Daily Pfennig : Trichet

It's A Risk Off Friday...

Chuck Butler — Fri, 20 Nov 2009 15:22:00 GMT

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                         A Pfennig For Your Thoughts
                               November 20, 2009

In This Issue..

* It's a Risk Off day!
* Commodity Currencies get rocked...
* Audit the Fed Bill moves along...
* Just keep spending money we don't have!

And Now... Today's Pfennig!

It's A Risk Off Friday...

Good day... And a Happy Friday to one and all! A Fantastico Friday in my books, as the people at the Retina Institute told me yesterday that the fluid on my eye was drying up, and almost completely gone. I told them I had not noticed any improvement in vision, and they said, "at least it hasn't gotten worse!" And for that, I am quite thankful! So... With that news, I head into today, and believe it to be a Fantastico Friday!

Well... In my hours on hours of waiting for the next person to look at my eye yesterday, (I think it was "train the eye doctor day" on Chuck's eye) I kept checking the currencies, and noticed that as the day went on, the non-dollar currencies were stronger, led by the Big Dog, euro... But then late last night, and I mean late last night, I checked them, and those gains had been wiped out...

So, when I arrived here this morning, I had one thing on the top of my list of things to do, and that was find out what happened... Come on, I said to myself, it had to be more than the Risk On, Risk Off stuff that's been hanging over the markets like the Sword of Damocles! But, when you get right down to the nitty gritty, that's all it was... For once again, there was some data or story, or rumor, that spooked the markets into believing the global recovery isn't going to happen, and the Risk Off came into play...

Like I said the other day, this happens so much that you start to believe Mr. Myagi is directing the markets... Risk On... Risk Off... (Wax on, Wax off) HA!

So, I bet your asking... So, what was that data, story or rumor that spooked the markets... Well... The only thing I can find was the report yesterday about Housing Starts dropping that Chris told you about... Did you know that about 14% of U.S. homeowners were either delinquent on their mortgage or in some stage of foreclosure. That is the highest rate since the group started collecting the data in 1972!

But there was something else that was announced as the day went on, that I think probably spooked the markets more than anything else... And that is a key House panel approved two amendments to a sweeping financial-overhaul bill that would give federal watchdogs new authority to audit the Federal Reserve, and would establish a fund of as much as $200 billion to help dissolve large, troubled institutions. Rep. Ron Paul (R., Texas) offered the amendment seeking to subject the Fed to audits.

The House Financial Services Committee voted 41-28 to approve the amendments, wrapping up weeks of debate but postponing a final vote on the bill until after Thanksgiving.

OK... More deficit spending for sure, and I'm positive that this was "hung on this bill" to audit the Fed as the only way it would get through the gauntlet...

Why would this Bill "spook the markets?" Ahhh grasshopper... To audit the cartel, is a step toward getting a peek behind the curtain, and that's scary folks... But! It's what's needed! And so I applaud the panel's vote... (too bad they had to hang that $200 Billion deficit spending package onto this, but that's how the dolts in D.C. work...)

So... When things get spooky traders, crawl back into the dollar's corner... Love is kind of spooky with a girl like you, is what I'm reminded of!

And when traders crawl back into the dollar's corner, the currencies that have booked the best performances against the dollar, see their fortunes reversed the most... So... In this case, it's the Aussie dollar, New Zealand dollar, Norwegian krone, and Brazilian real... These three will most likely put a losing week into the books, which hasn't happened very often during this rally that began in March. I say "most likely" because, we've seen swings in these currencies that could easily wipe out these weekly losses in a NY Minute! But with the data cupboard as empty as my stomach feels right now, (not to worry, I have my daily apple ready to consume!) today... I doubt we'll see any "swings" to bring these currencies to the positive side of the ledger this week!

The Weekly Initial Jobless Claims here in the U.S. printed yesterday at 505,000, same as the week before... I heard one air-head TV commentator (if it's a commentator, it must be from Idaho! HAHAHAHA! Get it? Common Tater?) any way... I heard one say that at 505,000, it shows that employment is on the mend... Ahem... Did you do the math? That's over 2 million new jobless people per month! Dolt head!

