Daily Pfennig : Treasuries

German Business Confidence Slides...

Chuck Butler — Tue, 10 Nov 2009 15:18:01 GMT

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In This Issue..

* Currencies trade in a tight range...
* $81 Billion in Treasury auctions this week!
* Fitch fans the flames of a fire in the U.K....
* Aussie Business Confidence rises...

And Now... Today's Pfennig!

German Business Confidence Slides...

Good day... And a Terrific Tuesday to you! I didn't start out this Tuesday on the right foot, and now I'm really running late! Oh well...

The non-dollar currencies didn't move much yesterday, the euro bumped up and down against the 1.50 figure, while the A$ did the same against 93-cents, and Swiss against parity... So the currencies are trading in the same clothes they went to bed in last night!

The Big Dog, euro, did attempt to move stronger into the 1.50 level, but that move was thwarted by a poor reading of German Investor Confidence this morning. German Investor Confidence as measured by the think tank ZEW, reported that their index had fallen to 51.1 this month VS the 56 in October. Most of those Germans surveyed said that they expect the economic recovery to be slow once the Gov't removes the stimulus in the economy. So... Previous euphoria is being replaced by realism... But that's OK... Better to have a reality grip on things than to go around thinking that everything is seashells and balloons...

But, the ZEW report hasn't dampened the euro's spirit too much, as the single unit has remained above 1.50 even after digesting the ZEW... But looks vulnerable...

The ZEW report gets all the ink... But on the back page we can find that German industrial production increased 2.7% in September compared with August, which saw a 1.8% rise.

Hey did you know that the U.S. is auctioning off another $81 Billion in Treasuries this week? Yes, this total is lower than the recent auctions the U.S. has held... But still... $81 Billion isn't anything to ignore! However, with the nutcases in the world, shooting off missiles, and ramping up nuclear capabilities, there's still some people that believe U.S. Treasuries are a "safe haven"... Of course I've proven that those that believed that and bought during the financial meltdown, lost tons of money... But don't let that get in they way of a "good story"... And so it will be, that this auction will not be the "one that fails"... But, in my opinion, we will experience that at some time in the next year, especially given the Gov't deficit spending!

And... If an auction of U.S. Treasuries fails... Well... Being long Treasuries isn't going to look too much like a "safe haven" position!

I was supposed to give a presentation last week in Los Cabos on the Treasury Bubble... Of course, we all know that I was not there, so I didn't give the presentation... UGH!

OK... There was all kinds of rumbling, stumbling, bumbling going on in the U.K. overnight, as the rumors were flying that the ratings agency, Fitch, said it would lower the U.K.'s AAA rating... Finally it was confirmed that this was stated in an interview with Reuters, and not an official communiqué' by Fitch... But, dear reader, when there's smoke like this, you can bet there's fire! The pound sterling has taken this news like a blow to the mid-section...

In Australia overnight... Australian Business Confidence rose to near 6 year highs for the index... October's index reading was 16, which was plus 2 from September's index reading. The businesses surveyed strongly believe that the Reserve Bank of Australia will once again raise rates in December... I loved this quote from the Australian Trade Minister, who said, "Despite the A$ going up, manufacturing has improved, and manufacturers just have to learn to accommodate this sort of thing going forward using hedging."

That's right! Tell 'em! Deal with this A$ strength and quite your whining! I love it!

The Canadian dollar / loonie continues to push higher VS the green/peachback dollar... This is all commodity related, as the data in Canada continues to be mixed, with the Bank of Canada (BOC) keeping rates in line with the U.S. thus, keeping the loonie from looking attractive... But, that's OK... With Gold inching higher and higher, Oil hovering around $80, and other commodities moving higher in price, the Loonie can get its lipstick from commodities to look attractive!

Speaking of Gold... I saw this quote and thought it hit the nail on the head... "It's not that gold has changed, but gold buyers have changed," said Suki Cooper, a precious-metals strategist for Barclays Capital. "It's a structural shift we're seeing on the investing side, from Asian central banks right down to individual investors buying ingots and coins."

That's right! Gold hasn't changed... It's still has to be mined out of the ground, it can't be made by any alchemist, it has to be mined... And the demand in Gold has skyrocketed in the past couple of years, thus pushing people to send in their gold bracelets, necklaces, and rings to cash in the Gold price surge... So... This group of people over here are selling any and all Gold they can get their hands on, and this group over there are buying it, for a rainy day...

Gold's recent rise has been spectacular to say the least, moving through the $1,000's to $1,100 very quickly... I think there are two things in play here... 1. the demand for Gold driving the price higher, and 2. the dollar's weakness. I heard a guy say the other day that "Gold hasn't gained... The dollar has gotten weaker"... What? Nothing about the demand?

We don't have any "real data" today to speak of in the U.S. but we've got a truckload of Fed Heads out on the speaking circuit... Lockhart, Yellen, Rosengren, Tarullo, and Fisher all will be speaking about something today... Shoot Rudy, even former Fed Chairman, Big Al Greenspan is going to speak today... No telling what he might say! Of course, if the subject comes up regarding the financial meltdown, he'll say that he had nothing to do with it! HOGWASH! And we all know it! So, it doesn't matter how many times he tries to absolve himself from any responsibility for the financial meltdown, we all know that at the root of it all... Sits Big Al Greenspan...

And then there was this... The folks over at Barclays say that they have recalculated the dollar's share of global currency reserves... The dollar, which once stood at 80% of global reserves, and right before the current weak dollar trend began in 2002, it stood at 73% of global reserves, has fallen to 62.8%... But... Says Barclays... This is almost entirely a result of weaker valuation rather than attempts by central banks to diversify holdings away from the dollar... Hmmmm... Now... I do agree that the euro's gains VS the dollar in the past 7 years would cause quite a bit of slippage in the dollar's value in terms of reserves held by central banks... But "almost entirely"? I doubt it... One could point at the Reserve Bank of India's purchase of Gold last week... They bought $6.7 Billion "worth" of Gold... You can't tell me that wasn't to diversify their reserves!

OK, to recap... Chuck's running late today... The non-dollar currencies are trading in the same clothes as yesterday. The ZEW German Business Confidence slipped this month, although Industrial Output rose. The U.S. is auctioning $81 Billion worth of Treasuries this week, and the demand for Gold is really pushing the envelope in terms of Gold's price!

Currencies today 11/10/09: American Style: A$ .9280, kiwi .7415, C$ .9455, euro 1.4990, sterling 1.6670, Swiss .9915, European Style: rand 7.44, krone 5.5960, SEK 6.8580, forint 181.50, zloty 2.81, koruna 17.0420, RUB 28.71, yen 90.10, sing 1.3880, HKD 7.75, INR 46.48, China 6.8267, pesos 13.30, BRL 1.71, dollar index 75.10, Oil $79.54, 10-year 3.36% (notice how, whenever the 10-year yield gets to 3.60%, it comes back down?) Silver $17.25, and Gold... $1,100

That' it for today... HEY! Tomorrow is a holiday! So, no Pfennig tomorrow! It's Veteran's Day tomorrow... My dad was a Veteran... And each year, I go back to a story that my darling daughter, Dawn told me... A few years ago, at Dawn's school, they had a Veteran's Day celebration, and had everyone bring in pictures of relatives in their military uniforms... When the picture of my dad, (Dawn's grandpa) came up on the screen, she was amazed, and sent me a note saying she had never seen how much I look like her grandpa (my dad)... So... Let's not just take the day off tomorrow... Let's stop to think about why the day is a holiday! And thank a Veteran... That's all... I hope you have a Terrific Tuesday, and I'll talk to you on Thursday!

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

A Jobs Jamboree for Friday 10/02/2009!

Chuck Butler — Fri, 02 Oct 2009 14:14:00 GMT

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In This Issue..

* The dollar remains well bid...
* G-7 to hand currencies off to G-20?
* Car Sales collapse...
* Auditing the Lehman cash movements...

And Now... Today's Pfennig!

A Jobs Jamboree Friday!

Good day... And a Happy Friday to one and all! Yesterday, I welcomed you to October. I had been prepared to tell you about a famous radio station here in St. Louis, that has long called October... Rocktober... But forgot, as usual! But anyway... It's the first Fantastico Friday of Rocktober!

Today is a Jobs Jamboree Friday too! And... I'm not getting a good feeling about today's labor report at the Jobs Jamboree. The forecast is for jobs losses to fall from -216,000 to -175,000, but the unemployment rate to tick up to 9.8% from 9.7%... I got the feeling, baby, baby, I got the feeling... Oops, a little James Brown on Fantastico Friday never hurts! But what I was saying was I'm getting the feeling that there are risks to this forecast... And that the job losses could come in higher, which would really be a BAD thing for the recovery flag wavers and risk takers, I'm sorry to say...

You see, the recovery flag wavers and risk takers are wishing, and hoping, and thinking and praying that the data in the U.S. continues to show some sign of life. Any signs that the U.S. economy could be slipping backwards, would deep six stocks for sure, and if last year's trading tells us anything, it would have an adverse affect on Commodities and Currencies too!

So... This is a BIGGIE, today, folks... So strap yourself in, and make sure you keep your arms and legs inside at all times during the ride!

Yesterday's currency trading left a lot to be desired... There was little movement from the overnight sessions which tomahawked the non-dollar currencies. That's a good thing... But the downside risk today is just too much for me right now... Maybe after 7:30 CT I'll be able to breathe again, for that's when the Jobs Jamboree prints... Again, Japanese yen enjoys the sun from both sides of their house... When the dollar is weak, yen rallies with the other non-dollar currencies... When the dollar is strong, yen rallies alongside the dollar! It's good to be the yen! (that is before the Ministry of Finance in Japan begins to intervene!)

Hey! Remember when I bashed the Cars for Clunkers scheme, I mean program, and exposed it for what it was, and what it would do to future sales of automobiles? Well, as they say... The proof is in the pudding!

Yesterday, it was reported that General Motors had posted a 45% drop in September U.S. light-vehicle sales, while Chrysler's sales fell 42%. Ford saw a much more modest drop of 5.1%. Among Japanese auto makers, Toyota said its September U.S. sales declined 16% from a year earlier, while Nissan saw its results fall 7% and Honda said its sales slid 23%. The auto industry was hurt by the expiration of the U.S. government's "cash-for-clunkers" rebate program.

Yes... I told you this would happen... I also think that any Gov't program to prop up the economy is just falling into the ghost of Japan's hands... I've explained this before, about how when Japan experienced a HUGE market correction after their go-go 80's, they panicked and began throwing money at the problem, instead of just letting the markets run their course... The Japanese introduced stimulus package after stimulus package, and Gov't program after Gov't program, like Quantitative Easing... And look how well that's worked out for them!

So the ghost of Japanese recoveries that never panned out, is haunting the U.S. Gov't now!

Today is also the start of a G-7 meeting in Istanbul... Istanbul was once Constantinople! Or so the song goes... Any way... The rumors coming out of the pre-meeting stuff is that G-7 will no longer make a statement or issue a communiqué' regarding currencies, as they now feel that the only group that should have that responsibility is the G-20, which last week took the world economies watchdog title from G-8...

Currency traders have long used these G-7 communiqué statements as a tool that indicates direction for currencies... And while that has actually come to fruition a handful of times over the years, for the most part, G-7 was nothing but a boondoggle!

One thing that's out there that you won't see a lot of people talking about is the vote going on in Ireland today, on the Lisbon Treaty, which the Irish people voted down last year... This Lisbon Treaty changes the way the European Union works, and would amend the Maastricht Treaty... It was intended that all member European Union states would ratify this before now... So, this vote is like the Sword of Damocles hanging over the euro for Monday morning...

You see, the vote will be taken today, counted tomorrow, and announced Sunday, which will cause a knee-jerk reaction to the euro trading on Monday... Right now, the polls show the Treaty will be accepted this time by the Irish. If passed, it goes to Poland and the Czech Republic, and if they vote yes then it would lead to ratification, which would be a good thing for the euro... A no vote would be bad thing, just like it was in June of 2008, when Ireland voted no the first time around.

Yesterday, the IMF issued a report on Currency Composition of Global FX Reserves... And this is quite telling I believe, for the report showed a continued diversification away from the dollar, in the 2nd QTR of this year... I had to laugh last year, when I was on the FXU Currency Tours, and one of the guys there said that the fall of currency reserves allocation of dollars from over 80% to 64%, was nothing but currency appreciation by the euro... I would point to the these IMF reports, when I talked so that I didn't make a big thing out of it...

Did you see the story in the Wall Street Journal (WSJ) regarding Lehman Brothers? This story has conspiracy stamped all over it, so you know me, I was all over this story like a cheap suit! Here's the gist of the story from the WSJ... "An examiner is looking into how the Federal Reserve was promptly repaid billions of dollars in cash and securities it lent to Lehman Brothers before the bank filed for bankruptcy, while other creditors are still owed money. The court appointed Anton Valukas, chairman of Jenner & Block and a former U.S. attorney, to explore whether the Fed received improper preferential treatment."

Chuck again... Now, you, me and the lamppost all know what went on here, just by that description in the WSJ... But, we'll wait for the report, I guess...

The U.S. stocks really got taken to the woodshed at the close yesterday, and the futures in the overnight markets are weak... So... Guess where the money goes when they sell stocks? That's right, U.S. Treasuries... So, just about the time you think that the mom and pop's of the world that went to Treasuries last year in the so-called Flight to Safety, had taken on enough losses, and were going to get out... Here comes the stock correction that I've been talking about... Or maybe not... Maybe this is just a couple of days of selling... Or maybe it is the correction...

So, if dollars are flowing into Treasuries, the yields of those Treasuries are going down once again... UGH! This just doesn't make any sense to me! Didn't these people that went to the so-called Safety of Treasuries last year, but lost money, learn anything? Or did enough time pass and they've "forgotten the pain"?

Oh Heck! This just feeds more air into the Treasury Bubble... Which means that it grows larger and larger, and also means that when it does POP, the losses will be severe and all across the board... I mean, isn't that what we've learned about what happens when a bubble POPS in the past?

