a "ski-jump recession, with short-term stimulus creating a bump that will ultimately lead to a more precipitous decline later."

WOW! These guys must be reading the Pfennig! OK, I kid, because these guys would never bet caught with the Pfennig in their hands... They probably put it between the pages of the "Economist" so that others think they're reading the Economist! HAHAHAHAHAHAHA!

Speaking of "must be reading the Pfennig"... I saw a thing that came across my desk yesterday that 57% of Americans would vote out every politician if the vote were taken right now! WOW! I didn't know the Pfennig was read by so many people! Recall, I said weeks ago, to "fire them all"... Well, let's hope that 57% grows to 95%, and Americans really do go through with their threat to vote them all out, if they continue to take us down the road to socialism / fascism / collectivism...

OK... You may recall a couple of weeks ago, I started asking you questions about the stock market rally, and it's ability to continue on... I truly believed that the stocks were overbought, and the P/E ratios were out of control... Now, I see quite a few jumping on that bandwagon, and calling for a stock market reversal.

Do we really think the Gov't will allow that to happen? Didn't the President himself, say that he thought it to be a good time to buy stocks... Isn't that sort of like a wink and a nod from the President that everything will be OK?

Beyond those conspiracy thoughts, let's just say the markets get to go where the participants take them ( I know, it's not reality, but let's just play along ), and stocks begin to reverse their gains from March... I would think it to take an adverse affect on the currencies and their gains since March too... Throw Commodities in there too!

Now, in the old days, I would look at a stock sell off and say, currencies will rise... "Honey, put on the red dress tonight, we're going out on the town!" but... These aren't the old days... This is the new improved way of throwing all risk assets into the same barrel! And I don't like it at all!

Ok... The Norwegian krone, traded with a 5 handle yesterday for the first time in a month of Sundays! It has traded back over 6 overnight... But, it was a good strong move from the krone yesterday nonetheless!

Well, today, we'll see the ISM Index (Manufacturing) from August, and for the first time in 19 months, it is expected to be above 50! New readers might wonder what I'm talking about here... But it's simple... 50 is a line in the sand that says any number below it represents contraction of manufacturing, and any number above it represents expansion of manufacturing... So, if it prints above 50 as expected one would say that manufacturing must be recovering...

Let's look at that closer... Come on, closer, closer, closer! We're experiencing a global recession, and global trade has been sketchy at best... But here's U.S. manufacturing showing expansion... And... The rise has been quite steady since March... With March printing at 36.3, April 40.1, May 42.8, June 44.8, and July 48.9... See the steady rise?

What else has happened since March? That's right, thank you for paying attention there in the back of the class! Yes, the currencies have been rallying VS the dollar... So, the dollar is much weaker than it was in March... The dollar index was 89.05 on March 5th, and today it is around 78... So... How did manufacturing / exports rise during this period of time? Because the dollar was weaker!

Let's keep that in mind, eh? For if we get an adverse affect on the currencies from a stock sell off, this recovery in manufacturing could go kaput!

We'll also see Pending Home Sales for July, and Vehicle Sales for August... Cash for Clunkers will push up the Vehicle Sales... But what happens next month?

Gold has backed off by about $8 in the past two days... It's a dip... Therefore it must be an opportunity to buy at a cheaper price! I was reminding all my friends that we spent the weekend together at a lake, that I had told them to buy Gold $400 dollars in price ago... I was booed out of the room at that point, because you see, they didn't buy it $400 dollars in price ago!

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

Currencies today 9/1/09: A$ .8355, kiwi .6820, C$ .9125, euro 1.4295, sterling 1.6220, Swiss .9440, rand 7.7975, krone 6.0275, SEK 7.15, forint 192, zloty 2.8780, koruna 17.9110, RUB 31.8325, yen 93.10, sing 1.4430, HKD 7.75, INR 49, China 6.8303, pesos 13.44, BRL 1.88, dollar index 78.35, Oil $69.69, 10-year 3.38%, Silver $14.75, and Gold... $949.50

That's it for today... Well, it's been an unusually cool summer here in St. Louis... We had two separate weeks of hot weather, and that was it! It normally is much hotter, with very high humidity... I wonder what that means for this coming winter! UGH! Just found out yesterday that I won't be going to Marco Island this December to speak like I had the previous two years... UGH! September is the last full month of baseball, and with the Cardinals in first place in their division, this should be a good month! There are two middle of the week day games in September, and I always enjoy those! So... Summer may be coming to an end, as along as September takes a long time to work through, I'll be OK! All righty then, let's get going on this Terrific Tuesday, the first day of September!

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

A Gusher Of Federal Money...

Chuck Butler — Wed, 19 Aug 2009 18:23:37 GMT

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

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

Some experts believe these 4 countries may become economic powerhouses in coming years. Now could be the right time to add these currencies to your portfolio. And you can do so-safely-with the U.S. denominated MarketSafe BRIC CD.
Don't miss this unique opportunity. Deadline to buy the BRIC MarketSafe CD is Oct. 13, 2009. Apply today or learn more at http://www.everbank.com/001CertificatesMSBRIC.aspx?referid=11808
.........

In This Issue..

* No currency movement to speak of...
* Buffett calls out the deficits...
* PIMCO does too!
* SNB selling francs to stem gains.....

And Now... Today's Pfennig!

A Gusher Of Federal Money...

Good day... And a Wonderful Wednesday to you! Another day with the medicine in my knee and it feels better yet today... I did have to ice it last night though, I guess I'm still not out of the woods here, but I can see the exit!

There was very little in the way of movement in the currencies yesterday. The euro moved to 1.4150, but was brought back down to the 1.41 handle overnight. Stocks rebounded yesterday, which gave a few risk takers the intestinal fortitude to dip their toes back into the risk assets water... But there just weren't enough of them to give the currencies the push they deserved to get.

OK... I gone for a few minutes, but I'm back now... My all-time fave Journey song was on the radio, so I had to stop to sing along. As always it's a good thing there's no one else here with me in the early morning! Oh! My fave Journey song? I knew you were wondering... The Girl Can't Help It...

Sorry about that tangent, but, you know me, I just type what's on my mind! But, back to currencies we go!

In a classic case of "The Markets do what they're supposed to do... Just not when" There are more than a handful of very well educated people and well respected investor types that have see the writing on the wall for the dollar... But... The markets have decided that it's just not the right time...

This is what I always say about diversification folks... It's the Hedge or insurance if you will that the Markets do what they're supposed to do... Now! Or whenever it is they do it... There won't be any tornado warning sirens, it will just happen... And you'll either be diversified with a portion of your investment portfolio out of the dollar or you won't... The great thing about this country is that you have the freedom to choose what goes in your investment portfolio... That is at least right now you do...

The reason this whole idea came to light for me this morning is a story that appeared on the Bloomie that was a reprint from a NY newspaper that I refuse to mention. The title line on the story goes like this: "Buffett Says U.S. Federal Debt Poses Risks to Economy, Dollar." OK, so you know that this had to pique my interest, eh?

Calling it the "gusher of federal money"... Buffett had this to say... "The U.S. must address the massive amounts of "monetary medicine" that have been pumped into the financial system and now pose threats to the world's largest economy and its currency."

So... Just chalk this down to yet another Big Kahuna, that sees the writing on the wall for the dollar, but the time is not right... That makes me think of those old wine commercials that would say, "we will sell no wine before its time"...

The folks over at PIMCO (Pacific Investment Management Co), the world's largest bond fund, also believe that the dollar will weaken as the U.S. pumps "massive" amounts of money into the economy. They even go further, in a letter to customers, saying that the drop of the dollar will come mostly against the emerging market currencies. "the greenback is losing its status as the world's reserve currency, said Curtis Melbourne, a PIMCO portfolio-manager. He went on to say... "Investors should consider whether it makes sense to take advantage of any periods of U.S. dollar strength to diversify their currency exposure."

WOW! Isn't this what I always say to you... Always, always be yourself, no wait! I always say to use dollar strength as opportunities to buy at cheaper levels! But the really funny thing that I saw was this... A reader sent a link to this story from PIMCO to me... And said... "Maybe if they read the pfennig they would have had a clue before today?" HAHAHAHAHAHA! That's absolutely correct! And I'll tell you this... A lot of Big Houses have people in research and trading desks that read the Pfennig each day...

There's more risk aversion creeping into the markets overnight (thus the drop back to 1.41 in the euro we just talked about), as the Shanghai Index fell -4.3% overnight... That weighed on European stocks this morning, and will carry over to U.S. stocks most likely...

The data cupboard has been emptied out and is looking to get restocked today... So the only thing besides sentiment moving the markets today will be the direction of stocks...

Talk about being tied to China... The Aussie dollar (A$) pushed to 83-cents yesterday before the rot on the Shanghai Index's vine was exposed... And the A$ is back to 82-cents this morning...

And... Just to confirm one more time that the Risk Aversion campers have taken over the campground, Japanese yen is the strongest it has been in weeks, looking as though it will take out the 94 handle... Feeling stronger every day, I know I'm all right now...

One currency that seems to "hang in there" the most, with no upside or downside to speak of, is the Swiss franc... Wanna know why? It's not because the Swiss National Bank (SNB) has warned the markets about franc strength... It's because the SNB has been sell francs every time it begins to move higher... SNB member Thomas Jordan was interviewed yesterday, and he confirmed what the markets had suspected for some time now, and that is that the SNB was selling francs to stem gains...

You know... I don't like it when a country's Central Bank sells its own currency... You may recall that the Reserve Bank of Australia (RBA) has done this in the past to keep their currency from moving too high too fast. This is where I think Central Banks overstep their job description... They are supposed to protect the value of the currency... NOT harm the value of their currency! I understand what these Central Banks are attempting to do here, it still doesn't mean that I have to like it!

Speaking of Central Banks... The cartel, I mean the Fed Reserve, has been keeping very quiet recently... I think that since Big Ben Bernanke told Congress that he had no idea where $500 Billion dollars that left the Fed went, he's doing damage control... He is up for re-appointment in January, and that statement won't be a gold star on his resume', eh? I was reading my friend, John Mauldin's weekly letter this past weekend, and he mentioned that some pretty important people that are "in the know" made a bet that Big Ben won't get re-appointed by the President in January... WOW! One and done for the helicopter Ben? I'll have to see that to believe it, as he has gone along with all the back room deals, brokerage sales, and changes to power that the administration is orchestrating... Whatever administration it was or is... Doesn't matter folks... There's been no change, except for the different color of lipstick on the pig...

Speaking of such a thing... That was the title of my presentation to that HUGE crowd of people in Vancouver at the Agora Financial Reserve's Wealth Symposium last month... That presentation was so well received, that I'm using it again in San Francisco on Friday... Updating it of course! Right Jason? And that is... "Applying a different color of lipstick to the pig"... Of course long time readers know that I've used the term: you can put lipstick on a pig, but it's still a pig; for a long time, and way before it became popular last fall during the election. The pigs in this case are the deficit and the dollar...

For instance... The deficit continues to grow to record levels each day, but is Washington D.C. addressing it? NO! they have decided to place all their attention on another item that's taking all of their time and efforts. Just applying a different colored lipstick to the pig, folks... That's all it is...

We learn these things in media training... To divert... To something you want to talk about... That's what's happening here...

A long time reader sent me some notes yesterday, and this one snippet I think addresses this in its entirety... "Here we are with the Japanese experience fresh on our doorstep, and we (or at least our government) is doing almost exactly the same thing. REFUSING to acknowledge weak balance sheets, denying reality, and virtually guarantying that the problems will continue and get worse."

OK... Enough of that! I could get started down a road that would lead to by blood pressure shooting through the roof, so... Let's not go there!

We haven't heard the term "green shoots" from Big Ben lately either... Again, I think that once you get the taste of your foot being in your mouth, you don't want to experience that again! Remember when I told you that Big Ben's "green shoots" were nothing but nut grass, weeds if you will? Here's the image I would get whenever Big Ben or the copy cat media types would mention "green shoots"... A guy feels ravenously hungry late at night and raids the fridge. All that's in there is a plate covered with aluminum foil. He removes the foil and finds a putrid piece of meat, covered with mold. He holds his nose and takes a close look. "Great", he says, "green shoots"... (OK, I didn't make that up, a reader sent me that note, and I told him that I definitely would use it in the Pfennig!)

I don't recall how long ago it was that I said this, but I do know that I said this at some point in the past... And that is that the so called recession that we're in is really a depression, and each time it looks like we're going to come out, we fall back... I think I even said that we could have a quarter of positive growth, only to fall back to negative the following quarter... Let's face it folks, this is a depression, not a recession...

Yesterday's data cupboard had the semi-stupid PPI (wholesale inflation) print for July, and the index printed a negative -.9%! Reversing June's jump to +1.8%... Year on Year, PPI is -6.8%... That spells price deflation, folks... And just means that things should be cheaper... But wait! Do you see cheaper prices? The thing I've been noticing lately is that when we send out for lunch each day, that the prices of things might not have moved, but the size of what you get sure got smaller... Which means that we're paying more for less! Not less for more! Something is awry here don't you think?

We also saw Housing Starts and Building Permits, which I carried on about yesterday... Well, they did not expand like forecast, but fell in numbers instead. Housing Starts were forecast to be 599,000, and came in at 581,000. And Building Permits were forecast to be 577,000 and came in at 560,000... Not as lofty as the forecasts, but still... 581,000 new housing starts when we are already choking on the inventory of houses that we have... I don't get it... I really don't...