Yes, I know it doesn't net out the jobs that were created... I'm strictly talking about jobs that are lost on a weekly basis... You can't in your Wildest Dreams, think that we're creating more than 2 million jobs a month during a depression!

So... That data wasn't good for the "recovery campers"...

I was writing some notes for my latest video on Wednesday, and noted that Japanese yen, gets the best of Risk On, Risk Off trading... For some strange reason, and yes, I'm well aware that Japan is the second largest economy in the world, Japanese yen is considered a "safe haven" when the Risk Off is in play... And when the Risk On is in play, spanking the dollar, Japanese yen doesn't sell-off!

Now... I'm not a HUGE fan of Japan, as their Gov't Deficit is tremendous in size, rivaling the doubled in size National Debt of the U.S. And I personally feel that the yen at 88 and change is bumping the ceiling... But, the markets can be irrational, right? And with yen, they are really irrational!

Hey! Did you see that there's pressure on U.S. Treasury Sec. Tim Geithner to resign? Personally, I don't know that he's done any worse than Hank Paulson... But, then, is that what we've come to accept? Bad leadership? I've said this before, and I know it really gets under some people's skin... But, besides the National Deficit, and the Trade Deficit, we have a Leadership Deficit... I'm talking about the lawmakers, The Fed Chairman, and Treasury Sec... I guess the administration should be thrown in there, for it's been that way for the last 9 years!

The European Central Bank's President, Trichet, and the Swiss National Bank's Gov., Roth, both spoke last night, and neither referred to the currencies in any way, but Trichet did add to the Risk Off mood of the markets by saying that, "it is too early, as of today, to declare the crisis is over." The People's Bank of China's Gov., Zhou, said that China was "passive on the direction of the dollar"... Hmmm... I have to wonder if he was truly speaking from the heart there, or... Just stating that to keep the dollar from falling into an abyss...

You know about the stock sell off that I've been warning you about for a couple of months now, that could very well drag the currencies and commodities along for the ride? Well... I know that you all think that I'm playing the boy who cried wolf, here... But, recent trading days have me worried a bit about this taking baby steps right now...

My trader / chartist, friend, sent me a note and told me to watch the A$, for it is very close to its 9-month trend line support of .9093 (it's currently at .9110), for should it close below that number it would signal (according to him!) a correction to 88-cents... Not a huge drop, but it's not like these charts can pin-point a level that a currency will turn-around... Or maybe they can! I'm lost when it comes to charts... I look at them and unless they are as obvious as a man with a hatchet in his head, like the U.S. dollar chart since 1971, then I could make a case for an asset that's being charted to go either way!

That's why charts are not "fundamentals"... Fundamentals are what put an asset into a trend, either weak or strong, and charts tell you what happened in that trend...

And then there was this... According to the Wall Street Journal..."Some of Goldman's largest shareholders have urged the firm to reduce the size of its bonus pool, arguing that it should pass along more of its blockbuster earnings to investors. The investors hold tens of millions of shares in the Wall Street firm, which is on track to make the biggest employee payout in its 140-year history."

Chuck again... Where have these "largest shareholders" been all these years? Why make a big deal about this now? Oh, that's right! The Gov't has made it look "dirty" to give bonuses...

Oh... And I heard that the Senate's version of the Health Care Bill will cost $849 Billion... Just keep spending money we don't have, Congress... I'm reminded of a saying by Voltaire... "Common Sense is not so Common"...

To recap... The Risk Off wax is being applied by Mr. Myagi again this morning, as the non-dollar currencies, other than yen, have given back recent gains VS the dollar. The "Audit The Fed" Bill has been pushed through the gauntlet for a vote after Thanksgiving. The Aussie dollar is near its 9-month trend level, and shareholders want "some of the action"!