Yesterday, the data cupboard was busy... We had the Weekly Initial Jobless Claims post a higher number than was expected, coming at 551,000, VS last week's 534,000... I always love it when the Jobs Jamboree follows a Weekly Initial Jobless Claims repot... Because... The Weekly report shows that, in this case, that 551,000 jobs were potentially lost last week, and today's monthly report by the BLS will show something far less...

We also saw that the U.S. Consumer continues to spend more than they make, as Personal Spending was up 1.3%, while Personal Income was only up .2%...

And then finally we saw the U.S. ISM Index (manufacturing) come in weaker than expected, but remain above 50, at 52.6... That's a weaker number than the August figure which was 52.9... And I would think that someone would have noticed this... But we had the TV on all day, and I had it one when I got home, and never saw mention of this anywhere!

And then there was this... Colleague, Aaron Stevenson, called me yesterday morning, trying to beat the deadline for stuff to add to the Pfennig... He missed... So I have it for today... Remember yesterday morning, when I announced that BOA CEO Ken Lewis was retiring, and that I thought that to be strange?

Well, Aaron was all over this, telling me that he worked for BOA for a number of years, and sat in on meetings with Ken Lewis, and that Ken Lewis was not the kind of person to take "early retirement"... In fact, Aaron says, "that 4 months ago, I heard an interview with Ken Lewis, and he said I'm 62, I'm not ready to retire." Aaron said that he was a "no surrender, no quit, kind of guy." Hmmm... I wonder what changed in 4 months? Well, Aaron thinks, and I agree, that he was forced out by the Feds, for speaking his mind on the BOA / Merrill Lynch deal that was brokered by the Fed and Treasury...

OK... To recap... Today is a Jobs Jamboree Friday, and I'm getting the feeling that it will be disappointing VS the forecast of 175,000 job losses. G-7 meets this weekend, and there might be a change in the what they say after each meeting. The ghost of Japanese recoveries, is at work in the U.S. Ireland votes on the Lisbon Treaty today, and the dollar remains well bid VS the non-dollar currencies... Except yen!

And this... On Monday next week, I will be doing an educational presentation for the folks at DTI... You can find out more here: http://www.dtitrader.com/trading_education_MMM_everbank.htm

Currencies today 10/2/09: .8630, kiwi .7130, C$ .9175, euro 1.4550, sterling 1.5850, Swiss .9620, rand 7.72, krone 5.8250, SEK 7.0420, forint 186.20, zloty 2.9185, koruna 17.4750, RUB 30.20, yen 89.30, sing 1.4170, HKD 7.75, INR 47.75, China 6.8265, pesos 13.77, BRL 1.7860, dollar index 77.20, Oil $69.69, 10-year 3.15%, Silver $16.25, and Gold... $996.75

That's it for today... A Big Day for investments, so hang on to your hat! That was a much better display of baseball yesterday by the Cardinals. They have 3 games left in the season, to get on a roll before the playoffs! I had a brain drain the other day, when I gave you the link to the Sovereign Society for the Offshore Academy Conference... I'm sure once you all figured that out, you just went to Google and got to the site! UGH! OK, my little buddy, Alex, plays football tomorrow morning against another top rival... He told me it's payback time, as his team lost to the rival last year... I told him, talk is cheap... You have to back it up on the field. OK... Enough! It's a Fantastico Friday, and we're in Rocktober! Time to get working on making this Friday, Fantastico!

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

The Dollar Gets Ambushed!

Chuck Butler — Tue, 22 Sep 2009 14:43:15 GMT

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

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In This Issue..

* Non-dollar currencies soar!
* Weber gives the green light...
* Is the Fed buying more Treasuries?
* China considering IMF's Gold!

And Now... Today's Pfennig!

The Dollar Gets Ambushed!

Good day... And a Terrific Tuesday to you! A Tuesday that needs no "turn-around", as the currency actions VS the dollar overnight are amazing! The dollar got ambushed overnight, as the euro shot right straight through the 1.47 handle, and has just traded 1.48! Hmmm... Didn't I say yesterday that the I didn't think the dollar strength we were seeing was any change in the recent trend? ... I love it when a plan comes together!

Traders have found a "soft spot" in the dollar, and are really going after it! I don't recall the last time I saw this kind of a move overnight. It must have been back when the dollar was getting sold like funnel cakes at a state fair, almost every day in the spring of 2008... But, I really don't recall... But, that doesn't put a damper on this morning's move! No way!

The only thing I can think of, or find in the news, that brought about this HUGE move in the currencies VS the dollar, is the fact that European Central Bank (ECB) Council Member, Axel Weber pretty much gave the "green light" to traders, when he said in an interview that the euro's strength is not out of line with fundamentals... That's right! The way I read that is this... It's Central Bank parlance for... "go ahead and drive the euro higher!"

Weber also said, "There were some stronger data coming from the Eurozone compared to some other regions. So, I think that the behavior of the foreign exchange markets is not out of line with these developments over the recent months."

Now... These comments carry even extra weight due to the position Axel Weber holds as President of the Bundesbank... Buba, as I used to call them, is Germany's Central Bank, and has always held a position of influence on the ECB...

So, Axel Weber says the euro's rally is OK with him... That's Big Folks... For, currency traders like to know that they can run up or down a currency and not fear that the Central Bank is going to step in with currency intervention to stop the run. And, for all intent gives them the Green Light...

OK... Now that the euro has pushed the envelope to 1.48, I expect to see some strong profit taking when the U.S. traders arrive... But, keep this in mind... The euro hit 1.48, and therefore, we now know that traders will take it there a few times before they give up... So, if the euro falls back into the 1.47 handle, look for it to bounce, at least a couple of times. I've explained this trading before... It really comes down to how badly the euro bulls want to push the envelope... Or the dollar bears want to push too!

The euro isn't the only currency gaining VS the dollar... Euro, Swiss francs, kiwi, and Swedish krona have all hit 2009 highs overnight, with kiwi gaining to .7215... A quick look at yesterday's currency round-up shows that kiwi was trading at .7040... Using my "new math" talents... That's a 175 pips move! WOW! New Zealand received some very good news on their deficit problem, as their annual deficit fell from 8.1% of GDP to 5.9% of GDP... Still too high, but moving in the right direction!

For once, it seems, the Aussie dollar (A$) followed its kissin' cousin from across the Tasman, kiwi, higher... It's normally the other way around!

You know what I think? I think that the markets are beginning to look at the man behind the curtain at the Fed, and realize he's just pulling levers, and creating special effects...

OK, I'll explain... Yesterday, I talked to you about the "new record" in size of Treasury Auctions will be shoved down the throats of the markets this week, to the tune of $112 Billion worth of 2, 5, and 7 year notes...

Well... I came across this yesterday, from Morgan Stanley...

"Households reduced Q2 Treasury purchases from their blistering pace in Q1 Foreign accounts reduced Q2 UST purchases as the Fed ramped up Q/E ops. Bank Q2 purchases remained anemic."

In normal speak, what that's saying is that Mom and Pop buying of Treasuries has backed off... You may recall me telling you many months ago that Mom and Pop buying of Treasuries had taken up the slack from declining foreign purchases... The Mom and Pop buying was credited to the "flight to safety", when the walls came crashing down last fall...

So... If Mom and Pop buying is backing off, and it was used to offset declining foreign purchases, who's left at the table to buy the Treasury's issuance this week and in a couple of weeks, and a couple of weeks after that?

Well... It's the Fed... I read this, and just couldn't believe my eyes! The Fed is taking on more and more.. I read where it is believed that about 50% of U.S. Treasury issuance in the 2nd QTR saw Fed intermediation... $164 Billion in the 2nd QTR ended up on the Fed's books, while foreigners bought $101 Billion and Mom and Pops bought $29 Billion... When you add in the Primary Dealers, the total of Non-Fed buying was $158 Billion...

Let me be perfectly clear on this... This is only speculation at this point... But it certainly makes sense doesn't it?

Now... Why isn't the main media all over this? Where are the questions about how the upcoming record amounts of Treasury issuance will be taken, and by whom? Why am I the only one asking these questions? It's just little old me (yeah, right! HA!), and my laptop... Oh, and let's not forget that the Administration has already given us the bad news that $9 Trillion in Budget Deficits will need financing in the next 10-years...

This all makes me sick to my stomach... I mean come on! This Deficit Spending has got to stop! And We've got to say NO to any additional new Deficit Spending! Stop it, right here, right now! Cut government in half... Get rid of non-Constitutional agencies... Audit the Fed, and turn this around!

OK... I've got to talk about something else before I throw my keyboard! I used to throw my keyboard, slamming it down on the desk all the time, and break them... The IT people would laugh, and just bring down a new one for me... But, since I got sick two years ago, I don't throw my keyboard any more... But, I was tempted... I could have gone into a song by The Squeeze there, but I didn't...

Remember last week, when I told you about the IMF wanting to get permission to sell quite a bit of their Gold? And at that time, I said... "China, are you ready to buy?" ... Thinking, of course, that China would be the only country that could / would buy up the 403 tons of Gold that the IMF is putting up for sale...

Well... Guess who answered my call? That's right, China! It is reported this morning, that China is considering buying the Gold that the IMF is offering. It's not clear whether they want just "some of the offering" or "all of the offering"... My guess would be the latter... As this would just add to China's goal of diversifying their U.S. dollar reserves...

And... If China does take down 403 Tons of Gold, that will take away from their Treasury purchases, don't you think?

But, I'm not going down that Treasury road again... I'm staying on the high road with Gold! Which at one point yesterday morning, looked weak... I even mentioned on the desk that it looked like Gold was getting spanked, as it was down over $10... But, later in the day, the shiny metal had come back and was on the positive side of the ledger for the day! And now, this news that China is considering buying the IMF's offering of Gold, has Gold on the high road too... Gold is up $12 this morning, back to $1,016!

So... Throwing stones at the dollar this morning on two fronts... The currency and Precious Metals fronts... Hey! I'm not throwing the stones! The markets, traders, investors, etc. are doing the throwing!

You know, each day, when I'm writing the Pfennig, the currencies are all trading, except... The Brazilian real... The real is still not a floating currency, as it goes through a "fixing" each day, but then the markets take it over, and trade it the rest of the day. So... When you have an overnight market like we've just had, when the non-dollar currencies have all spring-boarded higher, I sit with anticipation for the "fixing" for real, and then watch as the markets play catch-up... The move will be stunning, I'm sure... As real is much like South African rand, when it come to the wild swings...

There's not really any data in the U.S. cupboard this morning... In fact, the only thing I see globally is July's print of Canadian Retail Sales... And with it being so delayed, I doubt it will mean much when it does print!

I thought I would play a game of "Remember when?" Here's how it goes... Remember when the Swiss National Bank said they would intervene to keep the franc weak? Or... Remember when the Brazilian Central Bank Gov. said that he would do everything in his power to keep the real above 2? OK, I'll stop there... Oh... Swiss francs? They have gained almost 15%, and Brazilian real? Well, it's trading at 1.82... So let's just say that the "2" thing wasn't in the cards!

So, what am I getting at here? Well... I've told you for years now that Central Bank intervention can stop currency runs for short periods of time only... And that Central Bank jawboning will only last as long as traders want it too, for if the Central Bank doesn't back up the jawboning, then just like a child, Traders will then push the envelope...

OK... Maybe some day we'll play again, only with Big Ben Bernanke!

So... Traders have ambushed the dollar overnight, and Axel Weber has given them the green light to do so. Could the Fed be the major buyer of Treasuries? China may be the buyer for the IMF's Gold sales, and no data today to speak of...

Currencies today 9/22/09: A$ .8740, kiwi .7215, C$ .9375, euro 1.48, sterling 1.6340, Swiss .9775, rand 6.8250, krone 5.8350, SEK 6.8275, forint 183.30, zloty 2.80, koruna 17, RUB 30.12, yen 91.40, sing 1.4110, HKD 7.75, INR 47.96, China 6.8269, pesos 13.30, BRL 1.8240, dollar index 76.13, Oil $70.80, 10-year 3.49%, Silver $17.26, and Gold... $1,017.10

That's it for today... Cardinals' magic number to win their division is 3... Pretty amazing, eh? With two weeks left in the season! Hey, Californians... Did you see the little blurb in the L.A. Times quoting yours truly? Yes, there was a story in the L.A. Times this past weekend regarding "Foreign Currency Investing"... I spend a good amount of time on the phone with the writer, Kathy Kristof, who seemed quite interested in what I was saying! Today, is the first full day of Autumn... YIKES, you and I know all too well what follows Autumn! Oh well, maybe we can make Autumn last longer than usual! HA! So... Welcome to Autumn! And with that... I'll hit send, and get this on the delivery truck to your computer! I hope you can make this Tuesday totally Terrific!

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

German Business Confidence Continues to Surprise!

Chuck Butler — Wed, 26 Aug 2009 14:38:00 GMT

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In This Issue..

* Currencies rally in early morning Tuesday
* But see profit taking later in the day...
* Looking for yield?
* China expected to get back to 10% growth!

And Now... Today's Pfennig!

German Business Confidence Continues to Surprise!

Good day... And a Wonderful Wednesday to you! When I signed off yesterday morning, I told you that I was watching a mini-rally in the currencies. Well, that mini-rally turned into a real rally as the morning went along. Especially, after the risk assets got a boost from the Consumer Confidence revival. Yes, Brother Love's traveling salvation show revival, a.k.a. Consumer Confidence was much stronger than forecast, and the risk assets took off!

By mid-afternoon, the euro was pushing 1.4350, and all the "little dogs" were following along with their own version of a rally VS the dollar. But a funny thing happened on the way to the forum, and profit taking set in... Oh brother! Can't these guys wait until there is really a BIG move before they take profits? Oh well, I know, you're saying, "But Chuck, don't you always say that it's not a profit until you take it?" Yes, that's correct... But the rest of us just want to have a diversifying asset in our investment portfolio, and are not interested in 1/2 euro moves to take a "profit"!

This morning, German Business Confidence, as measured by the think tank, IFO, printed an increase in the index number for the 5th consecutive month! The index number rose from 87.4 in July to 90.5 this month. I would say that it was quite the move, eh? Given the exports data I gave you yesterday, you can see why German Business Confidence is strong... And I'll tell you something... Perception or Sentiment toward an economy, is half the battle folks...