I'm watching the euro pop up here in the past few minutes gaining 1/4 euro, which isn't much, I'm well aware of... I'm just marking the move up...

Currencies today 8/19/09: A$ .8220, kiwi .6705, C$ .9030, euro 1.4135, sterling 1.6430, Swiss .9315, rand 8.0750, krone 6.1325, SEK 7.2475, forint 194, zloty 2.9550, koruna 18.16, yen 94.10, sing 1.4505, HKD 7.7515, INR 48.80, China 6.8341, pesos 12.96, BRL 1.8435, dollar index 79.10, Oil $68.75, 10-yr 3.44%, Silver $13.65, and Gold... $935.25

That's it for today... And for me this week, and through to next Tuesday. Chris will have the conn on the Pfennig those 3 days. I'll be traveling tomorrow, and miss my darling daughter Dawn's 30th birthday... Tomorrow is also our little Christine's oldest son, Jamieson's birthday! So Happy Birthday to you two! I have two videos to do today, so I have to get ready to do those this morning. Remember when I told you that I would be doing videos where I answer questions that are sent it, for the subscribers of the Currency Capitalist? Well, we've been doing them for over a month now. I think it's going well. I mean I'm just myself, answering questions to the best of my ability, nothing more, nothing less... Our BRIC MarketSafe CD was quite the in-demand issue! And like all issues that we've done in the past, we saw a flood of applicants at the last moment... The cut off was yesterday, and our people were here late last night still approving on-line applications. WOW! A great job by everyone that was associated with this issue from products, to marketing, to legal, to operations, the newsletter writers, and of course the sales desk... And that guy that came up with the idea in the first place! OK... I've carried on enough here... Time to go! I hope your Wednesday is Wonderful, and I'll talk to you next on Tuesday next week!

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

Some experts believe these 4 countries may become economic powerhouses in coming years. Now could be the right time to add these currencies to your portfolio. And you can do so-safely-with the U.S. denominated MarketSafe BRIC CD.
Don't miss this unique opportunity. Deadline to buy the BRIC MarketSafe CD is August 18, 2009. Apply today or learn more at http://www.everbank.com/001CertificatesMSBRIC.aspx?referid=11808
.........

In This Issue..

* 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

Dollar rally peters out...

Chuck Butler — Thu, 30 Jul 2009 14:24:55 GMT

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In This Issue..

* Dollar rally peters out...
* Obama defends his policies...
* Commodity currencies should outperform...
* Global Power Shift Index...

And Now... Today's Pfennig!

Dollar rally peters out...

Good day... And happy Thursday to everyone! Hope everyone made it through the 'hump day' with no worries. We started the morning here with rainshowers, but it ended up being a beautiful afternoon and evening. Currency markets were similar to the weather here, as most currencies started Wednesday in the loss column vs. the US$, but rallied as the day progressed. The dollar had strengthened over the past couple of days due to 'safe haven' demand; but a surprisingly strong durable goods number (ex autos) combined with an 'all clear' signal from President Barack Obama had investors moving back into riskier assets. The commodity based currencies also got a boost as China signaled it would maintain an accommodative policy, easing speculation that the Bank of China would try to rein in bank lending. Lots to cover today, so lets get right to it.

Durable goods orders for June were released yesterday morning, and the overall number actually showed a pretty dramatic drop of 2.5% compared to the month prior. But the overall number includes automobiles, and with many of the big 3 automobile plants shut down for part of June, the markets were focused on the number ex transportation. Orders for durable goods, excluding automobiles and aircraft unexpectedly rose 1.1% in June following an adjusted .8% rise in May. The ex auto number was strong enough for some to reason that companies would have to start boosting output in the coming months. While the 1.1% jump in orders is nice to see, the overall drop was pretty dramatic, and the auto sector makes up a large percentage of overall output for the US.

Just after noon the Fed's Beige book survey of economic conditions was released. The report said the pace of the US economic recession slowed or stabilized in most areas of the country and pointed to a protracted period of weakness as the economy transitions to recovery. The Fed said labor markets across the country were 'extremely soft' and wages and compensation were steady or falling in most areas. Not the rosiest of pictures for the economy, but not overly negative either.

The nation's #1 cheerleader was out in full force yesterday afternoon, as President Barack Obama defended his administrations policies during a speech in North Carolina. President Obama's poll ratings have slipped as unemployment continues to be a drag on consumer confidence. So he took a break from pushing his health care reform to defend his economic policies, saying he had helped avert an economic disaster as the US economy was in a "freefall". He stated that the US "may be seeing the beginning of the end of the recession", and that his stimulus plans had "helped stop a recession from becoming a depression".

The British pound was one of the biggest gainers vs. the US$ yesterday after a report showed UK house prices rose in July for a third consecutive month. Another report showed the average cost of a home in the UK rose 1.3%. The pound will probably end up in positive territory vs. the US$ this month for a fifth consecutive monthly gain. The rally is a relief for pound sterling investors as the currency dropped more than 26% vs. the US$ last year. A Standard Chartered PLC analyst predicted further strengthening for the pound sterling in a report released yesterday. The analyst stated that the US$ is in a multi-year downtrend, and the pound will likely push up to $1.75 by year end.

But there is still the question of deficits in the UK. The BOE was one of the first central banks to institute 'quantitative easing' policies, and many are looking for them to be the first to stop the program. With the UK housing sector stabilizing, officials will likely pause the asset-purchase program which was set up to lower borrowing costs. But the UK is still going to have to deal with a record deficit, similar to the problems facing the US. The UK Treasury said it will sell a record 220 billion pounds of debt in the year ending March 2010 to offset falling tax revenues and increased government spending. Again, good news for the pound in the short term, but the storm clouds are still gathering.

Positive news out of Europe this morning has helped keep the Euro moving up in early trading. European confidence in the economic outlook increased more than economists forecast in July, as an index of executive and consumer sentiment climbed to the highest reading since November. But the economic recovery in Europe is still very fragile, as evidenced by another report which showed retail sales fell for a 14th month in July. Unemployment in the Euro region continues to be a concern, with the unemployment rate expected to reach 12 percent in 2010.

Both Morgan Stanley and BOA/Merrill Lynch told investors to sell the dollar vs. the Euro in research reports released yesterday. Morgan Stanley said investors should sell the dollar against the Euro, Norwegian krone, and Canadian dollar as the global outlook improves. "As the outlook continues to improve, we believe that currencies with strongest ties to the global growth cycle will outperform at the expense of the US dollar," a currency strategist at Morgan Stanley wrote in a note to clients. BOA raised its forecasts for the euro predicting it would rise to $1.50 by year end. The report highlighted the diversification of reserves as a key driver of the Euro. The euro is predicted to continue to gain vs. the US$ as central banks diversify reserves into Euros from US$ as the US government is debasing its currency through its program of printing money to buy assets such as Treasuries.

One currency which hasn't been performing well vs. the US$ recently is the Swiss Franc which is one of the few currencies to drop vs. the US$ over the past month. This is exactly what the Swiss National Bank has been trying to accomplish, as they have spent as much as $32 billion since March to keep the Swiss franc from appreciating. The SNB sold the franc and cut interest rates on March 12 to stem the currency's gains. The Swiss continues to be a popular choice for investors, but problems with Swiss banking and the government intervention will likely keep the Swiss franc from rallying dramatically. However, as Chuck has pointed out several times in the past, no central bank (not even the Swiss) has enough money to fight the currency markets. The markets will eventually win out, and the longer term prospect for the Swiss franc is still positive. It is just that we feel there are other currencies which have better prospects in the near term.

Norway is one such currency. Norway's central bank will likely be one of the first among the world's richest economies to begin raising rates as the global crisis shows signs of abating. Inflation in Norway is likely to increase past the Norges Bank's target, increasing pressure for Norway's central bank to hike rates. The markets are beginning to price in an increase in rates at the beginning of next year as the Norwegian economy starts to heat up. Oil revenues, and a conservative fiscal policy helped to soften the impact of the global economic crisis, and Norway is now set to be one of first European economies to recover. Retail sales in Norway were up 2.6% in May since March and underlying inflation accelerated to an annual 3.3% in June, the fastest pace in eight months. The housing market in Norway is also pushing the recovery, as property values rose 5.3% in the three months ended June, the second quarterly gain.

Norway's neighbor, Sweden, is another currency which has been performing quite well vs. the US$. The Swedish krona is second only to the Australian dollar in return vs. the US$ over the past week, and is among the top three currencies this month. Sweden's krona is benefitting from a jump in exports as Sweden's trade surplus almost doubled in June as exports to Europe and the US increased. The Swedish krona has also benefitted from recent IMF support of the Baltic region, where Swedish banks are heavily exposed.

The Australian dollar continued to climb overnight, and is the best performing currency vs. the US$ in the past week. Investors are betting that the Reserve Bank of Australia will be one of the first central banks to start raising rates. With the US Fed keeping interest rates near zero, investors are likely to search for yield, and interest rate differentials will push the AUD$ higher. We saw a similar pattern back in 2003, when the AUD$ rallied over 30% vs. the US$ on interest rate differentials. Australia's economy unexpectedly grew in the first quarter, and recent rhetoric from RBA Governor Stevens suggests the start of a tightening cycle sooner rather than later.

Brazil's real continues to be a strong performer and is expected to strengthen to 1.8 per dollar by year end according to JPMorgan Chase & Co. The real will strengthen due to faster economic growth and higher demand for commodities according to JPMorgan. The currency will benefit from a stronger trade surplus and increased foreign investment. In news released yesterday, China Development Bank Corp, the state run bank for public works projects, stated they plan on opening an office in Rio de Janeiro next year, one of its first branches outside mainland China. Close ties with China will continue to benefit Brazilian exports of commodities. The Brazilian economy will expand at an annualized pace of 4.2% in the second, third, and fourth quarters this year according to research by JPMorgan.

A great way to invest in 4 different currencies which should appreciate as the global recovery takes hold is our Global Power Shift Index CD. This newest CD offering combines the currencies of Australia, Canada, Brazil, and Norway; all countries which are perfectly positioned to take advantage of commodity price increases. The CD is available with 3 or 6 month maturities and a minimum deposit of $20,000. Call the desk for details!

Currencies today 7/30/09: A$ .8248, kiwi .6528, C$ .9213, euro 1.4061, sterling 1.6485, Swiss .9188, rand 7.7974, krone 6.2331, SEK 7.4434, forint 190.56, zloty 2.9674, koruna 18.1791, yen 95.09, sing 1.4437, HKD 7.7500, INR 48.3575, China 6.8323, pesos 13.2083, BRL 1.8935, dollar index 79.273, Oil $64.01, 10-year 3.70%, Silver $13.425, and Gold... $932.88

That's it for today... I'm running a little late this morning, as Christine is already here with the breakfast sandwiches (she even picks them up when Chuck is out!). Cardinals won again last night with a timely hit by Albert Pujols in the 15th inning. It is great to see the Cardinals coming on strong in the second half of the season, should be an interesting playoff run. Hope everyone has a Tub Thumping Thursday!!

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

Back To Risk Aversion Again!

Chuck Butler — Mon, 13 Jul 2009 16:42:15 GMT

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In This Issue..

* Earnings reports begin this week...
* Dollar, yen, francs get bought...
* Medvedev shows off new coin!
* A busy week!

And Now... Today's Pfennig!

Back To Risk Aversion!

Good day... And a Marvelous Monday to you! A Home Run Derby Monday to boot! I have no Idea what's going on this morning, as I just woke up, and it's very late in the morning! I was very careful to set my alarm last night, and I've never been one of those people that hit the snooze button when it goes off, but here I am, waking up late... UGH!

So... I'm writing from home, and then I'll shoot in to work... We're short handed this week, so, I'm sure everyone will be arriving to the office, not see my car, and be a little ticked... So, I've got a surprise for them, something they've never seen... Me come in late!

Well... It looks like Risk is under pressure once again... And the only thing I can see that's causing this Risk Aversion, is the Corporate Earnings Season... For instance we get 4 banks reporting this week, Goldman (yes, remember they're a bank holding company now... They ex-chief, and ex-Treasury Sec. Paulson, made sure that the change was made so that Goldman would qualify for TARP last year!) We also have JP Morgan, Bank of America, and Citi...

Data wise, there are a few top shelf reports out this week, and the thought of them showing more dandelions instead of green shoots, is probably wearing heavily on the risk assets this morning too.

So... The euro is sitting just below 1.40 this morning at 1.3985, so no real harm being done at this time, but still the bias is to sell the risk assets like currencies and commodities as we start the week.

You know, I've harped about this for so long now, that I sound like a broken record, OOOPS! For the younger crowd that would be a scratched CD! What I'm talking about is the fact that the risk assets like currencies and commodities being thrown into the same barrel has stocks... And how I was just wishin' and hopin' and thinkin' and prayin' that we would return to the fundamentals of these asset classes not having anything in common with the stocks! I just knew... No wait, I can't say that... I just knew, not that I know anything on the inside, that is... That stocks were going to be under pressure from the Corporate earnings season, and with the "link" still in place... That wouldn't be good for currencies and commodities... Let's hope I'm wrong!