Currencies today 11/20/09: American Style: A$ .9110, kiwi .7225, C$ .9360, euro 1.4850, sterling 1.6490, Swiss .9820, European Style: rand 7.5880, krone 5.68, SEK 6.97, forint 182.25, zloty 2.80, koruna 17.4340, RUB 28.95, yen 88.90, sing 1.39, HKD 7.75, INR 46.63, China 6.8278, peso 13.09, BRL 1.75, dollar index 75.64, Oil $76.91, 10-year 3.33%, Silver $18.17, and Gold... $1,137.20

That's it for today... I've been doing some "educational" presentations for the people over at DTI... I've done 2 on currencies, and 1 on Gold... Next Monday, I'll be doing one on "other ways" to diversify, using foreign stocks and bonds... You can listen to it if you want by clicking here at 1:30 CT on Monday... http://www.dtitrader.com/trading_education_MMM_Everbank_Nov23.htm

I'll be heading down the road to Columbia Missouri tomorrow, to watch my beloved Missouri Tigers on Senior Day... My little buddy Alex, had his football team banquet last night... His team went 20-5-1 in three years... That's pretty impressive! Now they move on to High School, where's it's a whole different animal! I have 4 videos to do today! YIKES! But I've got my "blue shirt" on... So, I should be good to go! Let's get working on today, and make it the best Fantastico Friday ever!

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.

RBA's Stevens Turns On The Green Light!

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

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

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

And Now... Today's Pfennig!

RBA's Stevens Turns On The Green Light!

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Dollar continues to fall...

Chuck Butler — Wed, 14 Oct 2009 15:21:42 GMT

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In This Issue..

* Dollar moves lower...
* China to take a role at IMF...
* US Borrow and spend policies continue...
* Gold sets a new record...

And Now... Today's Pfennig!

Dollar continues to fall...

Good day...and what a day it was in the currency markets on Tuesday! The rout on the dollar continued, and was broad based with gains in every currency we trade. The commodity based currencies led the pack, as the weaker dollar fueled a big run up in raw material prices. Reports out of both Asia and Europe signaled the global economy is recovering, and bolstered investors looking for a way out of the falling dollar.

European industrial output rose for a fourth month in August, increasing just below 1 percent from July. From a year earlier, August output fell 15.4%, a big drop but still the smallest YOY decline in 8 months. The Euro area continues to recover 'at a gradual pace' according to ECB President Trichet. The positive news coming from the manufacturing sector is a good sign the European economic recovery will be sustainable.

Another report overnight showed China's exports fell by the least amount in nine months during September. As we have written over and over again, China will lead the world out of the global recession, and the latest reports show China beginning to pull away. Reports due out next week will likely show China's economic growth accelerated to 8.9% in the third quarter; slightly above the governments target.

China has used the economic downturn to lock in a dominant position in world trade, and has replaced Germany as the world's biggest exporter. During the first seven months of this year, China has moved past Canada as the number one supplier of imported goods to the US with 19% of all imports entering the US originating in China. These exports continue to bolster China's foreign reserves which climbed $141 billion in the third quarter to a record $2.273 trillion. China has decided to keep their currency pegged to the falling dollar, which has helped them increase their exports leading to additional growth in their currency reserves.

The Chinese government is now looking to leverage their huge reserves to attain a more dominant role in the post-crisis global financial order. A story in the China Daily predicted Bank of China Vice-President Zhu Min will soon take up a crucial post at the International Monetary Fund (IMF). According to the Chinese paper, "Zhu's appointment at the IMF will be a significant step toward breaking up the US and Europe's dominant position in the international financial stage". Welcome to the new world order!

Today we will finally get some data in the US, with the release of retail sales, business inventories, and the monthly budget statement. We will also get to read the minutes of the Sept 23 FOMC meeting this afternoon. Retail sales is the number to watch, and it is expected to have dropped by over 2% with the end of the 'cash for clunkers' program. If the data come in as expected, it will confirm the US consumer will not be able to sustain their spending as the government stimulus fades. So while Europe and China look to be expanding, the US is bogged down with rising unemployment and weak growth.

I can pretty much predict what the administration will say after seeing the report: It is obvious that we need to have another stimulus package!! The administration thinks the way out of this mess is to borrow and spend, and if the US consumers won't do it on their own, the government will be more than happy to spend our money for us. But President Obama's effort to spend us out of recession is undermining the US$. In spite of his pledge to keep the dollar strong, the dollar index is down 10% during the first 8 1/2 months of Treasury Secretary Tim Geithner's term.