Now, I had a few emails from readers yesterday responding to the note I made about Germany's economy rebounding, and putting the recession in the rear view mirror... The readers all said that the economy is not as strong as it appears, and that after the upcoming elections, things will be different. Hmmm... Well, I guess you can decide for yourself, which camp you want to be in... Me? I'm going to remain in the "recession is over for Germany camp"...

I know, I know, the recovery is nascent at best, but come on! It's better than a sharp stick in the eye! OUCH! BTW... I noticed that Chris used one of my fave words, "nascent", last week... He's probably read the word in the Pfennig so many times over the years, that it is burned into his brain!

OK... Back to currencies... There was a radio interview on Bloomberg yesterday with a panel of investment strategists, and some were of the opinion that, and tell me if this at all sounds familiar, the dollar will continue to weaken this year as the global economy recovers from recession and investors seek currencies linked to growth...

The idea was simply that too many investors had cash tied up in T-Bills, and T-Notes, and that as the global economies recover ahead of the U.S. there will be higher yields to be gotten in those global economies. So, when the investors sell their T-Bill and T-Notes to buy overseas, the dollar will get sold, and thus lead it to weaken more and more...

OK... So... How many times have you heard that from me in the past year? Geez Louise, but these strategists will all claim that they came up with this idea first! FAT CHANCE!

Speaking of Treasuries... I sent along a note to Chris the other day, but I think he ran out of room, and then I completely forgot about it yesterday... But once again the U.S. Treasury is going to the well... And they will auction $197 Billion in new Treasuries this week... Is it just me, or does any one else wonder just how much more debt foreigners can choke down? I guess the thing to do this week and next is to check the cartel's, I mean the Fed Reserve's balance sheet to see if they take back any of these auctioned Treasuries like they did last month with the 7-year T-Note auction. Monetizing the debt, printing more paper dollars like it's Monopoly money...

And in a follow up from yesterday's report on the Budget Deficit being forecast for the next 10 years... The total of the deficit for those 10 years is now forecast to be $9 Trillion dollars... And in a follow up from yesterday's rant about forecasts... The $9 Trillion is more than $2 Trillion more than was forecast just 6 months ago! Hmmm... Another $9 Trillion!

Hey! A month ago, when I prepared for the Agora Financial Reserve Wealth Symposium in Vancouver, the National Debt stood at a level that put each citizen's piece of the debt at $37,000... Today, just one month after I pulled that data, each citizen's piece of the debt now stands at $38,191! That's absolutely shameful, folks...

In a seldom talked about country, Sweden... They too saw a bump in their Consumer Confidence report for this month. Like their neighbor, Norway, Sweden is beginning to see some real traction in their economy. And it shows when Consumer Confidence bumps higher, when it was forecast to be negative! Sweden's Riksbank, meets next Thursday, and while I don't expect any move, I would look for the Riksbank to confirm a positive outlook for the economy...

In Japan... their exports fell for a tenth straight month in July as demand from all of the nation's major markets deteriorated. Shipments tumbled 36.5 percent from a year earlier, thus once again making my point for me... This is no "safe haven"!

Reserve Bank of Australia (RBA) member, Roger Corbett, gave a speech last night, and for my money sounded quite upbeat about the economy! He hedged his upbeat tone a bit by saying that "how consumer demand holds up in light of no consumer stimulus will be one of the determining factors in how quickly our economy in Australia recovers."

Hmmm... That sounds reasonable to me... In fact it sounds quite OBVIOUS! So... Today, we have a new "Mr. Obvious"... HA!

A research center in China, the Development Research Center, issued a report saying that Chinese economic growth may exceed 10% in the first quarter of next year... The research center believes that China has already passed its worst period for the economy, and will meet the center's goal of 8% growth this year!

OK... I know there are a lot of skeptics out there regarding the data that China prints... But, it's what we have to work with! And... I also recall many times over the years, the so-called Chinese experts, would say that that growth was going to stall, only to see stronger growth print... So, for now, I'll stick with what I see reported, until I see other wise!

Chinese growth is good for commodities... And what's good for commodities is good for Australia, New Zealand, Brazil, Canada, Norway, and South Africa... There's your lineup for the "resource countries" and what a lineup it is! Wink, wink...

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

Currencies today 8/26/09: A$ .8335, kiwi .6840, C$ .9155, euro 1.43, sterling 1.6280, Swiss .9420, rand 7.8340, krone 6.0340, SEK 7.0890, forint 187.25, zloty 2.8675, koruna 17.80, yen 94, sing 1.4425, HKD 7.7505, INR 48.89, China 6.8310, pesos 13.02, BRL 1.8615, dollar index 78.38, Oil $72.20, 10-year 3.62%, Silver $14.35, and Gold... $949.60

That's it for today... We must have had a power outage here in the building overnight, as everything was black when I came in... So I had no currency trading / news screens to use this morning... Good thing my laptop was good to go! It was just like doing the Pfennig from the road, or home, but only here at the office! I can't get down on my hands and knees to turn everything back on, so... I carried on... What a great game last night from the Cardinals' pitcher, Adam Wainwright... 1-0 8 innings shutout ball! WOW! Now that's pitching! Of course I only saw 6 innings of it! UGH! Cards are now 19 games over .500, and 9 games in front... No time to rest though! Just need to get through today, as I have two 1/2 days the rest of the week! And then next week, will be September! WOW! Time to go... I hope you make your Wednesday, Wonderful!

Chuck Butler
President
EverBank World Markets
1-800-926-4922
1-314-984-0892
www.everbank.com
* Early withdrawal penalties apply. Fees may reduce earnings.

$75 Billion In New Treasuries This week...

Chuck Butler — Tue, 11 Aug 2009 14:43:47 GMT

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In This Issue..

* Currencies adrift all day yesterday...
* Data prints begin today with Productivity...
* Stop to think!
* Chinese data is impressive...

And Now... Today's Pfennig!

$75 Billion In New Treasuries This week...

Good day... And a Terrific Tuesday to you! Well, no data yesterday left the markets drifting about the open waters. Stocks rebounded, which gave the risk assets a bias to be bought, but for the most part, the day was much like being a drift in the ocean, with no direction or cares!

That will all change beginning today with the Nonfarm Productivity report for the 2nd QTR... Long time readers know my dislike for this data, as I believe it simply shows that one person works longer hours! The Fed Heads used to be all over this data like a cheap suit, and probably still trip over themselves to see the data when it prints... But to me, it's not what Big Al Greenspan made it out to be...

Tomorrow is the big data day this week with both the Trade & Monthly Budget Balances printing for July... The Trade Deficit should tick up some, as Oil prices have gained in recent weeks, and the Monthly Budget Deficit? Oh my! It is forecast to be $180 Billion in the red! Which annualized would be more than $2.1 Trillion! But don't worry about it folks, no biggie according to the folks in Washington D.C. The Treasury will just issue more bonds, and the Fed will buy up any that don't get bought, and pay for them with money they printed up fresh that day!

You know that I'm be facetious with the "don't worry" talk... I've been talking about this deficit spending for quite a few years now... I like the fact that others have joined in now that the numbers have gotten so large they are as obvious as a man with a hatchet in his forehead, but at least they've joined the "stop the deficit spending movement"...

Speaking of The Treasury issuing Bonds... This week alone the Treasury will auction $37 Billion of 3-year Notes, $23 Billion of 10-year notes, and $15 Billion of 30-year bonds... Even using "new math" that brings this week's issuance to $75 Billion! That sound? That sound you hear is foreigners choking on all this issuance! Does anyone know how to apply the Heimlich maneuver?

The "got yield" scenario I talked about yesterday, didn't play out yesterday, as stocks came back... The A$ saw some selling along with kiwi, reals, and any other "high yielder"... The selling wasn't bad, so we can probably put it down to profit taking.

I'm doing some research on the years around the depression, looking at market movements, and confidence levels... It's amazing the things that were being said right up and to the stock market crash about how everything was fine... Then skip ahead to the 80's and you had the same things going on with lofty praises for the S&L industry, especially one by Big Al Greenspan, and then the S&L industry circled the bowl... Makes you wonder, and I'm not talking about wondering who wrote the book of love... No, I'm talking about how this should make you wonder, or question, what's being said about how great stocks are right now... When the President makes comments about "a good time to buy stocks", you've got to stop and think folks... Just stop!

OK... I wanted to give everyone an update on the popularity of the BRIC MarketSafe CD we introduced last month... With over a week to go until we reach the funding deadline, this CD has received a ton of newsletter writer coverage, and interest... The funding has gone quite well, and we expect to open this CD with a very large amount of cash... That's exciting for me, as I saw this as an opportunity to deal in "speculative" investments, without market risk, and jumped on getting this available to our customers...

I also wanted to follow up on the Jobs Jamboree data we talked about yesterday morning... I had a very nice reader tell me that I "hadn't fallen off turnip truck" as the participation rate fell! That's right! As she said to me... "So, all those poor men and women that were hit at the beginning of the recession have the great pleasure of no longer being counted as either employed or unemployed."

I also wanted to follow up on last week's talk on the Weekly Initial Jobless Claims that fell for the previous week... I had a reader who recently became unemployed in California tell me the problems with trying to file as unemployed! Let's listen in to him explain his attempt to file as unemployed...

"Filled out the unemployment application on-line the day I was laid off.
About four days latter they send you another form to fill out and return. If not returned immediately, you lose your benefits.

Received a letter indicating they would call me 7 weeks after applying, to determine eligibility. It is scheduled for September 27th at 1 PM to
3 PM.

About two weeks afterwards, found there is no way to reach a human. The only way to reach them is EMAIL, which takes a couple of days to respond. EMAIL has a canned response, we will contact you on Sept 27th."

OK... Enough of that! China came out with some data today... While exports continue to suffer the stimulus that the Gov't put into the economy, which made sense due to the fact that the Gov't had a war chest of cash to put into the economy, which is the exact opposite of the situation in most countries including the U.S. Chinese Industrial Production growth was strong, marking three consecutive months of improvement in Industrial Production. The ongoing recovery of domestic demand is good, while consumer demand keeps holding up well with July retail sales growth up 15.2% year-on-year...

Now, I fully understand how there can be questions about the validity of Chinese data... But come on! We don't live there, we have no idea! And they don't have a John Williams (Shadow Stats) to show everyone that the Gov't's official data prints are misleading and most times inaccurate!

I saw this report on the Bloomie this morning from Zillow... "Almost one-quarter of U.S. mortgage holders owed more than their homes were worth in the second quarter and that figure may rise to as much as 30 percent by mid-2010 as job losses and foreclosures climb."

That's depressing stuff... Very depressing... So! Before I go to the Big Finish, I've got to find a "feel good" story... Of course if I were the Gov't I would have a pocket full of those, to pull out whenever the consumers needed one! HA! But, I'm not the Gov't! thank goodness! Whenever I think of the Gov't, I think of those words that Ronald Reagan spoke regarding the scariest words a person can hear... "I'm from the Gov't and I'm here to help"

OK... The euro looks to be catching some wind in its sails this morning, as it has gained 1/4 euro since I came in... I know that's chicken feed, but Hey! You've got to start somewhere, and after Friday's bloodletting, the tourniquet was applied on Monday, and today maybe we'll see it gain back lost ground... For... It is "Turn-around Tuesday!" (well hopefully it will be!)

And if the risk assets (like stocks) are rebounding, Gold and Silver should be on the docket to rally too... And a quick look at the Bloomie tells me they are indeed, rebounding... So, now, let's go to the Big Finish!

Currencies today 8/11/09: A$ .8365, kiwi .6715, C$ .9125, euro 1.4170, sterling 1.6475, Swiss .9250, rand 8.13, krone 6.2125, SEK 7.28, forint 191.80, zloty 2.9370, koruna 18.19, yen 96.50, sing 1.4460, HKD 7.7505, INR 48.02, China 6.8350, pesos 12.96, BRL 1.84, dollar index 79.12, Oil $70.73, 10-yr 3.78%, Silver $14.43, and Gold... $947.60

That's it for today... I barely mentioned it yesterday, and have been remiss in not mentioning it before, but next week I head to San Francisco Money Show. San Francisco has always been one of my fave cities to visit, and last year I had a blast there, except for that red-eye I had to take home so I could be on the desk Monday morning! I played in San Francisco when I was a young man playing my guitar... Right there in the Cannery... Last year, we went across the peninsula to an awesome restaurant named the Cliff House... I hope to make it back there this year! But, the real reason I go there is to talk to audiences about diversifying, and what I see going on, and or happening in the future... It's just my thoughts, but I seem to fill the rooms, so that's a good thing! Nice win by my beloved Cardinals last night. I was in bed by the 6th inning when they scored all their runs! UGH! Time to go... Try to make your Tuesday Terrific!

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

Risk Returns... Slowly...

Chuck Butler — Thu, 09 Jul 2009 14:24:08 GMT

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In This Issue..

* Currencies rebound...
* G-8 has no fireworks...
* Aussie / China and coal...
* Entitlements...

And Now... Today's Pfennig!

Risk Returns... Slowly...

Good day... And a Tub Thumpin' Thursday to you! I'm late, I'm late! I don't believe I ever heard the alarm go off this morning! I overslept by more than an hour, and will still be here more than an hour before any sign of someone else! But! That puts me behind by more than an hour today... I've got to play catch-up! So, let's get this Tub Thumpin' Thursday going!

Well... Let's see... G-8 never had the opportunity to shoot fireworks because China's leader had to return home to deal with the street riots going on in his country. So... The call for a replacement for the dollar as the reserve currency will have to wait for another day! And, with that news, the dollar got to remain in the sunlight, and bask in the glory of being the reserve currency and so-called "safe haven" another day...

There was added Risk Aversion yesterday when it was reported that an Australian shipment of coal to China was cancelled... This sent bad vibes through the markets for the currencies and commodities with the thought that China was putting the brakes on their buying of raw materials, and that their recovery had not taken hold like many had believed...