The one piece of data we get today is the Budget Statement... Last month, the Budget Statement printed an awful deficit of -$189.7 Billion (May)... Historically, June prints at a surplus... But Historically, so did April, and April was no where near a surplus this year! Year-to-date receipts for the Gov't are down 18%, and Year-to-date outlays are up 19%... That doesn't bode well for "history to come into play here"...

Last week, on Thursday, reported Friday in the Pfennig (thanks Chris!) was the Weekly Initial Jobless Claims, which printed the lowest level for this data series in more than 6 months, at less than 600K! But still, the number is still staggering, and one of the reasons that Commercial construction in the U.S. is set to decline 16% this year, followed by a 12% fall in 2010. No jobs... = no need to build offices for the "ghost jobs' that the BLS adds each month, because... THEY DON'T EXIST!

No need to get me started on the BLS (Bureau of Labor Statistics) this morning... I have to be clear and concise to get this out the door and me off to work!

Well... With the risk aversion back on the table... The two main beneficiaries remain to be Japanese yen and the U.S. dollar... Swiss francs are on the "kids table" but still a part of the beneficiary crowd...

The High Yielders like Aussie, kiwi, and South Africa get taken to the woodshed, when Risk Aversion comes to town... The Brazilian real is seeing a bias to sell, but for the most part has hung in there... Of course I remember saying that exact line early last fall, only to watch the real play catch up, until the turn-around in March of this year. So... I guess, what I'm saying is be careful!

So! Did you hear that Russian President Medvedev, showed off the "new world currency coin" at the G-8 meeting last week? He said.. "We are discussing both the use of other national
currencies, including the ruble, as a reserve currency, as well as supranational currencies. So... Here it is! This is a symbol of our unity and our desire to settle such issues jointly."

He then pulled a new coin out of his pocket and displayed to the attendees... Now... Don't get all tied up and twisted over this at this point. This was simply a "symbolic" move, there aren't mints all over the world rushing to get these coins minted and out the door... But, if you get the "symbolic" part, then you understand what Medvedev was attempting to do here... He was simply showing the G-8 attendees that if they really thought about it, they could see the need to move from a dollar reserve system, and to help them visualize it, he had a coin to pass around!

I can't believe that right now, with the whispering campaign to get an alternative reserve currency, that the dollar isn't getting sold, as I like to say, like funnel cakes at a State Fair! I guess the whispering will have to get louder, for this to make any real waves....

You know, I'm not for this "global currency"... I just wanted to make that clear! I'm not for removing the dollar as the reserve currency, for I know all of the "perks" that go along with it being the reserve currency! I'm just here to report the facts, and give my opinion / market commentary on how I think it will affect things...

I do believe, however, that given our deficit spending, and every growing to the moon National Debt, that the dollar deserves getting whacked, it's how things are done! Treasuries will get their comeuppance too one day... You can't just keep printing and printing and thinking that "buyers" will be there at the auction every time you print more... It's not going to happen that way... At least in my thoughts it won't!

OK... Time to go to the Big Finish... I know, I know, little shorter than usual this morning... But Hey! It was still chock-full-o-news!

Currencies today 7/13/09: A$ .7750, kiwi .6225, C$ .8605, euro 1.3980, sterling 1.61, Swiss .9240, rand 8.2930, krone 6.4830, SEK 7.9025, forint 198.10, zloty 3.1475, koruna 18.62, yen 92.10, sing 1.4650, HKD 7.75, INR 49.08, China 6.8328, pesos 13.71, BRL 1.9965, dollar index 80.16, Oil $59.96, 10-yr 3.30%, Silver $12.50, and Gold... $912.70

That's it for today... Went to the Futures Game yesterday, to sit through a 4-hour rain delay... UGH! Let's hope the rain stays away for the next two days! Home Run Derby tonight, All-Star Game tomorrow night. The family is all going to the Fan-Fest today, while I'm at work... Hey! Somebody has to work! HAHAHAHAHA! My beloved Cardinals went into the All-Star Game break on a good note, winning 6 of 10 on the road trip to end the 1st half of the season... This will be a very busy week for me, lots of writing to get done, and all the All-Star festivities... I go to my new oncologist this afternoon for the results of my scans on Friday, so all that and doctors stuff on top! UGH! Oh well, next Monday I head to Vancouver for the Agora Financial Wealth Symposium, their 10th year anniversary of the conference! And then I head off to vacation! So... Busy, busy, busy... Time to hit send, Hope your Monday is absolutely Marvelous I tell you!

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

Russian Rumors...

Chuck Butler — Thu, 28 May 2009 14:40:07 GMT

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In This Issue..

* dollar rallies on N. Korea warning...
* Emerging Markets decouple...
* A debt upgrade for New Zealand...
* Swiss francs rise despite SNB warnings...

And Now... Today's Pfennig!

Russian Rumors...

Good day... And a Thunderin' Thursday to you! Yes, the rain continues here in St. Louis, but that's normal for this time of year. But the rain brings the thunder... And so it is a Thunderin' Thursday!

Well... The dollar came back with some vengeance yesterday pushing the Big Dog, euro, back well within the 1.38 handle, and all the other little dogs, other currencies, followed. There wasn't data to speak of yesterday to push the dollar higher, it was simply a case of fright, as safe haven flows went the dollar's way after the news of a N. Korea attack warning spread throughout the markets.

Funny thing... I get a daily email from a news source that gives the highlights at mid-day... And yesterday, the email said, well, the email didn't really "say" anything, it can't talk! Any way, the email contained these two headline stories... 1. Crude rises for third session... And 2. Gold down for second day... I then glanced at the screen, and saw Crude Oil trading down on the day, and Gold up $5.80 on the day... So much for that news source, eh?

Yesterday, I talked about the high yielders, highlighting Brazil's return to a Current Account Surplus... But the high yielders have more to say about the dollar's future value... You see, it's more than the Commodity Currencies... It's also the Emerging Markets currencies, which seem to have a life of their own. There was a lot of talk last year about how the Emerging Markets economies had decoupled from the U.S. and a U.S. slowdown would no longer affect them negatively as a U.S. slowdown would have in the past. For a few months there, the decouple story was laughed at, as the Emerging Markets sold off just like everyone else. But then, like the Phoenix Bird, they rose from the ashes... And it's these Emerging Markets currencies that have taken the biggest bite out of the dollar this year!

OK... This is not an endorsement to run out and buy Chilean pesos! You've got to be very careful with these Emerging Markets currencies, as they are smallish, they are illiquid in most cases, and they have wild swings. Take for instance two more "mature" Emerging Markets, Brazil and South Africa... These two do NOT fall into the illiquid category... But currencies like S. Korean won, and Chilean pesos definitely do!

The real point here was to talk about the decoupling... It's happening just as those that saw that it could, said it would. It just took some time to get legs underneath themselves. Remember last year they called the action from July to December, "De-Leveraging"... This simply meant people were selling everything non-dollar and buying dollars... You might recall me questioning this thinking, but who am I to say this was wrong! Well, I read yesterday that this price action in Emerging Markets is being called the "Re-Leveraging"!

Speaking of an Emerging Markets Country / currency... The Russian ruble (illiquid!) was in the news yesterday... And here's where, I just didn't get the dollar strength yesterday... Here's the skinny... Rumors were flying around yesterday that Russia is planning to revise the weightings in their basket of currencies they use to value the ruble... The rumor had the weighting in euros for the basket, changed from 45% now, to 55% in October, and 60% in December....

Now... If true... This would be HUGE for the euro! Now we just need to all be Sherlocks and find out what's going on here... The Truth is Out There!

OK... Back to the majors!

The euro has recovered a bit this morning on the news from the European Commission, who, this morning said that European Confidence in the economic outlook increased to a 6-month high this month... The people surveyed repeated the thought that record-low interest rates, and the Government spending plans may be starting to work, and the economy may have bottomed... Hmmmm... I hate to be the bearer of bad news to these people, but I don't think their economy has bottomed...

I say this because I truly believe there's another hic-cup for not only the European economy, but the U.S. economy. I see where quite a few economists are now saying that the U.S. recession will in this year... Hmmm... Here's what I think... I do think that we'll see a quarter later this year with positive growth... But then I think it's followed by a negative growth quarter, thus... A bump...

And... Yesterday, I talked about how we might be seeing the end of the link between stocks and currencies, and stocks had gained the previous day, and currencies had not... Well, yesterday stocks sold off, and so did currencies... But this time, I think it had more to do with the N. Korea news than any "link" between the two... I really do think we're beginning to see a break... Let's hope so, because that would mean that we're taking baby steps toward getting back to "fundamentals"...

And these fundamentals include the fact that stocks and currencies have a low correlation to each other, and different pricing mechanisms...

U.S. Treasury yields continue to climb with the 10-year Treasury gaining 19 Basis points in yield yesterday... That pushes the annual climb in yield for this note to 148 Basis points... Hey! You can't say I didn't bring this to your attention before it happened!

My friend, Bill Bonner, had this to say about Treasuries yesterday in the Daily Reckoning (www.dailyreckoning.com) "The US Treasury market is in a bubble. Like all bubbles, it will pop. And as always, when bubbles pop, there are those who get hurt - and those who profit. The difference is how well you're prepared for it."

Oh, and one more thing... With Treasury yields rising... Mortgage rates will HAVE to follow... And that's not going to make Messrs Obama, Bernanke, Geithner and anyone else involved in artificially keeping mortgage rates low, happy... But, that's fine with me! I don't really care if they are happy with this development or not! They are responsible for this rise in yields, so they can only be unhappy with themselves!

In New Zealand overnight... The 2009-2010 Budget printed, and showed remarkable restraint (for New Zealand!) The Finance Minister, Mr. English, then spoke about how near term deficits are high, he believes that they are at a "peak"... Which is Finance Minister parlance for: We'll see our debt to GDP ratio shrink from here on out! That kind of talk is manna from heaven for kiwi investors, and the folks over at S&P liked it too, as they immediately raised the outlook for New Zealand's debt from negative to stable...

Last week, we had S&P lower the U.K.'s debt outlook and the pound sterling took off for higher ground... Sort of backwards thinking, eh? Any way... Kiwi has responded favorably for the time being, but without the Big Dog, euro, off the porch chasing the dollar down the street, kiwi will have a difficult time adding to these gains...

Someone asked me yesterday why I hadn't mentioned the Canadian dollar / loonie lately, given my statement that crude oil was rising yesterday... OK... The reader was right! I should have been all over the loonie like a cheap suit! The Loonie has gained 13% since March 1st, and Crude Oil has moved from $40.15 to $63.40 since March 1st...

It was a year ago, that the loonie was basking in the sun of parity with the U.S. dollar... All the talk then was that the loonie could go into uncharted waters VS the dollar... We all know that didn't happen... And the reason? Oil fell and commodities like Gold fell... But guess what's happening again? Oil and Gold are rising again... Hmmmm...

I saw something yesterday that hit me as strange... Forbes Magazine had a lead story titled: "Make A Buck On The Rising Euro"... The reason I found this strange, is that I've heard Steve Forbes talk the past few years and each time he emphasizes that the dollar is strong and will remain strong... But now his magazine had a story on how to make money buying the euro... Which means, to make money in the euro, (for dollar based investors) the dollar would have be weak! Strange, eh?

Anyway, the writer, Ryan Campbell, goes on to talk about how the euro has risen VS the dollar since March (something I told you weeks ago!), but also adds that the "charts sound the all-clear for euro bulls." Interesting... I hadn't heard from my charts guy lately, maybe this will wake him from his slumber!

And Swiss francs continue to defy the Swiss National Bank (SNB)... Francs have pushed to near 92-cents... Recall that the SNB issued verbal warnings pre- 90-cents that they were not happy with franc strength... Well, apparently that's all the SNB has... Verbal warnings, because they have not stepped in front of this franc fueled bus!

And Swedish krone is seeing some selling pressure this morning, as the old story regarding the Eastern European Banking woes, was brought up again... This is old news! Wrap it up in newspaper and carry it out with the other trash!

So... As I get ready to head to the Big Finish, I see that the currencies, led by the Big Dog, euro, are getting off the porch once again to chase the dollar. One currency that's not participating is the Japanese yen, which has taken a big spill overnight to near 97... However, that bad performance in yen hasn't spilled over to other currencies...

Currencies today 5/28/09: A$ .7840, kiwi .6255, C$ .8955, euro 1.3895, sterling 1.5960, Swiss .9195, rand 8.0425, krone 6.4730, SEK 7.7690, forint 204.30, zloty 3.2250, koruna 19.2450, yen 96.90, sing 1.4525, HKD 7.7530, INR 47.66, China 6.8289, pesos 13.24, BRL 2.04, dollar index 80.75, Oil $63.43, Silver $14.94, and Gold... $952.10

That's it for today... It's breakfast sandwich day on the desk... Every Thursday, I buy and our little Christine flies... I used to pick them up when I came in, but they would be stone cold by the time everyone else comes in, so now Christine does the picking up! Yahoo! Friday is bagel day, as my old latte' buddy Michelle, still picks up bagels. We used to do go to get the bagels together, along with a latte'... But... I had to stop drinking latte's and caffeine altogether. UGH! Last day of school for my kids! Time for Alice Cooper's School's Out For Summer! I don't want to miss this tomorrow, so I'll talk about it today... Sunday is our cake baker, Cheryl Harper's birthday... Happy Birthday, Cheryl! A big trading day for Chuck and Jen today, so, I'll get started... I hope your Thursday is Thunderin' in a good way!