And the boys over at the Federal Reserve certainly don't seem like they want a strong dollar either. Fed Vice Chairman Donald Kohn put a shot across the dollars bow yesterday when he said interest rates will remain low for an 'extended period'. I expect the minutes of the FOMC meeting which will be released later today will show the members continue to focus on the short term and have turned a blind eye to the threat of future inflation. The dovish tone which the Fed has taken will continue to push the dollar lower.

I read the following quote in an article on Bloomberg which I thought was dead on: "The all night printing runs at the Treasury are chipping away at the dollar's ability to hold value compared to other currencies and commodities," Mike Sander, of Sander Capital said yesterday. "With dollar weakness, inflation fears, a huge budget deficit, energy prices creeping up, metals such as gold, silver, and copper will be pushed up in price." Sounds like Mr. Sander is a Pfennig reader!!

As I pointed out in my opening paragraph, commodity prices have surged on the positive economic news from China and Europe. Demand by China continues to support the market for raw materials, and a falling dollar has created additional demand. The prices of oil, gold, and copper all moved higher yesterday and brought the currencies of Canada, South Africa, and Norway along for the ride. The South African Rand and Norwegian Krone were both up nearly 1% vs. the US$ and the Canadian loonie moved a bit closer to parity with the US$. Norway's finance minister helped push the krone higher with the announcement that their stimulus efforts will generate an extra .5% of economic growth next year. The Norges Bank considered moving interest rates higher last month, and looks poised to deliver a rate increase at their next meeting.

I know I will get some emails accusing me of being hypocritical, bashing the US and UK stimulus plans while praising those of Norway and China. The big difference between these plans is that Norway and China are spending money they already have, while the US and the UK are borrowing in order to spend. Norway is spending some of its $450 billion oil fund in order to stimulate their economy, and China has been spending some of their record reserves. These stimulus plans will be less inflationary than the 'quantitative easing' being instituted by the US and UK.

Gold benefitted from the good economic news and a push by investors to diversify out of US$ holdings. Gold advanced to a record level for a second day as investors increased purchases in order to hedge against a falling dollar and the possibility of future inflation. A report I read this morning predicts further price gains by gold: "A weakening US dollar and easy liquidity conditions will particularly favor precious metals," Morgan Stanley analyst said in a report today. "We expect prices of gold, silver, and platinum all to register further gains over the next year." Gold at $1,100 looks like a done deal in the face of increased investor appetite for dollar alternatives.

I'll end with a funny story Chuck shared with me via email last night. He was standing with Michelle Boschert out in front of the airport in Atlanta waiting for Frank Trotter to pick him up when a car rolled up and a guy yelled out... "Hey! Are You Chuck Butler? He didn't hear him at first, so Chuck said what? And he repeated it... Hey! Are you Chuck Butler? Chuck still wasn't sure what he was saying, but Michelle heard him and answered, YES! And the guy in the car yells out, I read your newsletter! And drives away... Pretty amazing, eh? Chuck's fan base is nationwide!!

Currencies today 10/14/09: A$ .9145, kiwi .7417, C$ .9741, euro 1.4909, sterling 1.5988, Swiss .9828, rand 7.2528, krone 5.5619, SEK 6.916, forint 179.51, zloty 2.8204, koruna 17.3585, RUB 29.38, yen 89.26, sing 1.3907, HKD 7.7501, INR 46.107, China 6.8263, pesos 13.0535, BRL 1.7216, dollar index 75.58, Oil $75.10, 10-year 3.38%, Silver $17.875, and Gold... $1,064.20

That's it for today... We had a busy day on the desk yesterday, as it was the funding deadline for another BRIC MarketSafe CD. This issue was almost as large as the last one which set a record. Those that missed the opportunity will have one more chance, as we are offering a November issue. Today is 'flu shot' day here in the office with our annual health and wellness fair. Hope everyone has a Wonderful Wednesday!!

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

ECB & BOE leave rates unchanged...

Chuck Butler — Fri, 09 Oct 2009 14:41:40 GMT

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......................................................
In This Issue..

* ECB & BOE leave rates unchanged...
* Trichet makes a mistake in judgment...
* Asian central banks defend the $..
* Gold pauses...

And Now... Today's Pfennig!