But... Overnight, calmer heads have prevailed. You see, it was my opinion when I heard that news yesterday, that it was simply one bad shipment to a customer that was having difficulties... Not ALL OF CHINA! And then overnight the data came out... This was one shipment, maybe 150,000 tons of coal... Australian coal shipments to China on a monthly basis run about 3 million tons! I truly believe that Australia's trade with China is on terra firma, and this was a one-off deal that went bad... I also believe that the sell-off of the Aussie dollar (A$) was completely overdone... Completely!

I don't know this to be a fact... But, given the relationship of the Asian investors and the A$, I would think the Asian investors to be licking their chops to have the opportunity to buy the A$ at these lower levels! Buy on the dips, right? Don't I always say that to be a prudent investment strategy?

Of course it didn't hurt that U.S. stocks rebounded yesterday a bit on the news that Alcoa's losses weren't "as bad as expected"... Talk about setting the bar low! It's not like ALCOA didn't still have a LOSS! But, don't get me started on this mental giant thought process that has a grip on stocks these days... "oh, don't worry, you only burned down 1/2 of the house, I would have expected it to all burn down!"

I've got to leave that alone before I really burst! Let's see, what can get my mind off of that subject... OH! The Bank of England (BOE) just announced that they would keep rates unchanged. Well, my goodness, what else would we expect them to do? Their base rate is .50!

Here in the U.S... The Obama administration is trying desperately to nip in the bud, the whispering campaign for another stimulus package... "No one in the administration is talking about a second stimulus at this point," said Robert Nabors, deputy director of the Office of Management and Budget. However he also mumbled something about how the President is not "ruling anything out"...

I don't care what they say... I'll believe it when I see it... And I still believe that the Gov't will believe that another stimulus is needed...

One of the discussions that I had with my fave economist the other day was about "delaying the inevitable"... I've talked about this before, but for new readers, I thought I would give them a dose of "Chuck's Thoughts" this morning... (HA! As if they don't get that every day!)

This "delaying the inevitable" is all about the TARP (troubled asset relief program) and how it all did was allow bad banks to continue to be bad banks longer, with toxic waste in their portfolio... This, even in the face of a suspension of the mark to market rules! Bad Banks should have been sent packing, then... And now, all we've done is let them hang on to cause even more collateral damage!

OK... I'll get back to the daily discussion now...

It looks as though the auction of $35 Billion in 3-year Treasuries went smoothly, which is another reason the dollar was strong yesterday... Every time one of these auctions go smoothly, the "deficits don't matter" crowd all point and say... "see, we told you, that foreigners will always come to the auction to buy Treasuries, so it doesn't matter what we run the deficit up to"...

Right! You just keep thinking that, and see where it eventually gets you! Ty sent me a note yesterday from an article he was reading, that plays nicely with this discussion... So... Let's play Marvin Gaye, and see what's going on!

"For now, the Treasury continues to find takers for government savings bonds at low interest rates. But somewhere between here and infinity lies a point at which American debt reaches unsustainable proportions, at which investors will balk at continuing to finance the American expenditures absent a higher return on their investments. Then, everything could change quickly, with interest rates soaring and the value of the dollar plummeting, as foreign investors lose faith in its fundamental value.

"We're running this $10 trillion gamble that interest rates aren't going to rise," said Kenneth S. Rogoff, a former chief economist at the International Monetary Fund and now a professor at Harvard. "If they do, we could end up in a very difficult situation."

Hey, you think so, Kenneth? My goodness, we have a new "Mr. Obvious!" I would think that we are already in a very difficult situation, given the fact that when the you know what hit the fan the U.S. had no war chest to use, like China did... Why? Because we didn't think "deficits mattered"... Dealing with problems from a position of strength, it would have made a HUGE difference from the get-go!

However, having said that... I believe that a larger problem is still on the horizon for the U.S. and the "deficits don't matter" flag wavers... And Hey! It's not going to happen overnight... It's going to be a slow, dragged out, problem that goes on for years, and then finally snaps! I'm talking about the entitlements and the retiring baby boomers... And more specifically when I'm talking about entitlements, I'm talking about Medicare!

The Big Boss, Frank Trotter, showed me a graph that he came across from the Concord Coalition the other day that illustrated this... While I wasn't shocked, having seen this all in the movie I.O.U.S.A. and in the book of the same name, there it was again staring me in the face...

The reason I tell you all this, is that the Current Administration has no other choice but to allow the dollar to weaken considerably over the years so that these deficits that "didn't matter" can be paid off with cheaper dollars... And it won't be this administration that has to deal with it... That's why this one and the previous one aren't concerned about the size of the National Debt...

Ok, enough of all that... I didn't mean for this to be gloom and doom! Let's move on...

The data cupboard has the Initial Weekly Jobless Claims for us to view today... I expect for the weekly number to remain above 600,000, and the Continuing Claims to have risen... Though this all sounds bad, the markets have become comfortably numb with this unemployment data... It will take something really BIG to slap the markets in the face and say WAKE UP!

And then, finally... The Japanese yen has really been on a tear this week as the Risk Aversion crowd dominated the markets... I find it very strange that Japan is considered a "safe haven" currency, given their national debt problems... And their once "Ace in the hole" the Trade Surplus, is taking on water... But... This is what the markets do, and they are never wrong! However, there's a road block ahead for the yen, as it trades with a 92 handle this morning... And the road block is in the form of the Bank of Japan. (BOJ).. It was reported that last night the Bank of Japan issued a statement to the markets that "they were checking FX levels"

That's Central Bank parlance especially coming from the BOJ, for... We don't want the currency to get any stronger, and we're just letting you know that we're ready to intervene if you don't settle down. Sort of like when grandma would tell you that if you didn't settle down she would send you to the woods to find your switch... Believe me you only didn't settle down once!

And when the Risk Traders come back and push the Risk Aversion crowd to the back of the room... Again, we'll see yen sell off again... So be careful here!

Currencies today 7/9/09: A$ .7845, kiwi .6305, C$ .8650, euro 1.3980, sterling 1.6260, Swiss .9250, rand 8.11, krone 6.4925, SEK 7.8590, forint 196.70, zloty 3.1150, koruna 18.55, yen 92.90, sing 1.4580, HKD 7.75, INR 48.71, China 6.8317, pesos 13.47, BRL 2.00, dollar index 80.21, Oil $61.29, 10-year 3.39%, Silver $12.95, and Gold... $915

That's it for today... Well... I got the news from the eye specialist yesterday regarding my left eye... The tumor and the fluid on the eye is gone, they successfully shrunk it and removed it... Unfortunately it left a ring of "stuff" on my eye, and my eyesight from that eye will never get any better. Of course, I still have my right eye, so I'm not completely bummed... My cutie little granddaughter, Delaney Grace came by to see me yesterday, she wanted me to come "sit by her" She's almost 2 now, and saying her ABC's, and singing songs, and she showed me how she knew her right from left now... Such a little joy to be around... I'll get to spend a whole week with her in about 10 days when we all go on vacation together... Can't wait! Well, my lateness has put me way behind this morning, I had better get going... Don't forget... Today is going to be a Tub Thumpin' Thursday no matter what!

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

The U.S. Treasury Moves The Goal Posts...

Chuck Butler — Wed, 01 Jul 2009 14:33:01 GMT

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

* A 4-day rally gets stopped at the border...
* Home Prices fall at a -18.12% pace...
* Alice Rivlin gives her 2-cents...
* Kiwi bond maturities galore next month...

And Now... Today's Pfennig!

The U.S. Treasury Moves The Goal Posts...

Good day... And a Wonderful Wednesday to you! As tradition with the Pfennig would have it, here's my introduction to July... There I was... On a July morning... Looking for love... With the strength of a new day dawning, and... The beautiful sun...

Yes, for those "old rockers" from the 70's like me... That's Uriah Heep, at their best!

OK... So, welcome to July! The last day of June was quite the volatile one to say the least! There we were waiting for the S&P/CaseShiller Home Price Index to print, and show that home prices were still down by quite a bit, when it did, it did, it printed at -18.12%... But! The media was all over that like a cheap suit, clamoring that the spiral down in Home Prices had come to and end! Which, may be true... But wouldn't you want to wait to see if next month's report confirms it? And... By the way... Since when does -18.12% fall in home prices beckon a rally? Yesterday, would be that answer!

So... The currency rally that was going on for a 4th day, was quickly wiped out, Ventures style... What? Don't know who the Ventures are? Boy, you really missed a lot of great instrumentals! Any way, the euro sunk like the Titanic from a level of 1.4130 to 1.40... The iceberg that caused this mess was simply the fact that traders, etc. believe the U.S. is on its way out of this mess... Of course, they must not be Pfennig readers, because... They would have read yesterday how I detailed the monthly numbers and showed how even with the spiral down in Home Prices ending, it would take until 2011 before the Home Prices got back to zero!

But NOOOOOOO!!!! They couldn't read it until late yesterday afternoon, because... Houston, we had a problem, with the Pfennig's delivery yesterday... See, how I've mellowed? I'm not even going to rant about this... Instead, I'll just remind everyone that whenever the Pfennig doesn't show up in your email box, you can most likely find it to read on the Pfennig's website, where you can view that "glamour shot" of me, and archives of the Pfennig! You can find it here: www.dailypfennig.com ---- Hope that helps!

OK... Well... After the thrill is gone, and the dust settled on all that yesterday, the euro is leading the other currencies higher once again... Here are a few things that have caused a sell-off of the dollar overnight once again...

Not that I'm a fan of his... In fact, I don't really care at all... But George Soros, normally has some interesting things to say, that end up being bang on... So here are a few one liners from a speech by George Soros yesterday... I believe this sounds very much like the things I tell you, have told you, and will continue to tell you...

SOROS SAYS SEES A "STOP-GO" ECONOMY GOING FORWARD
SOROS SAYS SELF-CORRECTING MARKETS IS A MISCONCEPTION
SOROS SAYS INFLATION FEARS WILL DRIVE UP RATES AS MARKETS REVIVE, CHOKING OFF GROWTH
SOROS SAYS CURRENT SUPER BUBBLE MADE POSSIBLE BY PAST INTERVENTION, EFFORT TO RESOLVE PREVIOUS BUBBLES
SOROS SAYS FORMER FED CHAIRMAN GREENSPAN REFUSED TO ACCEPT RESPONSIBILITY FOR STOPPING BUBBLES

And then there was Alice Rivlin, she of former Budget Director, and former Fed Reserve member, fame, had a few things to say to the House Budget Committee... Good stuff, but you have to wonder if anyone was paying attention! Here's Alice!

"The long term budget outlook: impending catastrophe"

"No one needs to remind this Committee that the outlook for the federal budget is worrisome indeed, scary. Long before the financial crisis and the current deep recession, this Committee was anxiously pointing out that current federal spending and revenue policies are on a risky, unsustainable course. Promises made under the major entitlement programs (especially Medicare and Medicaid) will increase federal spending rapidly over the next couple of decades, as the population ages and medical spending continues to rise faster than other spending. Federal expenditures are projected to grow substantially faster than revenues, opening widening deficit gaps that cannot not be financed."

Hmmm... Sounds like me too! Is this "sound like Chuck day?" HA!

OK... Enough of all that, I don't want anyone to get hurt, and I should have told everyone to put away the sharp objects before reading!

In other data yesterday, Consumer Confidence took a step backward, and fell in June to 49.3 from May's figure of 54.8... Maybe those that were surveyed has just read Alive Rivlin's talk to the House Budget Committee! Seriously though, this was a surprise, given the fat that the DOW gained 838 points in the 2nd QTR! At least, that's what the Wall Street Journal said!

Today, we get a truckload of data starting with Challenger Job Cuts, and the ADP Employment Change. Those are followed by the ISM Manufacturing Index, Construction Spending, Pending Home Sales and Vehicle Sales... Not a lot of "major" data prints, but still stuff to check the pulse of the economy.

I was talking to my good friend, and an economics professor at a prestigious University, yesterday, and she mentioned that "this piece of data is questionable as to the inputs"... I said to her... "What piece of data isn't questionable these days?"

OK... The "demand for high yield" was put on hold yesterday... But it will return, or at least I should say I think it will return... I don't know for sure to say "it will", so had better make the legal beagles happy... That's funny! To say that they would be "happy" with me... They cringe, and get very uncomfortable every day when they read the Pfennig! HA!

But you know me... I'm just trying to provide Market Commentary, and other things that I think are important, well, important to me that is!

Like... A long time reader sent me a note yesterday, and said, "hey Chuck, did you see the story in the Wall Street Journal (WSJ) on Foreign Demand for Treasuries?" Well, I hadn't and went immediately to the WSJ, and there it was... Tucked away in a corner so that no one would see it, if they weren't looking for it... A story, by Min Zeng, titled, "Is Foreign Demand As Solid As It Looks?

These are the things that really TICK ME OFF folks, so stay with me on this... Basically, as we all know the U.S. Treasury Auctions have been getting "covered" easily recently... And foreign demand was listed as the reason... Which would have been the exact opposite of what I was saying about foreigners shying away from Treasuries...

Here's the skinny... But I'll let Min Zeng tell it, since he did the research and brought this to the public, even though it was tucked away so no one would notice!

"But in a little-noticed switch on June 1, the Treasury changed the way it accounts for indirect bids, putting more buyers under that umbrella and boosting the portion of recent Treasury sales that the market perceived were being bought by foreigners.

The new definitions are deep in the arcane world of Treasury auctions. The change involves buyers who place orders through primary dealers. Those had been counted as direct buyers, but as of June 1 they were classified as indirect buyers, making that group larger than before. Because investors view that group as being dominated by foreign buyers, they assumed foreign demand was higher."

>>>> OK, back to me... Ahhh, so that's what's going on... The Treasury "moved the goal posts on us"... As Sylvester would say... That's despicable! Why isn't someone in Washington D.C. shouting from the roof tops about this? Oh, that's right, they're all in cahoots!

This is HUGE folks... So... When the markets were thinking that foreign demand was increasing, it was actually, as I had said, shying away from Treasuries! Which, if the market participants are thinking that as long as foreigners are "buying into our deficit spending" then the dollar will be on terra firma, but instead are getting "duped" by the U.S. Treasury, you would think that someone would have some xplainin to do... Right Lucy?