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

A building block...

Chuck Butler — Mon, 16 Mar 2009 13:57:08 GMT

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

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In This Issue..

* A quiet Friday...
* Euro hits 1.30...
* Chinese concern...
* This week in data...

And Now... Today's Pfennig!

A building block...

Good day...And a Marvelous Monday to you. Its hard to believe that Monday morning is already upon us, where does the time go? Just as the currency market took a breather, our cold weather from last week decided to follow suit as it turned out to be a nice late winter weekend. Friday was fairly uneventful as the currencies traded in a tight range throughout the course of the day so it will be interesting to see how this week shapes up. Let's see if the currencies can build from last week...

Volatility was basically non-existent during Friday trading with less than a .50% difference between the high and the low of the dollar index. The overall bias, however, was a weaker dollar and the euro held onto 1.29 for a majority of the day and was near 1.2920 as I left the desk. The pound and Swiss franc were the only two currencies left on the bench last week with losses of about 1% and 2.5% against the dollar respectively. The rest were able to turn in a decent week with the Swedish krona on top of the pile posting a 6.5% gain.

The SEK got beat up last month on concern of its lending exposure to the Baltic states but traders have come in not only on thoughts of it being oversold but also as risk aversion has eased a bit. We saw Swedish inflation fall to a 3 year low of .9% as rising unemployment and slower demand are keeping prices contained. Their central bank, the Riksbank, will meet on Friday and most are looking for a .25% cut to .75%, so we'll see if there are any surprises. The bottom line, not only with this currency but all of the other small European currencies, is that the euro needs to appreciate in order to provide any type of sustained traction.

I saw a report where Citigroup's technical analysis team said that if the euro trades above 1.2992, we could see sharp appreciation and a break out of this range bound trading pattern we have seen for a while now. They didn't provide any estimates as to how much but we did see he euro snap out of its 4 week decline last week. Its nice to see that we aren't the only ones out there taking notice that a turn in the currency market could be inching closer.

As I came in this morning, we had a sizable sell off in the dollar during overnight trading with the euro shooting up to 1.3040. It looks as though investors in Asia were feeling better after the results of the G-20 meeting. The Asian stock markets were up on the day as the G-20 finance ministers vowed to combat the global recession by working together to clean up the toxic assets and OPEC refraining from cutting output. We blew right past that 1.2992 figure here this morning so we should get a better idea of its staying power as the day progresses.

China threw a cat among the pigeons as they voiced concerns about their holdings of US Treasuries and wanted assurances their investments are safe. Premier Jiaboa said "We have lent a huge amount of money to the US and I request the US to maintain its good credit, to honor its promises, and to guarantee the safety of China's assets." A Chinese analyst commented that they are worried the US may solve its problems by printing money which would stoke inflation and if the US can make sure this won't happen, then China should continue to invest.

President Obama quickly responded to ease those concerns by saying in a press conference "Not just the Chinese government, but every investor can have absolute confidence in the soundness of investments in the US." Continued Chinese investment in Treasuries are crucial in financing the stimulus packages. I wouldn't think any type of a major sell off is likely but I could see them backing off a bit if they don't feel comfortable. It will be interesting to see if anything changes going forward, but I don't blame them for wanting some type of re-assurance.

With not much to report on from Friday, we can look at what is due out here in the US this week. This morning we have Empire manufacturing, TIC flows data from January, and February industrial production along with capacity utilization. The TIC figures are going to be a big one, which are supposed to show an increase, and will tell us for sure if foreigners were still buying up US financial assets. The rest of the data out today is expected to disappoint.

Tuesday brings us supply side inflation with the producer price index and Wednesday will give us CPI along with the 4th quarter current account balance. The Fed meets on Wednesday as well and are expected to keep rates unchanged but any comments or statements that result could be market movers. We round out the week with jobs numbers and leading indicators, both of which are expected to be worse than previous figures.

All in all, the data out this week points toward a continuation of the recessionary pressures and not much in the way of good news. Lawrence Summers cautioned that monthly job losses of 600k+ are unlikely to end soon and job cuts are probably not going to stop imminently. Consumer spending is the back bone of our economy so as job losses continue to mount, its difficult to see any type of sustained improvement.

I'll finish up with gold today as it continues to quickly bounce off of the minor sell offs we have seen. The actions taken by the Swiss National Bank last week have tarnished its view as a safe haven investment in some eyes, so gold would seem to be one of the few assets left classified as such. UBS said a couple of weeks ago they see gold trading as high as $1,100 within the next three months, which doesn't seem too far fetched especially as support levels continue ratcheting upward. We've seen a small pullback so far with the risk takers out in the markets this morning but its still holding onto $920 as I write. Until tomorrow...

Currencies today 3/16/09: A$ .66.19, kiwi .5309, C$ .7900, euro 1.3027, sterling 1.4221, Swiss .8452, rand 9.9158, krone 6.7672, SEK 8.4452, forint 227.89, zloty 3.4308, koruna 20.4326, yen 98.26, sing 1.5329, HKD 7.7528, INR 51.3350, China 6.8382, pesos 14.5153, BRL 2.3051, dollar index 86.667, Oil $44.24, Silver $13.0750, and Gold... 924.52

That's it for today...Hopefully everyone was able to enjoy their weekend, I know I did. We have March Madness to look forward to, so get your brackets filled out and the best of luck to you. It was a good weekend for our Missouri Tigers as they won the Big 12 championship for the first time and pulled a number 3 seed in the tournament. Anyway, we have a busy week ahead of us so I had better get to work. Have a Marvelous Monday!

Mike Meyer
Assistant Vice President
EverBank World Markets
1-800-926-4922
1-314-647-3837

Shrove Tuesday!

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

In This Issue..

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

And Now... Today's Pfennig!

Shrove Tuesday!

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

A Eurozone Bond To Compete With Treasuries?

Chuck Butler — Mon, 23 Feb 2009 16:32:58 GMT

In This Issue..

* The euro gets some wind in its sails...
* Citigroup is seeking more bailout funds?
* Gold hits $1,000!
* The ghost of Humphrey-Hawkins...

And Now... Today's Pfennig!

A Eurozone Bond To Compete With Treasuries?

Good day... And a Marvelous Monday to you! Sure seems as though I went from Friday to Monday, as I went out of town this past weekend, and before I knew it, I was driving to work this morning! UGH! There was a rumor on Friday that really sent the euro higher, and there was another rumor this past weekend about the Asian currencies... So... Let's look at those two items and more of course, as we begin the last week of February!

Well... On Friday, the euro finally caught some wind its sails after being pummeled all week by the dollar in response to the St. Valentine's Day massacre that took place the previous weekend. In case you had forgotten what I'm talking about here... I'm talking about the news that the Eastern European loan losses had grown to a point that they were causing major problems for Western European Banks that had extended the loans. There were calls for the "end of the euro" and all that... Yes, it's a very serious thing, but not the cause of a collapse of the euro!

OK... You may recall me saying that as much as I hated saying it, the IMF and Bundesbank needed to come to the rescue... Germany's Chancellor Merkel, was all "show and no go" in her press conference, and that all left the euro without a bid... But then along came John, Tall walking John, slow talking John... Well, no "John" in particular is involved, but I always got a kick out of that song! Any way... There was a story on Friday mid-day, that a "Eurozone bond" could be used to ease the turmoil on the financial institutions... Here's a snippet from Reuters...

"The Chairman of euro zone finance ministers Jean-Claude Juncker has proposed that the common euro zone bond should cover the first 40 percent of the overall euro zone government debt, sources familiar with the work of the Eurogroup said.
   This would be senior debt, guaranteed by the whole euro area, which now has 16 members. Anything above the 40 percent would be junior debt that would be issued by the individual governments.
   The junior debt would most likely be more costly for the government to issue, therefore encouraging a reduction of debt towards the common euro zone level of 40 percent, sources said.
   If agreed on, common euro zone bonds would in a matter of a few years create a highly liquid bond market of some 4 trillion euros which could successfully compete with a similar size U.S.
treasuries market for large investors like China."

That's HUGE folks! However, before we all go out to celebrate... There's opposition to this plan by Germany, who already has about 1 Trillion euros worth of German bonds issued... And if Germany balks, this plan will not get off the floor. But, for now, it has put some wind in the euro's sails...

You have to give the Eurozone ministers some credit for creating something that the likes of China could use as an "alternative" to Treasuries, as Treasuries have long been the only game in town for countries like China and Japan that have tons of cash to invest...

There was another story out this past weekend that I read about last night, that tells of the Asian countries pooling together reserves to back their currencies against speculators. The report called for around $30 Billion to be pooled by the Asian countries...

Now, that may or may not be true, but the point here is that this kind of smoke comes from the fire of protectionism... These are baby steps to a full blown protectionism plan... And you know me, there's no smoke without a fire, there's no heat without a flame...

The BIG news this morning though is the one that's going around about Citigroup... Let's see what the Wall Street Journal has to say about this... "Citigroup is in talks with federal officials that could result in the U.S. government substantially expanding its ownership of the struggling bank, according to people familiar with the situation.

While the discussions could fall apart, the government could wind up holding as much as 40% of Citigroup's common stock. Bank executives hope the stake will be closer to 25%, these people said.

Any such move would give federal officials far greater influence over one of the world's largest financial institutions. The proposal was made by Citigroup to its regulators."

Oh great, I can the dolts on Capitol Hill all screaming about how this is proof that the U.S. needs to nationalize banks... Well, let's see... If they hadn't already put tens of Billions into this bank, maybe they wouldn't be so ready to try and save it! See? This is what I was talking about months ago, when I said that the Gov. bailing out banks was a very bad thing... But, do you think these guys on Capitol Hill cared to listen then? And they are still not listening... They are dolts! When former Treasury Sec. Paulson, came to them and said he needed $750 Billion to make things right, these lawmakers didn't bat an eye, they didn't question where he got the $750 Billion figure, they didn't ask him how he would account for the spending, or how it would be paid back and when... No, they just followed him like ducklings crossing the road with their mother...

OK... This week... Hmmm... Well, tomorrow and Wednesday we get a double dose of Big Ben Bernanke speaking on Capitol Hill... This is the semi-annual testimony on the economy, which used to be required by the Humphrey-Hawkins bill that expired some time ago, but is still followed by Fed Chairmen. What's going on nowadays makes a joke out of Humphrey-Hawkins... You may recall the Humphrey-Hawkins Full Employment and Balanced Budget Act, which was put in place in 1978... I'd say the Fed has to do a Lucy... They got some 'xplainin' to do!

Tomorrow, we will see the S&P/Case-Shiller Home Price Index, which I'm sure will show that the home prices continue to fall here in the U.S. Tuesday also brings us Consumer Confidence. Wednesday will bring us Existing Home Sales followed by New Home Sales on Thursday, and we finish the week and month with a revision to the preliminary 4th QTR GDP, and the Chicago Purchasing Managers Index (manufacturing)...

So, we've got a boat load of data to go through this week, but the Big items are... 1. is the Eurozone going to issue a bond to rival Treasuries? 2. Is Citigroup going to seek additional bailout funds from the Gov.? 3. Big Ben's testimony this week 4. An Asian currency fund? 5. Data...

Gold traded above $1,000 on Friday! I saw it trade there with my own 1 eye! $1,002... But, you may recall me telling you either last week or the week before that I was sure Gold would trade to $1,000, but getting there and staying there would be difficult for the shiny metal, as profit taking would push it back down every time it gained ground to $1,000... And... That's exactly what happened late Friday, and in the overnight markets last night. Gold saw a ton of profit taking, and has been pushed down to $986... But, I look at like this... "it's cheaper today than Friday!"

The Citigroup story has the "risk takers" dipping their toes back into the water... As the "risk takers" aren't really taking risk these days... They only come out when there are stories about how banks being bailed out... But any way, that's what they are called, and when they come out to play, the high-yielders like Aussie, kiwi, Brazil, South Africa, get to join in and play too... And all of these are stronger VS the dollar this morning than they were all last week...

The Swiss franc hung on to the euro's coattails and moved higher even in the face of their banking problems, as they would not be a part of the Eurozone bond idea...

Time to head to the Big Finish... Lots of stuff to deal with this, the final week of February! And Oil is back above $40... Hmmm....

Currencies today 2/23/09: A$ .6495, kiwi .5155, C$ .8040, euro 1.2840, sterling 1.4635, Swiss .8615, rand 9.99, krone 6.7980, SEK 8.6650, forint 232.40, zloty 3.6550, koruna 22.30, yen 94.70, sing 1.5250, HKD 7.7525, INR 49.68, China 6.8390, pesos 14.76, BRL 2.38, dollar index 86.51, Oil $40.52, Silver $14.35, and Gold... $987.50

That's it for today... Yesterday morning, my beautiful bride and I had breakfast outside next to the ocean with a bright sun beaming warmth down on us... 4 hours later we were back in St. Louis, and 20 degrees! UGH! I made the trek to Jacksonville for the memorial service of our colleague John Kimsey, who would have celebrated a birthday today. I met John's wife, who said to me..."you must be Chuck, I read your letter every day"... I was also stopped in the hallway by a fellow that said, "are you Chuck Butler?, I read your newsletter every day", So... John must have converted quite a few people to be Pfennig readers! But really... I must be easy to spot, as how many bald, overweight guys are there walking around with a cane, and a beautiful bride? It was good to see a lot of EverBankers that I don't normally get to see, too bad it was for that reason... And special thanks to Diane Russell, the dinner was magnificent! OK... Mike Meyer's here, time to go! I hope your Monday is Marvelous!