Good day...Had a horrible night here in St. Louis, as every one of our teams let victory slip away. As you all know, Chuck drove to Columbia to watch his MIZZOU Tigers take on one of their arch rivals in a rare Thursday night matchup. The game went well into the night, as it was delayed due to problems with the lights at the stadium, so Chuck probably didn't get home until early this morning. I'll have the con on the Pfennig today, but Chuck will be back in the saddle again on Monday.

As predicted, both European central banks kept interest rates unchanged. The European Central Bank and the Bank of England kept their benchmark interest rates at record lows in an effort to keep stimulating their economies. Trichet signaled that the ECB has no plans to raise rates in the near future, stating that the current level is 'appropriate' for the current economic environment. "The recovery is expected to be rather uneven," Trichet said. "It will be supported in the short term by temporary factors but will be hampered in the medium term by balance sheet issues at financial and non-financial institutions."

When asked about the recent fall of the US$, and the possibility of currency intervention, Trichet repeated the standard line saying "excess volatility and disorderly movements" hurt growth and policy makers "will continue to monitor the exchange markets closely and cooperate as appropriate". Trichet also stated that he trusts his US counter parts (big mistake!) that their statement on the strong-dollar policy. "When the Secretary of the Treasury and our friend Ben Bernanke say that a strong dollar is in the interests of the US economy and that they are pushing a strong dollar policy, this is a judgment that is obviously very important for us and the global economy." NOTE TO TRICHET: YOU CAN'T TRUST A CHEATER!!

The current administration may say they support a strong dollar, but their actions sure don't show it. Quantitative easing efforts have pumped a record amount of liquidity into the markets, and Washington has the printing presses working overtime. Unless we the laws of supply and demand have changed, all of these US$ which have been created will cause the value of these dollars to drop. We have seen a 15% drop in the value of the dollar index in the past 6 months. The current administration has no reason to support a strong dollar, and realize there is no way they are going to be able to protect the value of the dollar while pursuing their 'quantitative easing' policies. In order to protect the dollar, Geithner and Bernanke would need to shut off the printing presses, and actually put them in reverse, pulling liquidity out of the markets. There is absolutely no way this will occur anytime soon.

The Bank of England also left rates unchanged and announced they will continue to push money directly into the economy through purchases of government and corporate bonds. At least one of the policy makers in England seems to understand what is going on. Conservative leader David Cameron stated today that the policy will lead to inflation, signaling to his party's annual conference that it would stop the government's main economic stimulus program if it wins the next election. "Sometime soon that will have to stop because in the end printing money leads to inflation", Cameron said. But others remain trapped in their own twisted reality with former BOE officials calling Cameron's remarks 'dangerous'.

The dollar moved up a bit vs. the Euro and Pound after the announcement, but fell again overnight. Overall, the greenback is up compared with yesterday morning, with the biggest moves coming against the New Zealand dollar and Japanese yen. Asian central banks intervened heavily in the currency markets on Thursday to help support the US$. With China keeping the renminbi stable vs. the US$, other asian currencies not pegged to the falling dollar have risen. Governments in Japan, Thailand, Hong Kong, and Singapore were big buyers of US$ yesterday and continued with their purchases overnight. Their efforts may work to slow the decent of the US$, but it won't change the direction. These central banks just don't have the financial power to change the inevitable fall of the US$.

Data released yesterday showed initial jobless claims in the US fell slightly to 521k and continuing claims also drifted lower. Both are still near historic levels, and don't support the claims that the US economy is pulling itself out of the recession/depression. In other news, chain store sales managed to eke out a small increase in September. While the news caused a rally on Wall Street, the YOY increase was mainly because the stores had absolutely abysmal sales one year ago. The largest industry group is cautioning against reading too much into the increase, and continue to predict a decline in sales for November and December.

In another report, the Commerce Department said wholesale inventories fell 1.3% in August, worse than the 1 percent drop economists had expected. This follows a 1.6% drop in July as business continue to reduce inventories.

Today we only have one piece of data, the Trade Balance, which is expected to show a deficit of $33 billion for August. This deficit comes in spite of a falling US$ which should eventually make our exports more competitive, and force a narrowing of this balance. The continued deficit forces the US to have to attract foreign capital as imports continue to outpace exports.