And here's another thing that just ticked me off when I read it this morning... Recall, last week I told you about how someone in China was dissing the talk that China's stimulus was working, and that China would not be recovering, which sent the Aussie dollar to the woodshed until this news had passed? Well... Talk about egg on their face! Here's the skinny...

China's manufacturing expanded for a fourth month in June... The official Purchasing Managers' Index rose to a seasonally adjusted 53.2 in June from 53.1 in May... And just like here in the U.S. any reading above 50 is thought to show manufacturing is expanding... The manufacturing index in the U.S. is around 44, so... We DO have the tale of two economies...

In one corner, we have the Chinese who have spent about $585 Billion worth of renminbi in stimulus, and are seeing the results... Whereas in the other corner we have the U.S. who have spent... More money than you can shake a stick at, and are not seeing green shoots like they "think they are", instead they see dandelions, and weeds!

And the currencies of Australia and New Zealand have responded positively to this news from China...

And since I'm talking about China, might as well check on the other members of the BRIC's (Brazil, Russia, India and China) Brazil's real just posted its best quarterly performance on record, and India was Asia's 3rd best performing currency, and if you throw out the two currencies above India that are illiquid, South Korea, and Indonesia, India was the best performing currency in Asia in the second QTR...

And the people over at the Royal Bank of Scotland (RBS) believe that the rupee won't stop here... RBS issued a research report calling for a record 11% gain by the rupee in the 3rd QTR... I bet this news is music to the ears of my colleague on the "other" newsletter that I write... The Currency Capitalist... (to find out more: https://www.web-purchases.com/CUC/WCUCJ900/landing) My colleague, Ashish Advani, at the Sovereign Society, has been saying the rupee would be a strong performer for months now!

Here's something you might want to be aware of, regarding the New Zealand dollar / kiwi... About $4.5 Billion in kiwi Uridashi and euro kiwi bonds denominated in kiwi will expire next month... I'm told that this is more than 4 times the size of a usual monthly expiration of bonds. This could very well be the hoola hoop the Reserve Bank of New Zealand (RBNZ) is looking for, given their wish that kiwi would weaken...

Royal Bank of Canada's Currency guru, Sue Trinh, says that kiwi weakness could be beneficial to Aussie dollars, as the Japanese are leaning toward Aussie over kiwi these days...

Sounds about right to me!

And then there was this... OK, you all saw that Bernie Madoff was given 150 years in prison... Did you see that his wife, Ruth, reached an agreement with the authorities to return all of her wealth except $2.5 million that she got to keep? The thing that I still don't get is how there aren't more people going down with the ship on this one... I've been in the back office of brokerage firms, ran a margin dept, etc. and know this wasn't just Bernie and his accountant... There was a lot of wool pulled over many eyes... And this will be the next step in the investigation by the U.S. officials... To see, who else knew what... If a whole stable full of people aren't found to have known, then I'll be surprised...

Currencies today 7/1/09: A$ .8045, kiwi .6410, C$ .8640, euro 1.4050, sterling 1.6430, Swiss .9220, rand 7.7675, krone 6.39, SEK 7.6337, forint 192.50, zloty 3.1390, koruna 18.3315, yen 96.90, sing 1.4475, HKD 7.75, INR 47.90, China 6.8330, pesos 13.18, BRL 1.9515, dollar index 80.11, Oil $71.27, 10-year 3.54%, Silver $13.67, and Gold... $931.20

That's it for today... So sorry about the tardiness of the Pfennig yesterday, but I can't do anything about it when we have technical difficulties... You know that I get up before the milkman, and the paper man, to get here to write it... It wasn't like I was dilly-dallying around and didn't get it done until 5 in the evening! HA! I see that my little buddy, Alex, got a 2nd and 3rd in backstroke and freestyle respectively at his latest swim meet. Really long time readers might recall when Alex's older brother, Andrew was a highly decorated swimmer, and I would write about his swimming records... And their sister Dawn, also was a medal winner as a young girl! So... It's now up to granddaughter, Delaney Grace to carry on the swimming tradition! HA! Cards lose again... UGH! OK... Time to try to get this out the door, hopefully it will go without a hitch... But whether it does or doesn't it won't stop me from having a Wonderful Wednesday... How about you?

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

Stuck In A Range...

Chuck Butler — Wed, 17 Jun 2009 15:59:22 GMT

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

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

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

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

In This Issue..

* A Turn Around Tuesday?
* BRIC meeting doesn't get covered by the media?
* Are the Bearer Bonds real or fakes?
* QTC's get Gov. backing!

And Now... Today's Pfennig!

Stuck In A Range...

Good day... And a Wonderful Wednesday to you! Remember last week, when I said that we had a "Turn Around Tuesday?" I came in this morning to find a story that Chris Gaffney had printed off the Bloomie for me... The writer refers to the price action yesterday as "Turn Around Tuesday!" OK... I for one, don't even begin to believe that I was the originator of a saying like that for the currencies... I just find it interesting, that a week after I make a big deal out Turn Around Tuesday that it is used in a story with much wider distribution than my little old Pfennig!

Cool Beans, eh? OK... Well... If yesterday was Turn Around Tuesday as the writer said, I sure didn't see it! We had a "stop the dollar at the 1.38 border" Tuesday... But a complete turn around from Monday's sell off, after Russian Finance Minister, Kudrin, threw a cat among the pigeons? Not that I saw!

We do seem to be stuck in a trading range of 1.37 to 1.40... With probes below 1.37 and above 1.40 short-lived. That's OK with me, at this point, but it had better not last too long, or traders will grow tired of the boring range... And, I will be yelling at the walls for some price action!

Well... The BRIC (Brazil, Russia, India and China) meeting didn't really bring about the Thunder and lightening as I thought it would... The leaders of these countries did discuss the need for a "more diversified monetary system to reduce dependency on the world's reserve currency." (read the dollar!) They also discussed selling bonds and swapping currency among the group. Now if we rewind back to Monday, I said that I thought this could be what they would do... The crystal ball was bang on that day! HA!

I can't believe the markets have allowed this to be swept under the rug... This could be colossal if it's carried through... And this way, all of them can smile and say they believe in the dollar and U.S. Treasuries while not dealing with them! Personally, I think the reason the markets aren't paying attention to these goings on, is that the media isn't covering it... The grip that the administration has on the media is really beginning to show just how tight it is...

One other thing from the meeting... The BRIC nations announced that they wanted to take a more active role in the world's financing system... And with $2.8 Trillion in currency reserves among the 4 of them... That would be more than a "kind gesture"...

Speaking of the media... I have to wonder what the media is thinking on this one... Here's the skinny... First of all, this story came to me a week ago... But at first, I thought, I had better make certain this is not a hoax before talking about it... What am I talking about? I'm talking about the report that two Japanese men were caught at the Swiss-Italian border with $130 Billion in U.S. Treasuries!!!!!!! Now, Chris and I were talking about this yesterday, and Chris said, "But I thought all Treasuries were book entry for some time now"... Yes, since 1982 (a great year, with the Cardinals winning the World Series!) Treasuries have been book entry only... So... The question I had from the beginning is "are they real or fake?" Because I didn't want to waste your time and mine if they were fake bonds... But apparently the someone believes them to be real...

Hmmm... $130 Billion in bearer bonds... Does this intrigue anyone? It sure does for yours truly. Does this mean that the U.S. Treasury has been printing bearer bonds and selling them under the cover of a dark night? That's the only explanation I can come up, IF THEY ARE FOR SURE REAL!

I don't know what to make of this except it has my attention, and I can't believe I don't see one story on cable news... But it's all over the news in Europe and Asia... More later, as additional news comes to light on this...

OK... Yesterday, I talked about the Current Account Deficit, which is expected to be $85 Billion for the 1st QTR... What I didn't talk about is that this would be the lowest level for the Current Account in a decade! And would represent just 1.5% of GDP. Now... I used to go out and talk about how the dollar entered the weak dollar trend in Feb. of 2002, after the Current Account Deficit reached 4% of GDP, which historically had been the line in the sand for currency issues...

But let's put this in perspective, eh? Back in 2001 and 2002, our GDP was running at 4-5%... It's now negative... So, maybe this won't be the harbinger to reversing the weak dollar trend, that it looks like on the outside... Besides, as I've said over and over again lately, the whole deficit talk used to center on the Trade Deficit (which account for the majority of the Current Account), and with the global recession going on, the Trade Deficit, while still having issues, is no longer the focal point... Instead, the Budget Deficit (the 2nd of the Twin Deficits) has taken the reins of the focal point... If it's not one thing it's another, my mother used to tell me! (the you-know-what disturber in me just has to make this comment... "no wonder the Current Account is lower, we don't report debts or the bonds that represent the debts!"... That's in reaction to the $130 Billion in bearer bonds!)

I came across a news story yesterday morning that caught my attention... It seems that the Gov't of Australia, has decided to put Government backing on state issued bonds like the QTC's (Queensland Treasury). This is HUGE for these issues, especially since the states in Australia were seeing downgrades in ratings! Now, the country of Australia has a higher rating, and these bonds will carry that rating, since they are now backed by the Gov.! The one thing it will do though, is tighten up the yield on these bonds... Probably by about 10-15 Basis points...

Why am I talking about this? Because... If the QTC bonds now have a higher rating, more institutions will be able to buy them, and the more investment in Australia, the more flows into Aussie dollars! The news brought the A$ back to 80-cents yesterday briefly... But this is going to take some time to work through. The thing here is that in the long run, this is good for the A$!

In China overnight, we had an announcement that could really become a problem with protectionism... China has introduced an explicit "Buy Chinese" policy as part of its economic stimulus program in a move that will amplify tensions with trade partners and increase the likelihood of protectionism around the world.

Now, long time readers know that I've always banged on 1. the Bush administration when they placed tariffs on Japanese Steel about 8 years ago, 2. Schumer and Graham for introducing a bill to place tariffs on Chinese exports to the U.S. Because... Both represent protectionism... And a currency will normally get taken to the woodshed for being associated with a country that takes protectionism measures...

So... Will this hurt the Chinese renminbi? Ahhh grasshopper, remember, the Chinese renminbi is a "manipulated currency". The Chinese Gov. decides what value the renminbi will be... So... In a regular floating currency scenario, yes, this would hurt the currency... But in China's situation, it's all different.

However, the reason I make a big deal out of this is that this announcement could lead to other countries placing their own protectionism measures to offset China... One protectionism measure, begets another, and another, and another... Oh boy! NOT!

Talk about smashing a bug! This would be just like doing that to the promises of a global recovery... Somebody stop them for they know not what they are doing! Or maybe the Chinese do...

Yesterday, Housing Starts in the U.S. surprised on the upside, and so did Building Permits... I don't like this for the simple reason that we already have an "inventory" issue with houses that have been built and not bought or occupied. But, the media was all over this new, because... It's the opposite from what I told you the day before that economists, Shiller, Roubini and Whitney had to say about housing! And the Housing Starts and Building Permits data flies opposite of the report this morning that mortgage applications fell 15.8% this month!

We also saw that Industrial Production fell -1.1% in May... So output was off sharply at factories, utilities and mines, in May, which is completely opposite of those that are saying the recession is over...

Today, in addition to the Current Account data, we'll also see the stupid CPI data for May... You never know what that data has in store for us, because the Gov't doesn't know what they want it to show for us yet! HAHAHAHAHAHAHA! Of course that's my feeling toward CPI, and I've explained it all many times over the years... But, in a nutshell, CPI is kept artificially low by the Gov't by re-weighting things that get too expensive, or substituting things that get too expensive... We all know why CPI is kept artificially low too, don't we? Yes... We do...

Now... I spent more time on CPI this month than I care to! It's just a dumb report that the media will be all over like a cheap suit!

I heard a great old song on the radio this morning that pretty much puts my feelings toward the direction of the country into words... "but you tell me over and over and over again my friend, ah, you don't believe we're on the eve of destruction." - Barry McGuire

And then, I see where the President is going to announce his sweeping regulatory changes today... Hmmm... Do you see what I see? This is a shift from markets driven regulation to Political regulation... Markets to politics... Somebody stop the madness! Serenity now!

Currencies today 6/17/09: A$ .7925, kiwi .6295, C$ .8805, euro 1.3865, sterling 1.6260, Swiss .9190, rand 8.0530, krone 6.4115, SEK 7.8350, forint 204, zloty 3.2580, koruna 19.2570, yen 96.40, sing 1.4580, HKD 7.7505, INR 48.08, China 6.8370, pesos 13.45, BRL 1.9735, dollar index 80.72, Oil $69.69, 10-year 3.67%, Silver $14.10, and Gold... $932

That's it for today... A pretty busy day for yours truly yesterday, with the monthly Review & Focus due, and the regular daily stuff all rolled into one day... Thank goodness, Chris and Mike help me with the Review & Focus these days! Speaking of the Review & Focus, I did a story on whether inflation or deflation is worse for an economy... You'll want to check that out, when it shows up in your mailbox! Hey! My beloved Cardinals scored more than 2 runs in a game last night... YAHOO! It's been a tough month for the redbirds, a June Swoon, if you will. Last night's game VS the Tigers reminded me of the 2006 World Series match-up, and we all know the outcome of that series! 10th World Championship for the Cardinals! OK, enough of that, time is a wastin'! I hope your Wednesday is Wonderful!

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

A Turn Around Tuesday!

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

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

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

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

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

In This Issue..

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

And Now... Today's Pfennig!

A Turn Around Tuesday!

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Rising Treasury Yields...

Chuck Butler — Tue, 09 Jun 2009 14:47:35 GMT

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

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

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

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

In This Issue..

* Another Treasury auction today...
* Spending habits come back to haunt reps...
* Some healing in the currencies...
* 10 Banks to repay TARP today...

And Now... Today's Pfennig!

Rising Treasury Yields...

Good day... And a Terrific Tuesday to you! Well... I sure stirred up the hornet's nest yesterday... Some people didn't think I should express my opinion... But that's OK... Here's the skinny... I wrote yesterday about the farce that the jobs report was, and what a feeble job the media did in reporting the "real numbers"... I then threw something in the Pfennig that I don't normally do, just to see what was more important to people... The fact that their Gov't lies to them, or the fact that they don't see eye-to-eye with me on the President...