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

Another HUGE Currency Rally!

Chuck Butler — Mon, 29 Dec 2008 23:43:17 GMT

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In This Issue..

* Gaza bombing has dollar on the run...
* More proof we're turning Japanese...
* Adding to the debt burden...
* What will deflation do for the dollar?

And Now... Today's Pfennig!

A HUGE Currency Rally!

Good day... And a Marvelous Monday to you! Well... It's been a long time, now I'm coming back home! Actually, I've been home all of my winter vacation, but I'm referring to the trading desk and EverBank's office. I had a vacation that had a split personality, as I was sick for the first part of it, then went to the eye doctor to get another shot / injection in my eye. So much for the first part! The second part went quite well, with lots of rest and time spent with family. Are there two better ways to spend your time? Not in my book!

So... The currencies had a split personality while I was gone too... At first, they rallied like there was no tomorrow, but then sold off, and then range traded. So, we'll finish the year on a down note for most of the currencies, but knowing all too well that the markets are beginning to realize that the debts the U.S. is chalking up are not going to go away, and in fact they're just going to get worse, and that spells bad times for the dollar... Eventually...

I did a lot of reading on my vacation, and the book I read the most was one by Christopher Wood, titled: The Bubble Economy... Now, on first take you would think that he was talking about the U.S.... But that would be wrong... This is an old book, and was written about Japan's economy in the 90's... I've spent a ton of time talking about the similarities between Japan then, and the U.S. now. And this book, just brings those thoughts even closer! For instance... In the book he quote the Levy Institute circa 1991... "monetary policy would not, on its own, be able to restart a depressed economy suffering from asset deflation and widespread financial crisis, for lower interest rates cannot motivate fixed investment when the market is glutted with existing assets worth much less than it costs to replace them."

Oh my! We're turning Japanese, I really think so!

So... Then this weekend, a Pfennig reader sent me a link to a story on Bloomberg regarding the Japanese... Here's a snippet... "Japan should write-off its holdings of Treasuries because the U.S. government will struggle to finance increasing debt levels needed to dig the economy out of recession, said Akio Mikuni, president of credit ratings agency Mikuni & Co.

The dollar may lose as much as 40 percent of its value to 50 yen or 60 yen from the current spot rate of 90.40 today in Tokyo unless Japan takes "drastic measures" to help bail out the U.S. economy, Mikuni said. Treasury yields, which are near record lows, may fall further without debt relief, making it difficult for the U.S. to borrow elsewhere, Mikuni said."

Well...the "rest of the story" can be read by clicking here: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aFgHlh.Dn4Lc

As I write, the euro is back on the attack VS the dollar, with it trading above 1.43 once again. There has been a 2 figure move up in the euro from just last night, as it appears that the markets are running from the dollar with the Israeli / Gaza thing going on. The Swiss franc is back above 95-cents, and so on... I also noticed, while on vacation, that the Aussie dollar bounced nicely off its 65-cent level. And Commodities staged a nice rally / comeback while I was gone. Gold is trading around $880 again...

When I left, I had told you about a Santa Rally for the euro, and it did just that, even with the profit taking after reaching 1.45, it's still much higher than it was when I said that we should look for a Santa Rally. I also was hinting that the Trading Theme that we've seen in place since July, was beginning to show chinks in the armor. Those chinks are becoming major exposed areas, as the markets are returning to focus on the fundamentals the hang over the U.S economy and dollar like the Sword of Damocles.

So... I see that the Fed has opened the door to grease the tracks to make GMAC a "bank-holding company" Why? Ahhh grasshopper... If GMAC is a bank holding company, they would be eligible for TARP funds, which would put them on the fast tracks to obtaining taxpayer bailout funding.

The thing I see happening now is that "everyone and their brother" is going to line up for taxpayer bailout funding... We've already set the stages for car loans, and student loans, and next we'll get real estate guys and who knows what else! Everyone is lining up at the Government bailout trough...

So, thanks guys... Thanks for running up the taxpayer costs... Thanks for making it possible that my grandchildren will be burdened with these unbelievable financing costs of all this debt we're building... Thanks... But no thanks!

It's all sort of like Humpty Dumpty isn't it? You know, all the king's men and all the king's horses couldn't put Humpty Dumpty back together again. All the Big Ben Bernankes and Henry Paulsons are trying to put the economy back together again, but it "ain't happenin"! Just shows to go you that they should have left it all alone... Let it fail... Then pick up the pieces and begin again... I've had a few people along the way that tell me that I don't offer solutions all I do is pick at the wounds... But they just don't read into what I'm typing each morning... I've said all along that we would end up in a debt ridden society if we didn't stop spending... So, there's one solution... STOP SPENDING! And then I warned that these bailouts that began last spring with the $150 Billion in checks to consumers, was going to put us on the road to turning Japanese, and we should have let things go their normal business course... There was another solution!

Now, that we're here in this quagmire of debt and there's more coming folks... I recall telling Chris while I was gone that there are rumors that the next bailout amount could reach $1 Trillion! But now that we're here, what's a poor boy to do? Well... For me, it's called savings... And when things look really bad, and prices have fallen to the core, then I'll put those savings to work, and if everyone does the same, the economy will grow once again, but from a lower base, which is a good thing. Of course, should everyone begin to spend their savings at once, this will bring about inflation that comes out our ears, but let's worry about that then, eh? Besides, like no one really thinks that with interest rates near zero, and all this money going into the system, that eventually we won't have an inflation problem do they?

OK... Now, that was a lot to get off my chest on my first day back, eh?

We didn't see any economic data on Friday after Christmas, so one would think that there's some catching up to do this week to end the year. But the data cupboard is empty today too! And it looks like those that are responsible for restocking the data cupboard, have taken this week off too... One piece of data we will get is the ISM (manufacturing) Index for this month... And remember when this index was hovering around the contraction/ expansion level of 50 and I kept saying that it was going to go below it and fall? Well, the index number in Nov. stood at 36.2, that's a long way from 50, eh? And the "experts" have forecast another fall to levels not seen since 1980! UGH! Now... Early last fall I fretted about the reversal in the weak dollar and its affect on manufacturing... Exports had just posted a strong performance in the 2nd QTR, boosting GDP, because the dollar was so darn weak! Well, I said then, that those wishing for a stronger dollar had better be careful for what they wish for...

So, with the trading desks still undermanned the volumes will be thin for the most part, unless... We see a ton of "book squaring" today, to settle before the end of the year... Either way, we need to be aware of the fact that thin volumes can cause wild swings in the currencies... Take last night's action for instance. When I went to bed the euro was trading 1.4130, and that looked pretty darn good to me... But when I turned on the screens, here in the office, this morning, what did my wondering eyes did appear, but the euro trading at 1.4350!

This rally means the euro is only down 2.5% from a year ago, which is far better than it was showing a month ago! And the best performer of 2008? Like you didn't know! It was Japanese yen, up 24.7% since last year! WOW! Of course there are some real "problem children" in the currency performance roster... Aussie, kiwi, pound sterling, loonies, and krone are all showing pitiful performances for 2008... But, if the recent price action is any indication of what could happen in 2009, if we return to the fundamentals, then these pitiful performances might get put in the rear view mirror...

U.S. Treasury Sec. Henry Paulson is just about at the end of his "tour of duty", and you've got to think that he can't wait for the new administration to take over! I don't doubt for a minute that the new Treasury Sec. will pull back on the bailouts... But what I do question, with Paulson leaving, is what happens with China? Paulson didn't make the progress with China that he set out to make, but what he did do is keep the knuckleheads in D.C. from slapping trade tariffs on China... I have to wonder if that will be the direction of the new Secretary... If it is, then that won't be good for the dollar, as protectionism is never viewed as a positive for a currency. So, those questions and more are on the docket for 2009...

I received quite a few emails from readers while on vacation with a question about something that another newsletter writer wrote about the euro / dollar... The writer believed that deflation was going to be a big problem for the U.S. next year, and that would be a good thing for the dollar, thus pushing the euro to parity. Hmmm... Well, that may be true, for I don't know what's going to REALLY HAPPEN! But! I would just have to say that since we're mirroring Japan so much, let's go back and look at what deflation did for the yen in the late 90's when deflation was so prevalent... Oh, it doesn't look like deflation did yen any favors then... And I doubt it will do the dollar any favors this time around... So, there's my answer to that call by someone else... To me, though, this is all good, as it still means that there is a two-way trade, and that not everyone is on the same side of the ship!

So... Before I head to the Big Finish, let me re-cap today's action so far... The dollar has been hammered overnight on fears that the Israeli attacks on Hamas in the Gaza Strip will disrupt oil supplies to the U.S. This has driven the price of oil higher to $40.40, and has caused a traders to unload dollars... The data cupboard is empty today, and trading desks are undermanned, which could cause wild swings in the currencies this week.

Currencies today 12/29/08: A$ .6965, kiwi .5850, C$ .8210, euro 1.4355, sterling 1.4670, Swiss .9585, ISK 143.20, rand 9.55, krone 6.95, SEK 7.67, forint 186.10, zloty 2.9050, koruna 18.54, yen 90, baht 35, sing 1.4370, HKD 7.6710, INR 48.42, China 6.8525, pesos 13.46, BRL 2.3450, dollar index 79.70, Oil $40.40, Silver $11, and Gold $885.80

Oh, and thanks for all the kind words about our Christmas card / photo we sent out! Chris had a little error on his listing of the names on the photo... He said "right to left", but it really was left to right... Now, we've really got you confused, eh? HA!

That's it for today... Well, did you have a great Christmas / Holiday? I sure hope so! Do you have Big Plans for New Year's Eve? If you do, please be careful! I will get together with close friends for dinner, and return home! Thanks to Chris for another great job Pfilling in on the Pfennig! Chris sure had some very kind words about my beautiful bride last Friday. I thought he had ticked her off some way! HAHAHAHAHA! Wait till he sees my travel plans for March! I guess most people will be back today, except for Jen, who will be out this week. She needed it after me being gone two weeks! My beloved Missouri Tigers play in the Alamo Bowl tonight (a far cry from where they thought they might play this year!), against Northwestern. Should be a good game. Go Tigers! The bitter cold we had here has been replaced by normal temperatures, still chilly / cold, but not bitter cold like they were. So, that's all good... I guess it's not too early to talk about the Orlando Money Show, which will be Feb 4-7... I'll be there, God willing, along with others... I wonder where the currencies will be then? This is always the biggest show, best attended, and a welcome relief from the cold weather here in St. Louis! OK... That's all I've got for today... Let's make it a Marvelous Monday, eh?

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

Maybe It's Time For A Change?

Chuck Butler — Wed, 26 Nov 2008 17:14:00 GMT

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In This Issue..

* Currencies continue to rally...
* More Stimulus...
* Data shows more rot on the vine...
* A Thanksgiving thought...

And Now... Today's Pfennig!

Maybe It's Time For A Change?

Good day... And a Wonderful Wednesday to you! The day before Thanksgiving... Tonight is, historically, the biggest "going out" night for the younger crowd, as they all return home from college, etc. Not for yours truly though... A little reminder that Friday I will not be writing... Friday night, a large group of friends and family are starting the holiday season off with a gathering at the Butler House, before all heading to see the Trans Siberian Orchestra's Holiday Concert... I'm getting pumped up for that!

OK... Another rally day in the currencies yesterday... One that wasn't as pronounced as Monday's 3-cent rally... But a rally just the same, and at one point, the euro was trading above 1.30... Hadn't seen that level in a while, so welcome back to the 1.30 level, Mr. euro...

Someone sent me a note the other day, and said, why don't you talk about Australia, Canada, and Swiss more? Hmmmm... Maybe they don't read the Pfennig "every day"... But those currencies are in my notes most days, and if they are not, they are a part of the overall direction in currencies that are being pushed down by the Trading Theme... But in the spirit of the season...

Aussie dollars have rebounded nicely the last three days, but this is really putting a band-aid on a bullet wound, for the A$ has suffered a shot to the heart, and you're to blame, no wait! They've gotten bashed, beaten and left for dead, by the unwinding Carry Trades, and Commodities price collapse. Large interest rate cuts by the Reserve Bank of Australia (RBA) haven't helped the A$... And so... Until risk is back in the markets, driving commodities higher and bringing the battered Carry Traders back, the A$ will not be on the short list of currencies that can mount a rally VS the dollar... Should those two items come back with vengeance? Now that's a horse of a different color!

The Canadian dollar is getting tarred with the same brush as the A$, only the main commodity pushing the C$ down is the price of oil... Now, this is a case of: Torn between two lovers, feeling like a fool... I would love to see the C$ rebound, but it needs a higher oil price to do so, and I'm not about to turn my back on lower oil prices! I love less than $2 gas!

Now there are those that would tell you that this current level of the price of oil is just a fleeting moment price, and that we're still in store for $8 gas down the road... OK, I'm not sure I can get my arms around that, unless... We as a country do what we've done about gas driven automobiles for the last 35 years... Nothing, absolutely nothing! Then $8 gas is probably in our future... But it's not now, and won't be next week or next month, or even next year... Let's all hope it's not in our future at all!