Canada got a good piece of news yesterday as Canadian employers added jobs for the second straight month in September. The unemployment rate fell to 8.4% as employment rose by 30,600. The report will increase pressure on the Bank of Canada to raise interest rates from record lows, and could lead to strength in the Canadian dollar. We have been supporters of commodity based currencies, and Canada certainly has an abundance of raw materials. Their proximity to the US has caused some concern, as the US is still their largest trading partner, but Canada has worked to strengthen ties to China and is now enjoying an increase in exports to Asia as the recovery takes hold in the Far East.

An associate from headquarters down in Jacksonville emailed me last night to ask my opinion on recent events in Latvia. Now I certainly try to stay informed on all of the countries around the globe, but had to be honest and tell him I haven't really ever looked at what is going on in Latvia. But after doing a bit of research, I realized what had sparked the question. Economic troubles in the Baltic state led to concern over the future health of Swedish banks. Plunging property values in Latvia have left borrowers 'upside down' on their mortgage loans mainly provided by Swedish banks. The Latvian government had announced a plan to protect homeowners from foreclosure, angering Sweden. But overnight, Latvia has announced it is pulling away from its earlier plan, and would come to an agreement with its international lenders. It looks as if the 'Latvian' crisis will be resolved, and Swedish banks will avoid possible losses which could have occurred. The Swedish Krona is unchanged on the month, and has increased over 12% in the past 3 months. With the Latvian crisis avoided, the SEK will likely resume its move higher vs. the US$.

After hitting an all time high yesterday, Gold slipped back slightly overnight. This was the first drop in the gold price this week, after the biggest weekly advance since April. We had expected a pause in the rapid ascent for gold, and a small move higher by the US$ pushed gold lower. Many traders are now calling for a near term correction in the price as investors take profits from the rapid move. According to an analyst at HSBC: "The likelihood that long-term dollar weakness will support gold does not obviate the fact that the near-relentless increase in bullion prices recently has raised the possibility that gold is due for a pullback," HSBC Securities analyst James Steel said in a report emailed today. "A dollar rally, even if only temporary, could provide a reason for gold longs to take profits."

Currencies today 10/9/09: A$ .9074, kiwi .7405, C$ .9572, euro 1.4761, sterling 1.5987, Swiss .9720, rand 7.3611, krone 5.6326, SEK 6.9742, forint 183.26, zloty 2.8760, koruna 17.4924, RUB 29.599, yen 88.75, sing 1.3917, HKD 7.7502, INR 46.4575, China 6.8255, pesos 13.2393, BRL 1.7364, dollar index 76.06, Oil $71.38, 10-year 3.26%, Silver $17.635, and Gold... $1,049.60

That's it for today... Tough night for the St. Louis sports scene as the Cards, the Blues, and the Tigers all blew leads to end up losing. I attended the Blues home opener last night, but caught the awful 9th inning of the Cardinal's game between the first and second period. What a waste of another great start by our stud pitcher Wainwright! The Cards have backed themselves into a corner now, and will need to win the next three in a row. The Blues started off the game on top, but couldn't hold their one goal lead and fell to their first loss of the 2009-2010 season. And finally, Chuck braved the cold and rain to watch his beloved MIZZOU fall in the fourth quarter. It was raining the entire game, so I just hope Chuck doesn't come down with anything! Looks like we may finally get a bit of a break in the rain today, but the temperature sure has dropped; summer is just a memory now. Hope everyone has a Fantastic Friday and a wonderful weekend!! GO CARDS!!!!
Chris Gaffney, CFA
Vice President
EverBank World Markets
1-800-926-4922
1-314-647-3837

Gold Soars To Another All-Time High!

Chuck Butler — Thu, 08 Oct 2009 14:39:07 GMT

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In This Issue..

* $1,055 for Gold!
* Global recovery prospects fuel run on the dollar...
* Trichet to defend the dollar today?
* Central Banks are diversifying...

And Now... Today's Pfennig!

Gold Soars To Another All-Time High!

Good day... And a Thunderin' Thursday to you! It's raining here in St. Louis, so, it must be Thursday! It's a big night for yours truly, but I'll talk about that at the end... We've got some big moves going on in the currencies and metals, so we had better get to it, and save the chit-chat for later, eh? But first, today is the funding deadline on our latest BRIC MarketSafe CD... We'll have one more in November and then that's it!