Given the response, I'd say that most had their eye on the ball with the jobs farce... And that's all I'm going to say from here on out...

One person did ask me what the President had to do with currencies, in an attempt to obviously steer me back to what I DO know... Well, perception is a BIG thing in currencies folks, and if your leaders are perceived to be one way or the other, it can play big into currency direction. So, to say that what I had to say didn't have anything to do with currencies is on the wrong path.

OK... Enough! The currencies did heal a bit yesterday, with the euro trading back to 1.39 and change during the day... After taking the euro down on Friday, and Sunday night, traders began to realize that the U.S. has to deal with more supply today... And... Once again, the fears that the U.S. won't have anyone show up for a Treasury Auction, just brings back the reality that owning dollars probably isn't a wise thing to do... $35 Billion in 3-year Treasury Notes will be auctioned today...

And... Treasury yields continue to rise... I keep coming back to the rising Treasury yields because, well... Because I want to! Seriously though, have you been keeping score at home on these rising yields? The 10-year Treasury hit a yield of 3.83% yesterday... Now that might not sound too high, but at year-end 2008, a mere 5 months ago, the 10-year's yield was 2%... And if you just keep bringing more supply after more supply to the markets, they are going to demand that those yields get even higher!

And let me remind you that as the yield on a bond goes up, the price of the bond goes down! So... For example... At 2% the price was 110.08... And at 3.83% the price is 94.20... (according to my Bloomberg!) So... All those investors that bought Treasuries last summer in a flight to safety, need to check their statements! Any way... I'm going to add the 10-year Treasury's yield to the Big Finish, so we can keep better track of it!

The political turmoil in the U.K. looks to be water under the bridge now, and the pound sterling came back strong! I'm shocked at how strong this currency bounced back after the U.K. elections were over. But then I was shocked that the currency was 1.65 last week too! But, as I always say, don't step in front of a run-away bus!

The high yielders and Commodity Currencies all saw some healing too, except Mexico, which is watching the price of Oil back off from the higher levels of last week. I saw a story on the Aussie dollar (A$) that struck me as strange... Now, first of all, I have a few detractors that tell me that I only write about things that make a currency look good and bypass the bad stories... I don't see it that way, but be it as it may... I saw a story that said the technical charts show that the A$ is going to fall back to 70-cents... Of course last week, another guys charts had it going back to 80-cents... Hmmm... I need to get these two chartists together and iron this out!

There's a preliminary G-8 meeting this weekend to set the agenda for the Big G-8 meeting in a couple of weeks. I have to think that the currency moves in the past 3 months have got to be on the agenda... That, and... China's latest rumblings about the dollar as a reserve currency. Speaking of China, the World Bank President, Robert Zoellick, was talking at a conference in Montreal last night, and said that China may seek to diversify its foreign currency holdings over time, moving them away from U.S. dollars... Here's more... "over time I could see china moving to some further diversification of its reserves."

Well... He sees it... But do the Chinese see it as a need? One would think that they do, given their worries that a weaker dollar could hurt Chinese investments in U.S. assets, and the fact that they brought to the table an alternative currency as the reserve currency of the world... I've reported all of this numerous times in the past couple of months, so nothing new... Just a need to review it once again...

As I write this morning, I'm watching the euro, which was 1.3920 when I came in, lose some ground to 1.3875... Not much of a move, but a direction that is not likely to last, in my opinion... Not with the supply thing hanging over the dollar's head.

Don't know if you follow stuff like this or not... But the elections for the European Parliament took place last week. In Germany, France, Spain and the U.K. the representatives that believed that throwing taxpayer money at failing corporations, got hammered... Hmmm... I wonder how that would play out here? But I'm not going to go down that road...

I mention that piece above, because I think it had something to do with German Chancellor, Angela Merkel's comments last week... Most of us thought she was taking a shot at the Fed and Bank of England... And she probably was... But her main goal, I believe now, after see the results of the elections, was to bring all this to light right before the voters went to the polls... I'm telling you... She's one smart cookie!

Gold and Silver are having a tough row to hoe in finding a bid... The Bid winds have not filled the main sails of Gold and Silver for 3 days now... And with this following story that I'm going to provide, the bid winds will be even tougher to find... As it will signal to the markets that the tourniquet has been wrapped around the patient (financial institutions) and some are recovering...

It was reported last night that 10 Banks will be allowed to repay their TARP (troubled assets relief program) funds... Could total $50 Billion! With the Fed being so demanding in their grading of these banks before allowing them to repay the TARP, I would think that these banks will be well suited to move forward from here...

With Gold hovering around $950 and Silver around $15, it certainly provides an opportunity to buy at cheaper levels than last week's lofty figures, eh? I would use these dips to my advantage... But then that's just me... It doesn't mean that it's the right thing to do!

My friend, Bill Bonner, had a great piece in his Daily Reckoning (www.dailyreckoning.com) yesterday, regarding house prices... Check this out!

Robert Shiller was talking about Home prices in the NY Times, and this just kind of hit me like a V-8 slap... "Even if there is a quick end to the recession, the housing market's poor performance may linger. After the last home price boom, which ended about the time of the 1990-91 recession, home prices did not start moving upward, even incrementally, until 1997."

We're also looking at $2.4 trillion worth of Alt-A mortgages that will need to be refinanced or reset. The peak in those resets won't happen until January 2013.

Hmmm... That's not anything that anyone selling a house wants to hear! But anyone that wants to buy, well... That's not as devastating to hear!

Well, the data cupboard is empty today, with the U.S. Treasury auction the only thing to deal with today. Tomorrow we get the Trade Balance report for April... Yesterday, I made a mistake talking about the Trade Deficit saying it was "millions"... When I know all too well that it is in the Billions! Just put that down to being writing too early in the morning! But for those of you keeping score at home, the Trade Deficit is forecast to be $29 Billion in April!

But more importantly, tomorrow we'll see the Budget Deficit, which is expected to be $180 Billion for the month of May... If it tallies there at $180 Billion, the Budget Deficit in the first 5 months of this year will have exceeded $650 Billion... And that's before the $787 Stimulus gets added... And other items that will come along... And don't forget that we posted a deficit in April! I still believe the Budget Deficit will be at least $3 Trillion this year!

That would push our National Debt to around $14 Trillion... You can keep score at home if you want by clicking on this link... http://www.brillig.com/debt_clock/

Time to head to the Big Finish...

Currencies today 6/9/09: A$ .7925, kiwi .6210, C$ .9025, euro 1.3890, sterling 1.6150, Swiss .9160, rand 8.1450, krone 6.4340, SEK 7.8150, forint 202.65, zloty 3.2350, koruna 19.3020, yen 98.30, sing 1.46, HKD 7.7515, INR 47.55, China 6.8354, pesos 13.40, BRL 1.9630, dollar index 80.83, Oil $68.85, 10-year 3.83%, Silver $15.07, and Gold... $952.45

That's it for today... A strange day for yours truly yesterday, but had a bright spot as my little granddaughter, Delaney Grace had come to visit, when I got home! She was eating some ice cream, and wouldn't share any with me! But would give me an ice cream kiss! She's so darn cute! Bad storms came through here yesterday, with the sky turning pitch black in the middle of the day once again, and a little hail just to top thing off! Those are scary storms! My beloved Cardinals got swept by the Rockies! UGH! This promising season, is slipping away, they had better get back in the winner's circle fast! Did you observe the 65th anniversary of D-Day last Saturday? I was having lunch with a very good friend, and we were watching the proceedings on the restaurant's Big TV... The waitress tried to stump us, but we were both quite aware of what was going on, and also reminded her that Flag Day was this next week! OK... Hope your Tuesday is Terrific!

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

A Currency Rally For The Ages!

Chuck Butler — Fri, 29 May 2009 15:11:00 GMT

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In This Issue..

* Negative momentum towards the dollar grows...
* Treasury yields continue to rise...
* Fundamentals and Charts coincide!
* Silver has best week in 22 years!

And Now... Today's Pfennig!

A Currency Rally For The Ages!

Good day... And a Happy Friday to one and all! I'm going to make the call and say this is going to be a Fantastico Friday! The sun is supposed to come out today after a week of rain, it's Friday, it's pay-day, and... The currencies have put on a rally that's the stuff that movies are made from! And... Once again, there were signs yesterday that the break of the link to stocks was in place! Take all that, and the fact that we woke up this morning for a brand new day... And you have a Fantastico Friday!

OK... So front and center this morning let me tell you about the currency rally that began yesterday morning... Let's look back at what I said as I was getting ready to hit the send button yesterday morning... "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."

And... The Big Dog, euro, did get off the porch, which allowed all the little dogs to get off the porch to all chase the dollar... Now, before I go on... I wanted to make certain everyone understands what I'm talking about here, when I say "chasing the dollar down the street"... Imagine, if you will, a Big ole dog sitting on a porch, and a rabbit (the dollar) comes hopping by. The Big Dog will spring from the porch to chase the rabbit... If the he catches the poor little rabbit, the rabbit will be cease to be... So, now replace the Big Dog with the euro... And the rabbit with the dollar... And when the euro is chasing the dollar down the street, it's not a good thing for the dollar... For what if the euro catches the dollar?

OK... Sorry for the explanation but it occurred to me that I talk so much about the "Big Dog" euro, and all that, I had better do some 'xplainin'!

For most of the day the currencies rallied VS the dollar, and stocks were going nowhere, which was another good sign that the link between these two asset classes had broken... Stocks did end the day on a high note... But, for the most part were down or flat on the day before rally in the afternoon.

I've been telling you that the "negativity" toward the dollar has been building pressure, and just like any pressure cooker, if the heat stays on, the pressure cooker will finally give in... And it sure looks as though the dollar bulls finally gave in yesterday... Let's just look at this move... Yesterday morning, when I arrived here, the euro was trading at 1.3830... By the time I hit the send button it was 1.3895... And this morning when I arrived, it has a completely different look to it... Trading at 1.4080!

Were you sitting on the sidelines and feel that you missed this move? Well... I have a governor on my writing, folks... But, still I pointed out emphatically a couple of weeks ago that the dollar index had traded through the downside of its 200-day moving average, and that the euro had traded through the upside of its 200-day moving average...

The boys and girls over at Morgan Stanley see a 10% Trade Weighted dollar drop... The believe this will happen through the end of the year... Hmmm... The dollar index (recall I explained this a few weeks ago) has lost 5% since May 8th when it traded through its 200-day moving average... And... The technical / charts people are beginning to jump on this bandwagon, and say their charts are telling them that this is a strong indicator that we're heading for another leg down in the dollar... So... You've got the fundamentals rounding back into shape, and the charts confirming it...

So... Let's sit back and look at the currency landscape for a minute... What's causing this run on the dollar, you might be asking... Ahhh grasshopper... I kept telling you and telling you, that the debts were going to come home to roost, and when the markets got tired of having to choke down the debt issuance, the reversal of the "flight to safety" treasury buying that boosted the dollar from July 2008 - Feb 2009, would rule... And the selling of the dollar would be just as swift as the buying of the dollar was back in July and August of last summer!

I know, I know, you basically wrote that off and said I was akin to the "boy who cried wolf"... But... I did it so that you would have that V-8 moment, when it all began to happen! I've tried to tell you that Treasury yields were rising, which meant there was Treasury selling going on... And it's come to this... What I put down before you months ago.

I'm not trying to blow my horn here, I'm simply trying to show you the sequence of events!

OK... Enough of that! This morning, there's news from the South Korean Pension Fund that is shaking the foundations of the Treasury market... The Fund has announced that they will reduce the amount of its exposure to U.S. Treasuries, and diversify into other assets... This fund is about $200 Billion in size... So, not the likes of China and Japan, but still... Just another outlet for Treasuries to be apparently closed...

In other news that's helping drive up the currencies, as it's not all just "dollar selling"... Retail Sales in Germany showed a nice rise, the first one in 4 months! And in some news that you might not find anywhere else... Eurozone M3 (Money Supply) printed at +4.9%... Hmmm... U.S Money Supply, the last time I looked, was running in the double digits... So... Which economy is going to suffer from higher inflation pressures? Money Supply is inflation folks...

And in some not so bright news for the U.S. economy and housing... The New York Times ran an article from the Mortgage Bankers Association (MBA), that shows 12.07% -- about 5.4 million -- of all U.S. home mortgages were delinquent or going through foreclosure during the first quarter. That compares with 11.93% at the end of last year. UGH! That's awful news... And U.S. Consumer Confidence was higher this month? Really?

Well, folks... I just glanced at the currency screen while typing, and yes, I can do that, with very little in the way of errors, to see the euro cross the 1.41 level... So, now the move looks even stronger, because the euro has gone through two levels of resistance at 1.40 and 1.41...

Looks to me like the only thing that can stop this run-away bus is a bout of profit taking, or the invisible hand of the markets... Dare I say government intervention? I don't want the folks at CNBC to tell me to take this idea to "Hollywood" like they did last week with my PPT thought!

I'm seeing quite a few articles these days on how "unhappy" Big Ben Bernanke is with these rising interest rates... It sure this let's his cow out of the barn, eh? His cow being artificially low interest rates on mortgages... Government intervention in this whole mess continues to muddy up the process, and Big Ben has had his hands right there in the mud! At least my son, Andrew, got his home loan rate locked in, before this latest rise in mortgage rates!

The data cupboard spills out all over the floor today with more data than the cupboard can hold! But before we begin the data round-up, let's look at a couple of other currencies besides the Big Dog, euro... The Aussie dollar (A$) is within spittin' distance of 80-cents! The loonie is within spittin' distance of 91-cents! OK, I'm outta spit now, so I'll just tell you that every currency I see on the board is moving higher VS the dollar.

And the precious metals of Gold and Silver are taking liberties with the dollar too! Last week I told you about the Gold and Silver ratio, and how the Silver ratio was out of line, which could mean a good "buying opportunity" for Silver... Well, in the past week, Silver has put in its best 1-week performance in 22 years! WOW! That's right, 1987, was the last time Silver had a performance like it had this past week! And to move it out further, Silver has gained 25% this month! Double WOW!