The Swiss franc... Oh, where to start? The Swiss National Bank (SNB) shot an arrow into the heart of the franc last week, when they cut interest rates 100 BPS... Who would have thought that the SNB had 100 BPS of rate cut arrows in their quiver? But they did, and now francs are back on the block.... The "block" I'm talking about is the selling short block to fund Carry Trades, where they held court with Japanese yen, until the SNB began raising rates in 2007... Then the U.S. dollar took over, and that's where we are now... Good thing for francs that the Carry Trade and risk Aversion is hanging over the markets like the Sword of Damocles right now...

You know... We've been stuck in this Trading Theme of investors buying dollars whenever the economic Tsunami looks deeper, darker and more dangerous, for so long now, I had to sit back and examine this current currency rally further for what it was... At first, I thought this was simply a case of the currencies rallying because the "light at the end of the tunnel was brighter" as witnessed by the large rallies in stocks, caused by the bailout of Citicorp... But, then if that was the "true case" we would have seen the yen get sold along with the dollar... And guess what? Japanese yen was rallying too, while the dollar got sold!

In short- it seems like the market is starting to realize that all the various stimulus packages and bailouts our "leaders are throwing at the problems our economy faces and recognizing that while they may or may not lead us to the promised land of no deep, dark, dangerous recession, one thing that is a certainty is they will need to be financed. And isn't this the Big Problem for the dollar that I've talked about for over a year now? In the end, the reality will be that this is all negative for the dollar... And well, in the end, our fiscal well being.

Yes, I completely understand that Europe faces a similar challenge, but let's face the facts here, Europe has a surplus, right now at least, and does not have the funding requirements that the U.S. does...

And finally, there's the "other" thought... The dollar has gone a long way in a very short time erasing 5 years of gains from some currencies... It was about time that it paused for the cause...

So... In keeping with the thought about the stimulus packages and bailouts... The Fed and Treasury announced another round yesterday... You might want to sit down, and reach for your wallet, just to make sure it's still there!

Here's how the Wall Street Journal reported the news... "The U.S. on Tuesday stepped up its efforts to support strained credit markets through new programs aimed at boosting consumer credit and the market for mortgage-backed securities.

Under the Term Asset-Backed Securities Loan Facility, or TALF, the Federal Reserve will extend up to $200 billion in non-recourse loans to holders of asset-backed securities backed by consumer and small-business loans.

The Fed also said it will purchase up to $100 billion in GSE debt through a series of competitive auctions starting next week. It will also purchase up to $500 billion in mortgage-backed securities backed by GSEs, with the goal of starting that program by the end of the year."

For those of you that didn't experience "new math"... (HAHAHAHAHAHA 2+2 is still 4!) the tote board shows us that yesterday's announcement totals $800 Billion in addition to what they already have in the hopper! Geez Louise, when will this all stop? The Fed's balance sheet has grown by over $1.3 Trillion so far this year and could very well be turning Japanese once again! What am I talking about here? Well... You all know how I've been saying that the U.S. if following Japan's model of the 90's? Well... The Japanese added debt on to debt creating stimulus packages and bailouts too, and then lowered interest rates to zero, and the only thing left was targeting the quantity of money rather than its price. By that I'm trying to say that they didn't care what happened to the yen's value, they printed and printed... Oh brother! Here we go again! Are we doomed to experience a decade of deflation like the Japanese did?

I don't think so... I think our deflationary period will be much shorter, and then on the other side of that, we'll see inflation that will cause you to reach for your wallet again to see if it's still there! This inflation will push commodities back into the limelight, and once again the dollar will be punished...

That's my story, and I'm sticking to it!

OK... The data yesterday was more of the same-o, same-o, awful looking stuff... U.S. preliminary 3rd QTR GDP printed at negative -.5%, and Personal Consumption (which the Fed used to look at closely, but doubt they do any longer) fell to negative -3.7% from -3.2% in the 3rd QTR. And, the S&P/CaseShiller House Price Index fell another 17.4% in September from a year ago. The rot on the Housing price vine still has some additional deterioration to go, unfortunately...

The Data Cupboard continues to yield plenty for us to look at each day with a heaping helping of Personal Income and Spending for October today. In addition, we'll see Durable Goods Orders for October, the Weekly Initial Jobless Claims, Chicago Purchasing Managers Index (manufacturing for that region), U of Michigan Consumer Confidence, and New Home Sales for October... Whew! My fingers are worn out after all that! HA!

But there's more... I've been wanting to have a brief discussion about this for some time now, and each day I experience a loss of memory and forget to do so! What am I talking about, I hear you asking? Well... It's Gold... And not just the price of Gold in dollars, which has rebounded nicely this past week... But to point out that Gold has been rising VS all the currencies. Which makes sense right? The dollar has pounded the currencies for 4 months, and Gold gets stronger in those currencies... It's an interesting situation... So, Gold hasn't sunk VS the other currencies like it has VS the dollar.

OK... Here's the dilemma for the currency traders today... We've got all this data to deal with, and everyone is going to be trying to leave early today to get a head start on getting home for Thanksgiving... Will the lack of volume this afternoon cause wild swings? It has a history of doing so...

China has cut their internal interest rate to help stimulate their economy, which the OED lowered their forecast for China's economic growth from 9% to 7.5%... Well... 7.5% still sounds pretty darn good, doesn't it? Especially, when you consider that by the time the 4th QTR U.S. GDP numbers are printed (not until probably Fed 2009), they will show U.S. GDP to be a negative -5.0%!!!!!!

OK... Now that was a lot for the day before Thanksgiving, eh? I had better stop here, as I don't want to get you stuffed before your Thanksgiving meal!

Currencies today 11/26/08: A$ .6480, kiwi .55, C$ .8175, euro 1.2960, sterling 1.5340, Swiss .8375, ISK 235 (really, this is the quote we received Monday!) rand 9.8880, krone 6.9530, SEK 7.9260, forint 201.30, zloty 2.9180, koruna 19.48, yen 95.40, baht 35.20, sing 1.5080, HKD 7.7550, INR 49.43, China 6.8285, pesos 13.37, BRL 2.3370, dollar index 85.38, Oil $51.60, Silver $10.29, and Gold... $816.84

That's it for today... Well... I've written today's Pfennig knowing all long that I had no network to get it out... I noticed the problem when I logged on this morning... No network... And since I get here long before most of our IT people are wiping the sleep out of their eyes, (not a knock on them, just to point out how early I get here) The Pfennig probably won't go out for a few hours this morning... So... I've got that going for me this morning! UGH!

Tomorrow is Thanksgiving... It's quite a day as families gather and celebrate with wonderful meals and lively conversations. It's also a day for some great football games! Here's a Thanksgiving poem for you...

Leaves are falling everywhere,
A bit of chill is in the air,
It's time for fun and food galore,
For turkey, pumpkin pie, and more...
Autumn is here and that means one thing,
All the joy that Thanksgiving brings.

And as we gather together
From wherever we live
We give thanks to our Fathers above
For the earth and its harvest,
For freedom and peace,
And, especially,
For the people we Love.

I hope everyone has a wonderful and fulfilling Thanksgiving.

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

Veteran's Day

Chuck Butler — Tue, 11 Nov 2008 14:47:07 GMT

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

Gold and silver prices are down.

Invest for as little as $5,000, avoid costly broker commissions, and receive account statements every month.

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In This Issue..

* The China good feeling dissipates...

* Currencies lose their edge...

* Fannie Mae needs more!

* Silver manipulation?

And Now... Today's Pfennig!

Veteran's Day

Good day... And a Terrific Tuesday to you! A Veteran's Day Tuesday! This is a Banking and Federal Holiday today, so the bricks and mortar banks are closed, and there will be no mail delivery, and of course your friendly neighborhood Government worker gets the day off. I'm here, in the saddle, writing the Pfennig like it's a regular work day, and the boys and girls will begin to gather in about 2 1/2 hours from now. We'll get all caught up, return some calls and head home today.

Veteran's Day... I thought I would begin today with a snippet of a Veteran's Day poem by Jared Jenkins...

For every life, there is a soul

For every soul, there is a life

For those who have died, we show great appreciation and remembrance

For those who live, along with them live the horrific memories of battle

Some, memories of defeat

Some, memories of victory

Our veterans were more than soldiers

They were, and still are heroes

OK... Well... All that build up yesterday about how the markets liked the sound of the Chinese announcement to inject $586 Billion worth of renminbi into their economy, dissipated early on in the NY market yesterday. As I left you the euro had climbed above 1.29 again, but ended the day around 1.2740... This is tied directly to the Trading Theme, and that's all I have to say about that... Have a great day, and I'll talk to you tomorrow...

HA! Had you there for a minute! The dollar rallied once again, when the deep, dark, dangerous clouds returned, and the risk takers that had come out of the woodwork on Friday, disappeared, which left the currencies hung out on the line. Gold rallied $10, which is really counter-intuitive to the risk takers disappearing and the dollar rallying... But it did, and I'm not here to argue about that!

As I said yesterday, the data cupboard was bare with no data to report Monday... With today being a holiday, we won't get our next glimpse of the awful fundamentals data until Wednesday. In the overseas version of a data cupboard, the German Investor Confidence, as measured by the think tank, ZEW, surprised on the good side, with the index rising in October... This index had been on the slippery slope for the past few months. The news is that the index rose because the European Central Bank (ECB) stepped to the plate a couple of weekends ago, and made good contact with the financial meltdown in Europe.

Again... Let me say this loud and clear, folks... There's a HUGE difference in Central Banks that provide liquidity... One does so from a position of strength like the ECB and China... and the other does so from a position of weakness (the Fed)...

But the good report isn't doing anything to help the euro this morning, as the overnight stock markets didn't fare too well, which has led to U.S. index futures being off... And all that means a rotten trading day, thus keeping the risk takers on the sidelines, and the dollar being the king of the hill...

And... All this means the Japanese yen is back on the rally tracks! I see this morning where BNP Paribas says that their Elliott Wave chartists believe yen will trade to 96.85 in the next week... Of course you know me folks... Trends are what move currencies... Charts merely tell you or give you an excuse as to why a currency moved in that trend. In this case... We all know that while the deleveraging is going on during the credit market squeeze, that dollars and yen are the only two currencies to gain (Chinese renminbi goes back and forth)...

Back here in the Good Old U.S.A.... The accountants over at Fannie Mae announced that the $100 Billion pledge to them "may not be enough"... This announcement came after Fannie posted a record $29 Billion loss and confronting more difficulty in issuing and refinancing debt. I guess the folks at Fannie thought, Shoot Rudy, if AIG can go back for second helpings of bailout funds, then we can too! I think we should all get used to this, as I said when all the original plans to bail out these firms were announced... These bailout funds are going to be like cocaine to these needing bailouts, and they are going to need more and more...

And the Wall Street Journal reported this last night that... "The Federal Reserve said Monday it will allow American Express to become a bank-holding company, saying "unusual and exigent circumstances affecting financial markets" justified a fast approval of the company's application. The surprise move would give American Express access to new low-cost financing from the Federal Reserve."

Before it's all said and done, we'll all be one big happy family, no make that dysfunctional family of "bankers"... Shoot, they may as well bring the automakers into the fold too, they need some of the low-cost financing from the Fed too! I could really go off on a tangent here... But, I'll keep it on a even keel, as it's not like there's anything I can do about all this, so why get to upset with all these dolts!

So... The bad fundamentals, no make that awful fundamentals, continue to mount for the U.S. to deal with... But before we can deal with the awful fundamentals, we have to deal with the credit markets squeeze... No ifs, ands or buts... If we can get the lending going again, and I'm not talking about to individuals, I'm talking about between banks, and with Corporations, then the focus will return to the fundamentals... That's my story and I'm sticking to it!

You know... One thing that I talked about last summer, and was even quoted in the Wall Street Journal talking about, was the fact that with the low interest rates in the U.S. the dollar had replaced the Swiss franc as a funding currency in the carry trade... And since then, the borrowing rates in the U.S. have gone even lower... But Carry Trades are not too popular at the moment, with risk taking on the sidelines... So the affect on the dollar at this point is mute. But, this explanation helps with the "reason the dollar is rallying"... I've explained more times than I care to that with Carry Trades unwinding, the "funding currency" which was sold short, gets bought to cover the short position, and so, just like Japanese yen, the dollar rallies...

And while I'm on the weird things going on in the U.S. I thought I would give you a snippet of a letter that Ted Butler (no relation, that I'm aware of) sent out regarding what he feels is manipulation of Silver. Here's the other "Mr. Butler"...

"This week, I received a copy of a letter, dated October 8, sent from the CFTC to a California Congressman, Gary G. Miller. It discussed allegations of a silver market manipulation because of the data in the monthly Bank Participation Report. The data in that report for August showed that one or two U.S. banks held a massive short position in COMEX silver futures of 33,805 contracts, or more than 169 million ounces. This is equal to 25% of annual world mine production, and was up more than five-fold from the prior month's report. After this position was established, silver prices fell more than 50%, in spite of a widespread shortage in retail forms of investment silver."

So, there you go! Ted Butler believes he has the proof of manipulation in Silver, but what's the Gov't going to do about it... Ahhh... As one of my all time faves, Edwin Starr, sings... Nothing, absolutely nothing, say it again!