OK, front and center this morning, Gold has soared to another all-time high! When I turned on the screen this morning, Gold was flashing a great big $1,055 figure... WOW! But wait! OK, now that sounded like an infomercial... But wait! If you act now, you can get double the Ginsu knives! HA! OK, getting back to the original, but wait... Gold and Silver for that matter, aren't the only risk assets moving higher this morning... All 16 of the countries that are deemed to be the biggest U.S. trading partners, have currencies that are taking liberties VS the dollar this morning...

Basically, it's like this folks... We keep seeing signs that a global recovery is taking place, I mean, the Reserve Bank of Australia (RBA) even hiked rates this week for crying out loud! And... With those signs of recovery, come the feelings that global rates will be rising, as witnessed by the RBA this week, and with global rates rising, the yield differential to the dollar becomes even greater in favor of the non-dollar currencies.

This is quite evident, when you look out on the currency landscape and see that Aussie dollars (A$) are trading with a 90-cent handle... Brazilian reals are trading 36% higher VS the dollar since March 1st!

Why did I highlight those two currencies? Well, as has been well documented, the RBA already hiked rates and increased their rate differential to the dollar this week, with the thought that they would come back again in November for another rate hike... And Brazil? Yesterday, I saw a story flash across the screen that the Brazilian Central Bank Gov. is mentioning at least 200 BPS of rate hikes before he leaves office next year! Talk about increasing the rate / yield differential!

Yesterday, I talked to you about the euro, and explained why it had not participated with the other currencies' assault on the dollar... Well, the Big Dog /euro got off the porch to stretch its legs and chase the dollar down the street a bit last night... The euro is trading with an eye toward 1.48...

I'm waiting for some data to print from Germany this morning before I go on... So let's wait a bit... OK, I'm back now... Well, keeping with the theme that a global recovery is taking place, German Industrial Production rose in August 1.7% from a decline in July. As reported here about a month ago, Germany exited their recession in the 2nd QTR, posting a positive, albeit negligible, GDP... I expect their 3rd QTR to be a bit stronger, as they build on this nascent recovery.

The European Central Bank (ECB) meets this morning, in fact, they're meeting as I write... I don't expect the ECB to move rates, announce any quantitative easing, or anything like that... What I'm half expecting though is for ECB President, Trichet, to attempt to put a tourniquet around the dollar, to stop the bleeding... Hey! Nobody in the U.S. is fighting to keep the dollar strong, so somebody has to!

OK... I've explained this many times before, but for the new readers, it's really something that needs to be understood... Look, the ECB and Trichet, know all too well that the U.S. has painted itself into a corner, and the dollar is getting punished for their actions... And, they understand that all they would have to do is talk glowingly about the euro and it would deep six the dollar in a heartbeat! But what good would that do? It's far better to just keep the lips zipped shut, and watch a general, slow, depreciation of the dollar... So... The euro's run to the high 1.47 handle this morning, could be at risk to what Trichet has to say... But remember folks, he's just wrapping a tourniquet around the dollar, it's not like he's in love with the dollar and the fundamentals behind it!

Last night, I was doing some reading / research and came across a story that really piqued my interest... Here's a snippet from the Bloomberg...

"Central banks are diversifying away from the dollar "more aggressively," according to Barclays Plc, the world's third-largest currency trader.

The dollar accounted for 37 percent of the $115 billion foreign reserves central banks amassed in the second quarter, after adjustment for exchange-rate changes during the period, compared with 52 percent in the euro, according to a Barclays analysis of data that the International Monetary Fund released on Sept. 30. That was the first time that the dollar's share fell below 40 percent in the new accumulated foreign reserves of $100 billion or more since the euro's 1999 debut."

Remember, about a week or so ago, when I told you that the IMF's currency report basically showed a move away from the dollar too...

HEY! IF CENTRAL BANKS ARE DIVERSIFYING, SHOULDN'T YOU BE DOING IT TOO?

OH! And there was this quote from Canada's Finance Minister, Flaherty said..."We are all concerned about the U.S. dollar"...