OK... Time to settle down... Let's take a look at the mess on the floor from the data cupboard! First off, a revision to 1st QTR GDP will print this morning, expect a revision to show GDP performance was worse than first reported. Look for GDP to revised down to -6.1% from the original -5.5%... Personal Consumption for the 1st QTR will also print, and is also expected to be worse than originally thought. Then the Chicago Purchasing Managers Index (manufacturing for the region) will print... And finally, the U. of Michigan consumer confidence index is expected to show confidence is rising... In what? I guess simply stocks... But given the soaring unemployment, the recession / depression, and rising savings rate, where are corporations going to make money to support these stock prices? I think I've said this already, but if I haven't it simply means that I wrote it somewhere else, but I truly believe that we are going to see negative price to earnings (P/E) ratios later this year... Now, that REALLY gets my stock buying juices going!... NOT!

I don't like going to the Big Finish on a Friday on a sour note like that... But, what's a poor Pfennig writer to do? At least currency and precious metals holders are happy this morning! Oh! And it's Friday, so we must have a "feel good Corporate story" today at the end of the Big Finish!

Currencies today 5/29/09: A$ .7995, kiwi .6380, C$ .9085, euro 1.4120, sterling 1.6165, Swiss .9335, rand 7.9470, krone 6.3130, SEK 7.5650, forint 199.58, zloty 3.1610, koruna 19.0385, yen 95.80, sing 1.4420, HKD 7.7510, INR 47.12, China 6.8281, pesos 13.11, BRL 2.0025, dollar index 79.52, Oil $66.17, Silver $15.54, and Gold... $975.45

That's it for today... The momentum in the currencies right now is incredible! My beloved Cardinals, back in first place where they belong, are on the West Coast this weekend, which means I miss most of their games, as I can't stay up that late! The sun is supposed to remain out for the weekend here, so we've got that going for us! It's that time of the year, with all the graduation parties. Congrats to all the graduates! Good luck! I just love these 4 day work weeks! Time to go to the "feel good" Corporate story of the week! I hope your Friday is Fantastico!

********************************
Pat here in Jacksonville with the Fitness Industry "feel good" story.
Although we're not insulated from economic downturns, we are somewhat more resilient than other discretionary money takers. Nonetheless, the industry as a whole shares a relative bruise on the shoulder - bad dept is up, new business is down, etc. The good news is that people don't have to get a loan to join a health club. So in these dark, gloomy economic days our clubs have actually seen increases in year to year revenue three straight months. How is it that health clubs can realize growth in this environment?
In the good ole days it was all about margins. Today it's all about market share. Hands are folding everyday and if you want to see the next card you better have chips on the table. Understanding this, we have eliminated any reason not to do business with us; long term contracts - gone - exorbitant initiation fees - gone. Conceding to the consumers' ultimate terms has redefined our modus operandi - we no longer establish the terms and conditions for how we conduct business. The consumer does. They want ease of entry? We give it to them. They want no long term commitment? Fine. This is how we not only are surviving but thriving (relatively typing) in a recession. It's the microcosmic adjustment I fully expect to see manifest to the macro stage in the very near future. My fav quote from John Kimsey..."Do something; even if it's wrong - do something!" Going against the grain of generally accepted rules can sometimes forge new generally accepted rules.

Patrick Meinert
President
Fitness Management and Consulting
841 Prudential Drive Suite 120
Jacksonville Florida, 32207
www.fmcjax.com
Office (904) 396-6122
*************************************************

I hope you liked Pat's story!

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

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

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

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

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

In This Issue..

* 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

Maybe, Just Maybe A Break In The Link?

Chuck Butler — Wed, 27 May 2009 12:57:53 GMT

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

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

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

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

In This Issue..

* Currencies consolidate...
* Brazil posts a surplus!
* Dr. Marc Faber speaks...
* High yielders rule!

And Now... Today's Pfennig!

Maybe, Just Maybe A Break In The Link?

Good day... And a Wonderful Wednesday to you! A very tight trading range day was in place yesterday for the currencies... In yet another sign that maybe, just maybe, because you never know, the currencies could be breaking their link to stocks... U.S. stocks jumped 196 points yesterday, and the currencies range traded... Hmmm....

Not that this will become a "stock jockey journal"... Stocks jumped on the news that Consumer Confidence surged this month... Talk about looking at things through rose colored glasses! Any way, Consumer Confidence surged... Better to have blips in Confidence than to be all negative all the time I guess! I also guess the stock jockeys took what was behind door number 1 (consumer confidence) and not was what behind door number 2, which was the Case-Shiller House Price Index...

For the first quarter, the S&P/Case-Shiller U.S. National Home Price Index posted a 19.1% drop from a year earlier, the biggest quarterly decline for the reading's 21-year history. So much for those (insert name to call them) that thought we would see Home Prices level off! Not that there's anything wrong with "wanting" to see Home prices level stop falling, but come on... Where was the proof of that happening? So... Any way... Obviously, Home Prices continue their multi-year tumble... And, the most important thing about the report is that it gives no signs... Get that? NO SIGNS, of abating Home Price declines...

Alrighty then... We've got those two under our belt! Let's get on with the news! So... Now, I read where N. Korea is threatening a strike against S. Korea... Not that we follow the S. Korean Won, but that can't be a good thing for the S. Korea's currency... Of course there are a lot worse things that could happen and people wouldn't be worrying about the currency! But for now, it's just words...

The good news this morning is that Brazil has posted their first Current Account Surplus in 19 months! $146 Million in April was the figure... And any Current Account figure that's written in black is good for a country and their currency! And the real is no exception to this rule. The real is trading this morning at 2.0060, spittin' distance from losing that "2" handle! (real is a European Style priced currency, so the lower the price, the more value it returns VS the dollar) The real hasn't seen the underbelly of a "2" handle since October of last year!

You may recall last fall, I wrote about how the real was holding serve, but eventually it had to give up ground, with the euro losing value and commodity prices circling the bowl. But now that the Big Dog, euro, and commodity prices are on the rise, once again... The real is back in the driver's seat... Ooh, ooh, ooh, driver's seat... A free Pfennig to the first person that knows the name of the band that sings that song. No Googling it!

Don't know if you look at these things or not... But Treasury yields continue to inch higher and higher... It's almost as if they are looking for the pressure point that will cause the U.S. / Fed and Treasury too much pain... In the meantime... Holders of Treasuries are losing value... Of course if they hold them to maturity they get their principal back, so no loss of principal there... But how many of the Treasuries that were purchased last year in the "flight to safety" were made with the thought in mind to hold them to maturity? My guess, is very few... And so it goes for those that thought they were making a flight to safety!

And of course, the dollars they bought to make those Treasury purchases has lost quite a bit of ground since March, which means the Treasury holders get a double whammy / hit... Bond price, and currency price... Fun times at the old Treasury ranch, eh?

And while I'm on that subject... Recall that I've gone out on the limb (no worries, I picked a big strong limb!), and said that I believe that on the other side of this current deflationary asset price scenario we are in, we'll see inflation that rivals the inflation we saw in the late 70's, early 80's... Inflation like that will absolutely kill the price of bonds...

And to that... We have a quote or two from Dr. Marc Faber. I sat on a panel with Dr. Faber at the New Orleans Investment Conference in 2007. A truly intelligent man with the ability to look ahead and see things that others don't see... Well... Any way... What I'm trying to get at is an interview that Dr. Faber gave on Bloomberg TV... Here's the good Dr.

"The U.S. economy will enter "hyperinflation" approaching the levels in Zimbabwe because the Federal Reserve will be reluctant to raise interest rates." He went on to say... "I am 100 percent sure that the U.S. will go into hyperinflation. The problem with government debt growing so much is that when the time will come and the Fed should increase interest rates, they will be very reluctant to do so and so inflation will start to accelerate."

OK, back to me... Now, I think Dr. Faber mentioned Zimbabwe to illustrate his "hyperinflation" call... Myself? I think that just what I said above that inflation will rival that seen in the late 70's, early 80's... Dr. Faber has a point, that I've tried to make before, so let's see if I can get it across now... When a Central Bank raises interest rates, the new Treasury supply they issue has a higher yield, than previous ones issued... That makes the previous ones issued, less valuable. So, what will the Fed do, when the first signs of run-away inflation show up? Do they bite the bullet and raise rates causing all their previous issues to lose value (hello, China, I've got bad news for you), or do they do what Dr. Faber suggests they will do... Nothing, absolutely nothing, say it again!

And what's this all got to with currencies? Ahhhh grasshopper... Everything has to do with currencies! Those dollar denominated Treasuries when reversed and sold, will have the dollar purchases reversed and sold too!

And then throw in what I've been talking about lately with China already signing 6 currency swap agreements with countries that allows them to take dollars out of their trade equation with these countries, and put renminbi into wider use, and you've got the "Perfect Storm" forming for the dollar, folks... I know this is all what I see, and now "fact" per se... But, it's staring us right in the face! I don't know why more people aren't talking about this!

OK... Let's go somewhere else, all this talk is starting to give me a rash!

How about.... Asia? Yes, let's see... There were rumors yesterday that Asian countries like Singapore, India, and Japan had to intervene in the markets because of the dollar's decline. It's likely that Asian Central Banks had to sell their currency and buy dollars to keep the fall in the dollar to a minimum. I really, truly don't like when Central Banks get into the markets... It's manipulation... And as long as they can do that, and... Print money... There really is no such thing as "free markets", right? If, Alan Greenspan can manipulate interest rates to allow the stock market to run higher for years, was it the stocks that was the "root" of the rally, or was it the Fed Reserve manipulation? Yes, I'm sure you know the answer...

Well.. Gold continues to consolidate after last week's huge run-up. I think that when you see assets stop to take a breather, it's a good thing. 1. it allows those that were looking to buy a chance to buy without chasing a rising asset... And 2. Trading trends are not one-way streets, so as long as the asset doesn't have a HUGE sell off, then the price action is good... It allows the asset to form a new base from which to spring higher!

I see the pound sterling trading this morning with a 1.60 handle... That's the first times since November last year... Only this time the currency is rising instead of sliding down the slippery slope! I really don't see the value in pound sterling, but apparently others do! This rise does give owners who wanted to get out of the currency an opportunity to do so at higher levels!

I heard one of the salespeople yesterday tell a customer that the South African rand had been the best performing currency this year... But that was before the Brazilian real posted its Current Account Surplus and rallied! Any way, I was going to talk about the rand... Now, I've always said that I wasn't a huge fan of the rand, because it was volatile, and the corruption in the country just didn't give me a warm and fuzzy... But, what's going on right now is simply a case of the rand being 1. a high yielder, and 2. a commodity currency...

The need for higher yields is quickly becoming a growing concern for investors... They are difficult to find, and when you do find them, they're mostly the property of Emerging market countries, or Commodity countries... Not your run-of-the mill "major" currency like euro, yen, or sterling! So... What I'm telling you, is simply be careful out there in high yield land!

The price of Oil spiked up yesterday to over $63!

And finally... The first test of the 2-year auction of Treasuries, passed... But getting investors to go short probably isn't the real problem... The real test will be the 10-year and out... I told you earlier that yields were rising... Well... How does this sound? 10-year yields are up 129 Basis points so far this year and 103 Basis points since the March 18th quantitative easing announcement.

OK... The email server is down and out this morning, so I have no idea when this will actually get to you today... I've got some things to get done this morning, so I'll just go ahead and go to the Big Finish, and hope it goes out!

Currencies today 5/27/09: A$ .7845, kiwi .6190, C$ .8980, euro 1.3930, sterling 1.60, Swiss .9190, rand 8.2870, krone 6.3830, SEK 7.6570, forint 203.50, zloty 3.1950, koruna 19.23, yen 95.30, sing 1.4515, HKD 7.7525, INR 47.70, China 6.8284, pesos 13.18, BRL 2.0067, Dollar Index 80.50, Oil $63.11, Silver $14.53, and Gold... $950.60

That's it for today... Today is a very special day... It's the first ever World MS Day... 100 nations around the globe are joining together to build awareness for multiple sclerosis. My mom had MS, so that's why I point this out today. I see currencies selling off a bit since I did the currency round-up... The monsoons continue here in the Mid-West... The river that runs through my little town is swelling once again, with all this rain-fall I have to believe it will spill over its banks soon... And that makes getting to and leaving from my little town a bit difficult! Well... Mike's here, that means I'm running late! Time to get on with this Hump Day... I hope your Wednesday is Wonderful!

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

A Rare Day, Indeed!

Chuck Butler — Fri, 22 May 2009 14:17:06 GMT

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

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

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

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

In This Issue..

* Stocks, bonds and dollars get sold!
* The U.S. to lose our AAA credit rating?
* A return to fundamentals day 2...
* A Corporate Feel Good story for a Friday...

And Now... Today's Pfennig!

A Rare Day, Indeed!

Good day... And a Happy Friday to one and all! A Fantastico Friday here in St. Louis, as we bask in the sun of a 3-game sweep by my beloved Cardinals over the Cubbies! It's also the beginning of a 3-day Holiday weekend. It's Memorial Day on Monday! Time to reflect and give thanks for those that put their lives on the line for our freedom...

OK... Front and Center this morning the Big Dog (euro) has left the porch and is chasing the dollar down the street! I got home yesterday afternoon, rested, and then checked the currencies at the NY closing before they handed the books over to Japan, and saw that the euro had leap-frogged to the 1.39 handle! WOW! What was going on?

Well... First of all... Didn't I tell you long ago that whenever the fundamentals returned to the markets that had been absent since July of 2008, we would see the dollar return to the underlying weak trend? OK... I don't know if this is "exactly" what's happened, but I do know this... The negativity toward owning dollars is growing like a nut-grass weed does on hot summer days. I also know that ever since the euro moved higher than its 200-day moving average on May 8th, there's been little or no looking back. And... To finish this up, people are beginning to notice the monetary policies of the U.S., the rising deficits, the supply that's needed to finance the deficits, and... The thought that the U.S.'s credit rating could be downgraded... OUCH! Hey! That's going to leave a mark!

Seriously though... This would not be a good thing... You know, Bill Gross of PIMCO, the world's largest bond house, right? I've quoted him on quite a few occasions in the past... Well, anyway, Bill Gross, said that he believed that the U.S. would eventually lose their Triple A (AAA) rating...