There was an article posted on CNBC's website yesterday that listed Companies here in the U.S. that are announcing layoffs... This was not a pretty scene folks... But if you want to check it out, click here... http://www.cnbc.com/id/27645929

Yesterday, I told you the "news of the weird" with the announcement by the Fed that the guy who was responsible for risk management at Bear Stearns, the now defunct Bear Stearns I might add, was hired to head the group that overseas the purchase of the toxic waste bonds by the Fed... This to me is akin to putting the fox in control of the hen house! Any way... A long time reader sent me a note regarding this announcement... "I read somewhere about this appointment in several places last week on the web. One "source" actually suggested perhaps he was hired just to keep his mouth shut as who would better know how really toxic the traded paper is and what really lies out there?"

OK... You know me, I'm not one to put speculation in the Pfennig, especially when it appears on a website... But, this really struck a chord with me (probably cmaj7 my fave chord!)... And it appeals to my conspiracy theory blood... Let's just hope it's not even close to the truth!

I hear that the major oil companies that are attempting to get Oil out of the oil-sands in Canada, have decided to halt the spending there. For those of you not familiar with these oil-sands in Canada... These are the world's biggest energy reserves outside Saudi Arabia. Getting the oil out of the ground here is a real problem and costly, and with the price of Oil dropping since July, the oil companies drilling here, have decided to cut back on the costs... I don't understand this decision, as this IS the time to drill!

Currencies today 11/11/08: A$ .6685, kiwi .5830, C$ .8385, euro 1.2740, sterling 1.5575, Swiss .85, ISK 182, rand 10.1825, krone 6.90, SEK 7.875, forint 210.50, zloty 2.2050, koruna 19.89, yen 97.75, baht 34.94, sing 1.4980, HKD 7.75, INR 48.10, China 6.8250, pesos 12.88, BRL 2.2050, dollar index 86.02, Oil $60.30, Silver $9.97, and Gold... $739.15

That's it for today... Funny thing happened this morning as my alarm went off... Jim Croce was singing, "I hope I didn't wake you" I said, "OF COURSE YOU DID!" HA! Then as I was sitting here typing away, the rain was pelting against the window, and the great song by POCO was playing on the radio... Bad Weather... I saw some more previews for the new season of 24 last night... Can't wait for that to start again! This coming weekend, I'll be in New Orleans for the New Orleans Investment Conference. This is the granddaddy of all investment conferences, and has been a "go to" place for the Gold Bugs over the years, as it was started by THE Gold Bug, Jim Blanchard... I really moved up the roster of speakers at the New Orleans Conference this year... Last year, I was the very last speaker of the Conference... This year, I'm the second to last speaker! See how I've moved up in the world? HA! That's OK... It's a good crowd... The Big Boss, Frank Trotter, is filling in for me on an investment panel Saturday morning, as I don't arrive there until Saturday afternoon. Then he leaves as I arrive. Two ships passing in the night! OK... Well, I would just like to say Thank You to anyone that reads this letter that is or was in the service for this country... And Thank You to those that are no longer with us to read the Pfennig. Sure hope your Tuesday is Terrific...

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837

FOMC Meeting Begins Today...

Chuck Butler — Tue, 28 Oct 2008 14:40:33 GMT

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In This Issue..

* Mini-currency rally is cut short

* Is it Japan or U.S.?

* Gold stages a rally...

* Swiss francs remain well bid...

And Now... Today's Pfennig!

FOMC Meeting Begins Today...

Good day... And a Terrific Tuesday to you! Well... We saw some profit taking in the currencies yesterday, which meant a mini-rally in non-dollar currencies for the first time in what seems to be a month of Sundays! At one point in the day, the euro had added more than 1-cent to its figure dragging sterling, Swiss, Canada and a host of others along. But, that didn't last in the overnight markets, and we're right smack dab back on square one where we left off yesterday.

This morning we'll listen in on former Fed Chairman Volcker's speech, which ought to be a good one, don't you think? I mean, this is the guy that said a couple of years ago that the U.S. could see a currency crisis... And didn't it? OK, it's not now, but turn your clocks back to June, and you'll see what I'm talking about here. Volcker is a "hero" of mine in how he took on the inflation of the late 70's early 80's and didn't dance around the dance floor with it... He whipped it into shape, and then left it all in good shape for Big Al Greenspan... We all know what happened after that!

We'll also see Consumer Confidence for the first part of this month, which is expected to take the Nestea plunge from and index number of 59.8 to 52! You know me, I can't ever, for the life of me, figure out how Consumer Confidence can even be this high! But then, if every one worried about the stuff I worry about, this would be a dull place to live, eh? HA!

The S&P Case/Shiller Home Price Index will also print this morning, so expect more rot on the vine with home prices here... And finally... The Fed begins a two day meeting today... The Fed's FOMC begins today with a rate announcement expected tomorrow. What do you think it will be... A 25 BPS cut? Or 50 BPS cut? I'm thinking that it will be 50 BPS... I've always kidded that I wondered what the Fed Heads do for two days before announcing their rate moves... I think they play Battleship! By Joe you've sunk my Battleship! HA

One of my fave economists, Nouriel Roubini, said in interview that he believed the Fed was going to have to move rates to zero! That's a big fat goose egg folks! Wow! What country does this all remind you of? Come on, you know what I'm referring to here, as I keep bringing this up over and over again... Oh, I think I'm turning Japanese, I really think so... (my good friend, and big fan of the 80's, Rick, tells me that song was by the Vapors)

Let me add up the facts here... A collapsing stock market, check. Falling bond yields, check. Economic stimulus packages, check. Bailouts, check. Dire times for the economy, check. A Central Bank that believes cutting interest rates to near zero is the right thing to do, check, and checkmate! Which country was I talking about there? The U.S. or Japan in the 90's? Oh, I think I'm turning Japanese, I really think so! This all reminds me of those Memorex commercials... Remember? "Is it live or Memorex?" Is this Japan or U.S.?

Speaking of Japan... The yen saw selling yesterday for the first time in a while... I know from my view in the cheap seats, most yen selling that I saw was simply profit taking... You have to think that given the price action in almost all assets these days, seeing one with a profit is very inviting, eh?

So... With yen weakening just a bit, did it mean that the risk takers were back? I don't think so... Not yet anyway. As I said, it all looked like profit taking to me. Not even the threat of Bank of Japan (BOJ) intervention was going to bring the risk takers back out... By that I mean, that if the BOJ was going to intervene, which means sell yen to weaken it, the risk takers might use that information to their advantage and put Carry Trades back on the books... But, that didn't happen, I think the risk takers have had the bejeebers scared out of them with all that's going on, and it will be awhile before we see them in the places with bright shiny faces!

And... While I don't want to spend the whole letter today on Japan... I must say that I think we should all be very wary of the BOJ and their history of intervening to keep yen weak. This will be a huge battle between the Carry Trade unwinders and Uridashi Bond sellers VS the BOJ... Just don't get caught up in it... If it happens, stay to the sidelines, you don't want to get caught up in an intervention battle...

I was reading friend, Bill Bonner's Daily Reckoning (www.dailyreckoning.com) last night, and noticed that he was talking about the Dow going to 5,000... He had this to say about it, which plays well with our thought about all the deleveraging going on in the world right now... Here's Bill...

"It probably would have corrected to the 5,000-range already. But the feds intervened. And now we've really got trouble. Because in trying to head off a recession/bear market, the authorities provoked a housing bubble, a financial bubble, and a worldwide credit bubble. Homeowners over-bought. Banks over-lent. Consumers over-stretched. Almost everyone seemed to over-do it. So, what might have been a typical bear market has been transformed into a monster of deleveraging."

Gold is up $13 this morning! But Silver has dropped below $9... And we still can't find physical Gold or Silver supplies anywhere! We did find 2,000 Gold Olympic Coins from Canada a few weeks ago, and those went out the door as fast as they came in! This whole lack of physical metals and slumping prices is beyond my ability to figure it out... I get asked all the time why isn't Gold going higher, and I went through all that yesterday, but it's important to know that I'm a firm believer that all this stimulus, and low interest rates are going to fuel much higher inflation, and that should be a good thing for Gold prices.

The Swiss franc continues to remain well bid and resist the strong pull down of the euro. I would think that given all the "risk" in the global markets these days, that francs would be well bid, which means that there are buyers of the currency. There's little in the way of yield here in Swiss francs, but it's better than nothing, nada, zero, zilch, a big fat goose egg like we'll soon see here in the U.S!

In its semi annual Financial Stability Report released overnight, the Bank of England (BOE) said that the five biggest banks and Nationwide building society could lose as much as 130 Billion pounds over the next five years, well in excess of the 50 Billion pounds that the banks recently promised to raise as part of the Treasury's bailout plan, forcing the banks to ask shareholders for even more cash. Things don't look rosy for the U.K. or pound sterling, folks...

And speaking of not looking so rosy... Nothing has changed in Iceland... We can't get payment for our maturities, as the clearing mechanism for currencies has been shut down, with the takeover of the largest banks in Iceland. Now, I read that the Icelandic Central Bank raised interest rates 400 BPS to 18% this morning... For what? I don't get it... That's like rearranging the deck chairs on the Titanic! I just wish the Central Bank would worry more about getting maturities paid! UGH!

You know... I talked a lot about foreign bonds when I was doing the Currency Tours. Foreign bonds are a great way to take a long term position in a currency, and not worry so much about the day-to-day moves of the currency. You lock in a yield to maturity on the bond, and it's liquid... Seems like a lay-up to me, especially when you consider that in a lot of countries your yield to maturity would be higher than what you can find here. Foreign Bond trading is how I got my feet wet in the currencies... I cut my teeth on Foreign Bonds, so they have always been near and dear to my heart...

I was thinking the other day about all these people taking losses breaking their CD's and attempting to catch a falling knife, and said to myself... "Chuck, why don't you tell people about taking that currency they own, and using it to buy a foreign bond?" So... There! I did just that! Should you want to talk to somebody about that, our bond guy is Don Ries... He can be reached at the same 800#, 800-926-4922, that you call us on everyday...

Chris Gaffney sent me a note yesterday regarding our first MarketSafe CD maturity, which happened yesterday! Recall, we created MarketSafe CD's on different assets (before all the volatility in the markets squeezed us out of the structured product creation), and the owner of the CD would have upside potential of the underlying asset, and enjoy 100% principal protection... Well, this first maturity was one based on the S&P 500... And it sure looks like the owners of that CD did quite well!

Chris tells me that the ending price of the S&P 500 index today was 848.92, which equates to a 29% fall vs. the original S&P price of 1196.54. Investors in this MarketSafe CD will be receiving their original investments with no upside payment. So... We saved investors 29% (assuming they would still be holding stocks)... Pretty cool...

And on that note... I think I'll head to the Big Finish! Oh, and the currencies have risen a bit since I first came in, so we've got that going for us today!

Currencies today 10/28/08: A$ .6190, kiwi .5495, C$ .7720, euro 1.2505, sterling 1.5680, Swiss .8615, ISK (no quote), rand 10.66, krone 6.8650, SEK 7.9950, forint 212.75, zloty 2.9775, koruna 19.48, yen 94.60, baht 34.90, sing 1.5075, HKD 7.7520, INR 49.87, China 6.8385, pesos 13.21, BRL 2.19, dollar index 87.13, Oil $64.03, Silver $8.91, and Gold... $742.50

That's it for today... A very long day yesterday... Systems problems delayed our start, then a ton of stuff to trade it was incredible! And the Phones? Unbelievable! Today's another day, so I had better get ready. I found out yesterday that we're having an art gallery show in the office on Thursday evening. Frank has supported the arts with this being the 3rd art show we've held in our offices after hours. Our old friend, Rick Barcheck, picks out the artwork, comes in, hangs it, and hopes someone will make an offer to buy it! They are good times, with lots of old friends from the Mark Twain Bank days... And then, Friday is Halloween! My darling daughter, Dawn, called the other day to see if it would be OK to bring her daughter (my granddaughter), Delaney Grace by on Friday in her Halloween costume. Can't wait to see that! When Dawn and her brother Andrew were little, my beautiful bride would always bring them by to see me at the office in their costumes. Dawn is carrying on the tradition! OK... Enough! Time to get to work! Hope you have a Terrific Tuesday!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837

Congratulations to Chuck...

Chuck Butler — Tue, 16 Sep 2008 14:19:23 GMT

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In This Issue..

* Great news from Chuck...

* FOMC could lower rates...

* TIC flows to slow...

* Yen and SFR continue to rally...

And Now... Today's Pfennig!

Congratulations to Chuck...

Good day... I want to start this mornings Pfennig off with a note Chuck sent the trade desk last night:

"The doctor called, and I'm CLEAN! My scans were clean, and, I'm officially off the Sutent, and considered a "Cancer Survivor" now! YIPPEE!"

I know the markets are in a state of turmoil, but that great news from Chuck took precedence over anything I could write about the currencies. It looks like Chuck's positive attitude along with all of our prayers have beaten back the cancer (I guess his doctors and the new medicines deserve some of the credit also). Congratulations to Chuck, can't wait to shake his hand when he returns from the first week of the FXU tour. But now lets move on to the markets.

I was so focused on the Wall Street turmoil yesterday that I failed to mention the FOMC will be meeting today. Just a few weeks ago, the markets were calling for an interest rate increase by the Fed to tackle inflation. But the events of this past weekend, along with a dramatic drop in the price of oil, has many calling for another interest rate cut. The Central Bank has already injected billions of money into the markets to try and calm them after the bankruptcy of Lehman. The Federal Reserve yesterday added $70 billion in reserves, the most since the September 2001 terrorist attacks. The funds were needed as banks and financial firms tightened up their lending in reaction to the financial turmoil.

Firms with healthy balance sheets, and cash available to lend out just don't trust other firms who are looking for capital. The credit markets have seized again, and overnight lending rates were heading dramatically higher until the Fed stepped in and increased the money supply through overnight repos. But this increase in money supply is by definition inflationary, and if they can't pull it back in from the markets, the long term impact is to cause further downward pressure on the dollar.

Chuck had this to say about events this weekend: "OK... A Financial Tsunami... That's the best description of what I saw happening yesterday, after Sunday's announcement of Lehman and Merrill Lynch... But the biggest fish so far is probably AIG, and all their problems... You see, AIG is facing a downgrade in ratings, which means they will have to post more collateral on their loans. Collateral that they don't have! Stocks plunged 500 points yesterday. It's a Financial Tsunami, and the dollar is caught in the headwinds!

I just don't get those that say the dollar will be a "safe haven" during this time, how can the country that is causing the Tsunami, have a "safe haven currency"? I would think the currencies of Japan, Singapore, Switzerland, and China would be the safe havens... With the euro experiencing perceived problems, investors are a little skittish toward the euro... But, remember this, the euro is the offset of the dollar!"

As Chuck points out, US treasuries are still being sought out as a safe haven for parking cash during these troubled times. A quick look at the treasury markets yesterday showed that two-year note yields dropped 44 basis points, or 0.44%, to 1.79%, the biggest decline since Sept. 17, 2001. The 10-year bond gained over two-full points as investors parked cash waiting to see what is going to happen. I actually understand why investors are parking cash in these treasuries, as they don't feel they can trust the banking system or commercial paper markets and need to just find a quick place to hide during this financial Tsunami as Chuck calls it.

But will these investors be happy sitting in these US treasuries with rates below 1% on short term bills and a top rate of just 3.93% on the 30 year bond? Why would anyone be happy holding these treasuries when their real yields (adjusted for inflation) are actually negative? Inflation in the US will be reported this morning, and is expected to show the Consumer Price Index rose 5.5% from August of last year. So while investors may have gone to Treasuries as an immediate knee jerk reaction to the crisis, I don't expect them to stay there long. The smart investors will start to look for other places to move these funds. And right now, the best opportunities are in markets outside of the US dollar. If the FOMC does decide the lower rates today, or generates a dovish statement, investors will begin to move back into the better prospects which can be found in countries outside of the US.

Gold started to move back off its recent lows, but the move to hard assets wasn't as dramatic as I thought it would be. After all, if investors are looking for a 'safe haven', how much safer can you get than Gold? One argument which I have heard against Gold is that you can't get paid any interest on your gold holdings, but if you are willing to earn a negative real yield on US treasuries, an investment in Gold actually becomes even more attractive. Logically, events like those that occurred this weekend should set off a buying frenzy in the metals markets. But while Gold and Silver both rose slightly yesterday, they are down this morning.

So precious metal prices are down, just when you would expect them to be rising. And judging from the calls to the desk, supplies of minted coins for both Gold or Silver are getting harder to find. Our metal dealers tell us that the mints just haven't been able to keep up with demand for gold and silver coins, but prices for these commodities continue to slide. Just doesn't make any sense to me, but I'm not the only one perplexed by the metals markets. I read a piece by our friend the Mogambo Guru yesterday which makes a good case for investors to add gold and silver to their portfolios at current prices. Investors should have a portion of their investments in gold or silver, as a hedge against inflation, and against a possible meltdown of the current financial system.

In addition to the inflation data and FOMC rate announcement, the TIC flow data will be released later this morning. The numbers are expected to show that foreign investors slowed their total net purchases of US investments during July. With the latest crisis, I would expect to see the August numbers show a reduction. This number is important, as the US needs to attract foreign capital in order to fund our ever increasing deficits. If we are unable to attract enough foreign capital, the dollar will need to move lower or interest rates need to move up. A combination of these two is the probable outcome over the long term.

The dramatic increases in market volatility continue to benefit the Japanese yen and Swiss franc, both of which turned in good performances vs. the US$ yesterday. These currencies continue to move up as investors exit leveraged carry trade positions. With reversals of these carry trades, the high yielding currencies of Australia, New Zealand, and South Africa have been sold. In fact, all of the emerging market currencies are down vs. the US$, with the Brazilian real and Mexican pesos off over 1% during the past 5 days.

Unfortunately the Aussie and Brazilian real have gotten caught up in the sell off of commodity prices and the risk aversion trades. I continue to believe that long term the commodity riches held by these two countries will support their currencies, but short term it looks like they will continue to be sold. Investors looking for shelter from this storm should look at the Asian currencies of China, Japan, or Singapore. Investments in the Swiss franc also look to continue to appreciate.

I'll end it there today, as the markets are going to be interesting again today. I think the FOMC will hold rates steady, but hint at the possibility of support for the economy which means lower rates by year end. But the Fed could succumb to calls from the stock jockeys for a rate cut to help steady the stock markets. If this is the case, look for a general sell off in the US$ as investors exit the 'safe haven' of US treasuries. Should make for an interesting trading day.

Currencies today 9/16/08: A$ .7904, kiwi .6521, C$ .9315, euro 1.4199, sterling 1.7823, Swiss .8999, ISK 91.77, rand 8.1755, krone 5.826, SEK 6.8084, forint 171.84, zloty 2.3918, koruna 17.010, yen 104.13, baht 34.29, sing 1.4331, HKD 7.7792, INR 46.935, China 6.845, pesos 10.7722, BRL 1.8149, dollar index 78.83, Oil $93.05, Silver $10.855, and Gold... $778.40

That's it for today... Just have to say congratulations to Chuck again! Chuck spent yesterday in Seattle, and is in transit to San Diego where FXU will hold class tomorrow. San Diego is one of Chuck's favorite cities, and the crowds were expected to be quite large, so I'm certain he will give a great presentation. After San Diego, FXU will move across the country to hold class in Dallas on the 19th. If you are near any of these towns, I would suggest trying to get registered, as these will be great opportunities to learn how to protect your portfolio during these tough financial times. Hope everyone has a Totally Terrific Tuesday, I know ours will be!

Chris Gaffney, CFA

Vice President

EverBank World Markets

1-800-926-4922

1-314-647-3837

Financial storms claim two more...

Chuck Butler — Mon, 15 Sep 2008 13:57:30 GMT

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In This Issue..

* Financial storms claim two more victims...

* Yen and Swiss Francs move back up...

* Euro approaches 1.45 before reversing course...

* Oil below $100...

And Now... Today's Pfennig!

Financial storms claim two more...

Good day... The financial storm claimed another victim this weekend as Lehman Brothers Holdings Inc. filed for bankruptcy after being unable to find a buyer. Bank of America, who was rumored to be bidding on Lehman ended up buying Merrill Lynch & Co and AIG Inc. is asking the fed for an emergency loan. All of this financial turmoil has sent the dollar lower vs. most of the major currencies as investors are beginning to realize the situation in the US markets is worse than the rest of the world.

Over the past three months, currency traders have rallied the dollar on the basis that the US was in better shape than Europe. They will now need to rethink their strategies, as the past few weekends show just how bad the US financial sector is ailing. And unfortunately, their will likely be more to come. Risk aversion is a popular theme in the markets again, and the purchase of US treasuries actually helped to keep the US$ from falling further.

The best performers over the weekend were the Japanese yen and Swiss franc, both traditional funding currencies of the carry trade. As Chuck has explained several times in the past, when market volatility increases, traders typically start to exit the carry trades which are only profitable during times of relative calm in the markets. The reversal of the carry trades means investors sell the emerging markets and high yield currencies and use the funds to pay down loans which they had taken out in the low yielding 'funding' currencies of Japanese yen and Swiss francs. The Japanese yen strengthened as much as 3.4% vs. the US dollar overnight, and the Swiss franc had the biggest one day gain in six months.

I have to say I am surprised Treasury Secretary Paulson stayed away from helping another bunch of his Wall Street buddies. I read where Paulson said Wall Street has been aware of Lehman's troubles for a long time and had time to prepare for any crisis at the company. I know we closed out all of our currency trades with Lehman a couple of months ago, and hopefully most other prudent companies did the same. I hope this weekend's events are an indication that some sanity has returned to the Treasury department, and a line has been drawn after the widest expansion of federal safety nets to the financial system since the Great Depression. Its about time we quit guaranteeing the losses at these huge financial firms.

The big news over the weekend overshadowed data released Friday which showed the drop in August's US retail sales was the largest of the year. The .3% decline in purchases followed a .5% drop in July. The figures signal faltering consumer spending will keep inflation in check, adding strength to our argument that the Federal Reserve will likely resume lowering US interest rates by year end. Consumer weakness in the US will extend the recession which I believe we are already in, and force Bernanke to go back to the easing rates here. Lower interest rates in the US will put pressure on the dollar rally which has occurred over the past three months.

The other piece of data released on Friday here in the US showed producer prices fell in August for the first time this year. The dramatic drop in the price of oil was the main reason for the easing of producer inflation. Speaking of oil prices, crude continued to drop over the weekend falling back below $100 for the first time since the beginning of April. It should be interesting to see how this continued drop in crude will impact the dollar. Recently, the dollar and oil have had a negative correlation, with a surge in oil prices corresponding with a drop in the dollar, and the opposite occurring over the past few months.

The Euro hit a high of 1.4481 in early European trading before moving back down below 1.42. European Central Bank Vice President Lucas Papademos gave a shot in the arm to the Euro over the weekend when he signaled the ECB has little intention of pursuing US style tax and interest rate cuts to support the European economy. "There are indications that broad-based second-round effects are materializing and we want to make sure that they don't become even stronger and broader," Papademos told reporters in Hamburg. "It's not considered likely" that the euro area economy will shrink in the third quarter, he added. His comments were echoed by ECB council member Yves Mersch, who said slower economic growth and a drop in oil prices have not blunted inflation risks. The ECB will continue to battle inflation, and will likely react with another rate increase if benchmark inflation remains above their goal of 2 percent. This difference in the predicted paths of interest rates could be the factor which finally reverses the dramatic rebound in the dollar.

The Australian and New Zealand dollars fell as investors exited the carry trades. Both currencies continue to drop as investors move away from the higher yielding currencies and back into 'safer' assets. The fall in commodity prices, a lowering of interest rates, and this reversal of carry trade investments have combined to move the kiwi 12 percent lower vs. the US$ over the past three months. During the same time period, the Australian dollar has fallen almost 14 percent vs. the US$. The only good news for the Australian dollar lately has been the three day rally in the price of gold, a major export for Australia. If Australia can refrain from further drops in interest rates and gold continues to rally, we could see the Aussie dollar make up some of the losses we have seen recently.

Should be an interesting day today in the currency markets, as investors digest this weekends events. In prior crises, after the initial sell-off in the dollar, the dollar actually rallied back up as investors moved into cash and the 'safe haven' of US Treasuries. But a major sell off in the US stock market could further losses in the dollar as foreign investors may finally decide they have had enough of the rollercoaster ride of the US investments. But with most of the world's economies slowing, investors are going to have to search hard for places to invest.

We continue to suggest investments into the Asian currencies and economies. While all of the global economy is expected to slow, Asia will continue to be the world's growth engine. And with a burgeoning middle class in India and China, internal demand will make up some of the demand lost to recessions in the US and possibly Europe. The Chinese Renminbi, Singapore dollar, and Japanese yen should continue to be some of the best performers going forward. I also think some of the economies with strong underlying economic fundamentals will again become popular. These include the Swiss franc, Swedish krona, and Norwegian krone all of which look cheap at their current levels.

Investors who have been waiting for a signal to purchase may want to start putting some of the US$ sitting on the sidelines back to work. As it becomes more and more apparent that the US will need to lower rates again before increasing them, the dollar will get back on its long term downward spiral. This weekend's events could be the catalyst which finally ends this dollar rally.

Currencies today 9/15/08: A$ .8047, kiwi .6551, C$ .9324, euro 1.4185, sterling 1.7899, Swiss .8936, ISK 91.64, rand 8.2046, krone 5.7726, SEK 6.7497, forint 169.91, zloty 2.3749, koruna 17.075, yen 105.33, baht 34.57, sing 1.4340, HKD 7.7926, INR 45.935, China 6.844, pesos 10.7113, BRL 1.7810, dollar index 78.966, Oil $96.58, Silver $10.86, and Gold... $775.02

That's it for today... St Louis got the remnants of Ike yesterday with tropical storm type wins and rains rolled through the area. I actually ran with my wife in a half-marathon during the height of the storm. Almost 5,000 similarly crazy runners toughed out the heavy rain and strong winds, but the race had to be ended at 10 miles due to flooding on the race course. We were pretty upset, as my wife was running a personal best up until they shut us down. I feel sorry for all of the people down in Texas who are still without power, the winds also knocked out the power in some homes here. Hope everyone has a Marvelous Monday, and a great start to your week!

Chris Gaffney, CFA

Vice President

EverBank World Markets

1-800-926-4922

1-314-647-3837