Don't look for any answers from that crew on CNBC! Don't know if you caught my appearance on the CNBC Power Lunch yesterday... But, they had this "lynching mob" ready and waiting for me... I was told by the producer that I would get a chance to tell my "story" on the comment I made the other day about the PPT. (Plunge Protection Team) BUZZZZZZZZ, WRONG! Thank you for playing, there's a nice parting gift for you at the door! As I tried to put the whole thing into context, one of the "lynch mob" said to me, "You're losing me"... Oh really? You only have an attention span of 1 minute? Any way... I know, I know, these guys are there to entertain, not inform... and they thought it was entertaining to mock me, rather than listen and maybe have their viewers informed...

OK... I know, my public relations people will be reeling this morning when they read that, but... I just had to get it off my chest. The mass media is so to blame for a lot of this mess we're in... The sat there and said nothing... They looked the other way, while the Gov't slowly tears at our Constitution... OK, I had better stop now!

Back to currencies, because THAT'S the story of today! It sure looks like the scene we've seen before when the dollar reaches this threshold of major weakness again... It looks like the scene, it smells like the scene, walks like the scene, it must be the scene! The dollar is once again on the threshold of major weakness!

Why do I think the "fundamentals" have come back into play? Well... Bad data... Since July of last year, we've been in this funky trading theme that rewarded the dollar, every time things looked bad in the U.S. for the economy... However, in the last week, we've begun to see a change... Not a "sea change" yet... But a change... And this is when you want to get in on something, not after the "sea change" has come! Then you're chasing the market...

Yesterday's bad data came on two fronts, one that everyone had the chance to see, and one you would have to pay close attention to... 1. Initial Jobless Claims rose again last week. This time to 637,000, which was higher than forecast, and the previous week's number was revised upward... And then number 2. The Fed left the markets out on a line... You see they did NOT purchase as many Treasuries as the markets believed they would... On the outside that would seem to be a good thing... But underneath the covers, things are different... The markets took this lower bond purchase by the Fed as an indication that they will have to come back and do more later, as the Fed attempts to hold down long term Treasury yields... And in doing so... The dollar will get stuck in the middle. In fact, here's the dollar's new song... Clowns (bad data) to the left of me, Jokers (the Fed) to the right, here I am stuck in the middle with you!

Yesterday was also a very bad day at Red Rock for not only the dollar, but stocks, and bonds! You don't normally see days like that... I read somewhere that there have only been 18 days since 1990 that we've seen a day like yesterday! Stocks and bonds both getting sold? Where were the funds going from those sales? Ahhhh grasshopper, this is playing out just as I told you it would when the safe haven buying of Treasuries were reversed... The funds, yesterday, were obviously going toward currencies and metals!

And, the currencies and metals have added to their gains from yesterday in the overnight markets! And going into a thinned out Friday, before a holiday weekend, trading... This could get ugly for the dollar today... If I had been standing on the sidelines waiting to get in, I don't think today would be the day... Although the currencies might continue this move higher, I just don't think that chasing a market in a thinned out market, is the prudent thing to do... And on the other side, we could just as easy see a big sell off today... Because, as I always tell you, be yourself! No, wait, that's Tutor Turtle and Mr. Wizard talking... I always tell you that in thinned out markets, you can see wild swings...

OK... So it wasn't just the Big Dog, euro kicking sand in the face of the dollar bulls yesterday... All the little dogs were able to get off the porch and chase the dollar down the street too. For instance the Canadian dollar / loonie reached .8875, a level it hadn't traded at since October of last year! Aussie dollars (A$) has a 78-cent handle, something it hasn't seen since October of last year... And look at the Indian rupee go! And Gold is $955!

When we return on Tuesday of next week, the data cupboard will be overflowing with data here in the U.S. All sorts of Housing data, which I can't see as anything good for the dollar, given the new direction and return to fundamentals.

Currencies today 5/22/09: A$ .7835, kiwi .6190, C$ .8870, euro 1.3955, sterling 1.5880, Swiss .9175, rand 8.33, krone 6.3880, SEK 7.5225, forint 199.50, zloty 3.1325, koruna 19.1550, yen 94, sing 1.4430, HKD 7.7518, INR 47.11, China 6.8232, pesos 13.14, BRL 2.03, dollar index 80.15, Oil $61.60, Silver $14.65, and Gold... $955

That's it for today... After the signoff, I'll bring you this week's "Feel Good Corporate Story"... Great time last night with colleagues, Chris Gaffney, Jen Mclain, and Christine Peplow, as we were all treated to a game at Busch stadium to watch our Cardinals! And to watch Albert Pujols hit a monster home run! And... An "almost" complete game by our pitcher! WOW! What a night! So.. It's Memorial Day, on Monday... It's more than breaking out the grills, opening the pools, and all that... Although that's all fun! OK... Time to get to the "feel good" story... Remember, I asked for stories from businesses that were doing good during the recession so that you weren't always reading depressing stories! Here's this week's... I hope your Friday is Fantastico, and your Memorial Day Holiday weekend is grand!

This week's highlighted Company.... "My online business, Cool Cribs Lifestyles, started last August and has skyrocketed higher than initial goals ever imagined. We sell high quality Spiritual Living products that have meaning behind them and are chosen with love and care. As so many people are looking for sense behind all the turmoil they see in daily life and on the news, they are reaching out for items to warm their hearts and comfort their souls. This is the niche we fill. We love what we do, provide excellent customer service and offers products chosen with love.

Aside from this, we also sell the coolest retro handsets for cell phones that harkens back to the old days. This is one hot little item we simply can't keep in stock."

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

A Huge Rally Gets Stopped!

Chuck Butler — Mon, 11 May 2009 14:41:07 GMT

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

* Jobs Jamboree results...
* A double whack for Treasuries...
* The loonie is stealth like...
* Oil on the rise...

And Now... Today's Pfennig!

A Huge Rally Gets Stopped!

Good day... And a Marvelous Monday to you! I hope you enjoyed your Mother's Day weekend. Friday was absolutely crazy in the markets. The currency screens lit up, the price of Oil was on the rise, and Treasury yields were rising, thus pushing the value of existing bonds downward. An absolutely crazy day, that scared the bejeebers out of the Chinese... So, let's go to the tape to see what's going on here...

Front and center to talk about this morning, was the Jobs Jamboree... The mass media would have you believe that the recession has ended, and there are no longer any problems with the credit markets, and liquidity, not to mention the sorry state of financial institutions... Why? Because after the previous month's job losses were revised up from 663,000 to 699,000 (nobody cared about that!) the April figures came in at, according to the media, "just" 539,000... YAHOO! Let's have a party, according to what I kept seeing on the TV!

Well... Before we go and buy the party favors and balloons, let's take a closer look at the number, to see where the jobs were created... Something an old-time journalist would do, before claiming it to be party time! Well, what to my wondering eyes did appear? 72,000 jobs created by the Gov't. That's right... Add those back and the civilian job market did add / create some jobs... But not the lofty number of jobs the media would have you to believe. It's not that I want to see jobs lost, folks... I just want things to be reported correctly, so that investment decisions can be made on facts, not fiction.

So... Here's how I would have reported it... "April's job losses finally put a tourniquet around the labor market and created jobs for the first time in 6 months. The "absolute" number of jobs lost remained above 600,000, but, April's figures do give hope that we will see further gains in future months."

OK, enough of that! The hoopla over the labor data kick started the risk assets, as, if you recall, I said they would on Friday. Currencies led the way, with commodities in second, and stocks finally getting a clue later in the day. The Big Dog, euro, led the little dogs (the rest of the currencies) off the porch to really chase the dollar down the street. This chase lasted all day, and by late afternoon, I yelled across the desk that the dollar index has moved to the downside of its 200-day moving average! This move really lit a fire under the dollar bears, and they came out to play for the first time in a month of Sundays.

So, the risk assets were kicking some tail and taking names later... What was hurting? U.S. Treasuries! As I've said over and over again in the past, holders of Treasuries are growing tired of the paltry yields... And now, the currency the Treasuries were denominated in was getting hammered... The move out of Treasuries drove down the price, and pushed the yield higher... I doubt the Fed and Treasury are happy about that! The Fed will have to start buying more Treasuries to get the yield under control...

Another entity that wasn't happy about watching their $750 Billion or so, of dollar denominated Treasuries get double whacked like that in one day... The Chinese! How would you like to take on losses like that?

But really folks, yes, the price action in the currencies and Treasuries were violent on Friday, but... This has been happening for about 2 months now... Yes, we've seen the back and forth of these assets, but when you put a line on the 2-month performances, you'll see this wasn't just a one-and-done!

OK, so the Chinese watched all this and thought they were in a horror picture show! I saw a Chinese official try to wipe out China's harping about "the need for a replacement reserve currency"... Shoot Rudy, wouldn't you do the same thing?

So... The "backing off" by the Chinese, has everyone re-thinking Friday's price action... For if the Chinese are going to balk, the rest of the world needs to stop and take a breather. Again, folks, this is one of the very bad things that I've tried to explain to you over the years regarding the imbalances between the U.S. and China... With China doing the "rope-a-dope" regarding their call on the dollar, the euro and other currencies have backed off their lofty figures of Friday... The Big Dog, euro was nearing 1.37 on Friday afternoon, when I left for home... It's back down to 1.36 this morning...

The move on Friday proved to be just too fast... And the currencies are coming back to fill the gaps they passed up on Friday.

Did you hear that the Fed used a "different" method of valuing the banks? The Fed's "yardstick" Tier 1 Capital surprised quite a few observers... Many analysts thought that the Fed would use what's called "tangible common equity", which would look at the assets and make them accountable for unrealized losses... But NOOOOOOOOO! Had the Fed used "tangible common equity" the total hole the banks would be in would be $68 Billion deeper!

My dad used to tell me... Chuck, figures lie, and liars figure...

Not that I'm accusing the Fed & Treasury of just going through the motions on this... No wait, I guess that IS what I'm doing!

Let's go back to the mention above regarding the dollar index moving downward through its 200-day moving average... The dollar index is a measure of the value of the dollar relative to a basket of foreign currencies. It is a weighted geometric mean of the dollar's value compared to the euro (EUR), Japanese yen (JPY), Pound sterling (GBP), Canadian dollar (CAD), Swedish krona (SEK) and Swiss franc (CHF).

It was started in March 1973, soon after the dismantling of the Bretton Woods system. At that time, the value of the Dollar Index was 100.000 and has since traded as high as the mid-160s but also into the low 70s. It currently stands at 82.63...

The dollar index is heavily weighted toward euros...

Many institutional investors use the dollar index as their means of trading the dollar... And to see it fall through its 200-day moving average, was enough proof for them that the dollar is heading south.

The 200-day moving average, for those of you unfamiliar with this term, is a long-term moving average that helps determine the overall health of the asset, which in this case we're talking about the dollar. It is for all practical purposes a dividing line, if you will, between as asset being healthy and one that is not.

OK, enough of the lessons! I mentioned at the top that the price of Oil was on the rise Friday, and although it has backed off now, with the Chinese comments, for a while there on Friday, you could see the bubbling crude, black gold, Texas Tea, spouting off toward $100 again... Yes, Oil saw a $60 handle briefly on Friday... It's back down to $57.42 this morning... Now, that's one thing we DON'T need is a rising Oil price!

The Canadian dollar / loonie on the other hand, loves a rising Oil price! Recall, I told you a few times in the past that the loonie needs a stronger Oil price to really go a tear higher... But even with the move in Oil recently, the loonie has been moving steadily higher VS the dollar. When I say recently for Oil's move, I'm talking about the last 2 months... In the last two months crude oil is up +31% (since March 1st)... WOW! No wonder the loonie has gained almost 12% since that same March 1st date...

In fact, I just ran a currency scorecard using March 1, 2009 as my beginning date, and the currency moves since that date have been phenomenal! Except for yen, which is flat during the past two months. How do these sound? Kiwi +22%, Sweden +19%, Norway +12%, and so on...

The U.S. data cupboard is empty today, but gets restocked tomorrow with the latest Trade Deficit report... The way the Trade Deficit has been falling in the past 6 months, I might have to say Trade Balance, and not assume it will be a deficit some day! Well, the fall in the Trade Deficit is a direct result of the U.S. recession. U.S. consumers "finally", taking a breather on spending... The reduction in the Trade Deficit however, has NOT been a result of improving exports, which would be the preferable method of reducing the Trade Deficit. If exports were leading the way, it would mean that U.S. manufacturing was hitting on at least 6 of 8, and that would be good for the economy! But... Instead, we get a reduction from a lack of consumer spending... A combo of both would be great! But that's pie in the sky stuff!

We'll also see April's Retail Sales on Wednesday. March's Retail Sales were awful (-.9%)... I do expect to see April's figures to be stronger, according to the BHI... (Butler household index)...

At least all the rate cuts are over for this month. The Bank Stress Tests are a thing of the past, and we can maybe... Just maybe, return to the fundamentals!

Currencies today 5/11/09: A$ .7620, kiwi .6025, C$ .8655, euro 1.3580, sterling 1.5115, Swiss .9020, rand 8.3650, krone 6.4120, SEK 7.7375, forint 205.50, zloty 3.2280, koruna 19.6520, yen 97.80, sing 1.46, HKD 7.75, INR 49.50, China 6.8239, (see when China got spooked on Friday, they weakened the renminbi!) pesos 13.12, BRL 2.06, dollar index 82.63, Oil $57.42, Silver $13.83, and Gold... $912.50

That's it for today... I'm headed to Las Vegas today... So the Pfennig will be going out later the rest of the week, as I'll be in a different time zone... I'll speaking 3 different times at the Las Vegas Money Show. I don't know how I got signed up for 3 different times, but it is what it is... Cards get one of three from the Reds... Tough weekend for my beloved Cardinals! It was great seeing all the kids yesterday. Little Delaney Grace entertained us, singing songs and just being a toddler... I'm running a bit late today, as I had to finish packing for my trip this morning. I do not enjoy Las Vegas, so, this is one of those trips where you can't wait to get there, so your time there can start and get on toward leaving! On that note... I hope your Monday is Marvelous... And you have a wonderful week!

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