And then there was this... Haven't you heard about the guy, known as the Cheater? It seems every day now, you hear people say now, Look out for the cheater, make way for the fool-hearted clown, look out for the cheater, he's gonna build you up just to let you down... Come on... We all know who I'm talking about, you know him, you love him... It's U.S. Treasury Sec. Tim Geithner!

Yes, the man that was in charge the NY Fed, and oversaw the banks in that region, of which, most of them needed TARP money didn't they? Any way... The thing I want to talk about is his latest statement about the dollar... Here's Timmy! "officials recognize that the dollar's important role in the system conveys special burdens and responsibilities on us, and we are going to do everything necessary to make sure we sustain confidence."

Yeah, sure you are... How many Treasuries have you auctioned off this year? Something like $1.6 Trillion? Now, that will give everyone in the world a warm and fuzzy about the dollar's future won't it? NOT!

OK, I had better go on to something else before I get too wound up!

The Bank of England (BOE) is also meeting this morning... And after an awful set of economic reports in the past month, the BOE members are scratching their heads and wondering what to do next... They cut rates to the bone... They've bought toxic assets from financial institutions... They've nationalized a few companies that were about to go under... They spent money on stimulus packages... And they've implemented Quantitative Easing...

Sounds like the U.S. doesn't it? I'll tell you who else it sounds like... It sounds like Japan in the last decade... I hate to be the one to half to tell these dolts that none of this works! It just makes a laughing stock out of your Central Bank, and puts your currency on the slippery slope downward...

Oh, but not to worry, Tim Geithner is maintaining the confidence in the dollar... ( I guess no one told Canada's Finance Minister, eh?)

Again, Chuck, go on to something else, and quit coming back to this!

Well... Earlier in the Pfennig this morning, I told you about the rise in the A$... I didn't tell you that it was trading at a 14-month high, as it was reported that Australian employment surged 40,600 in September! With a print like this, I think that's it's almost a given now that the RBA comes back in November and hikes rates again!

Another currency at a 14-month high is the New Zealand dollar / kiwi... Remember how I've told you about the Reserve Bank of New Zealand (RBNZ) Gov. Bollard, and his penchant for jawboning kiwi lower? I despise him for these things, as a Central Banker, your job is to protect the value of your currency, not diss it!

Well, now Bollard has company... New Zealand Finance Minister, Bill English, has this to say... "We're uncomfortable with it (kiwi) at this stage in the economic cycle." You see, Mr. English is concerned that the economic recovery will be stamped out with a strong kiwi... Well, I've got a cure for you Mr. English... Tell Bollard and the boys over at the RBNZ not to raise interest rates, and that will do the trick! It'll stop the speculation in its tracks! However, if the RBNZ does raise rates next month, then you have no one to blame but yourselves!

OK... Let's get back to Gold, before we head to the recap and the Big Finish!

I did a video yesterday on Gold... And I talked about how you can go about your life without an inflation hedge in your back pocket and suffer the consequences of not only having your purchasing power reduced by the falling dollar, but having what dollars you have left eaten away by inflation... OR... you can get that inflation hedge... and put it away for a rainy day... or pull out to play it like a "Get Out of Jail Free Card" when inflation hits...

To recap... Gold has soared to another all-time high of $1,055 overnight. And the non-dollar currencies are all gaining VS the dollar on the thoughts that a global recovery will result in wider yield differentials in those currencies VS the dollar. A$ and kiwi have both traded at 14-month highs overnight... And... We could see some downside risk to the euro if ECB President Trichet decides to defend the dollar today after the ECB meeting this morning.

Currencies today 10/8/09: A$ .9050, kiwi .7398, C$ .9475, euro 1.4770, sterling 1.6060, Swiss .9745, rand 7.3440, krone 5.6545, SEK 6.9890, forint 182.75, zloty 2.8655, koruna 17.4375, RUB 29.60, yen 88.30, sing 1.39, HKD 7.75, INR 46.36, China 6.8260, pesos 13.31, BRL 1.7480, dollar index 76.03, Oil $70.23, 10-year 3.19%, Silver $17.84, and Gold... $1,055.08

That's it for today... And for me this week, as Chris will have the conn on the Pfennig tomorrow. My beloved Cardinals took game one of the playoffs on the chin last night, leaving 14 runners on base... UGH! It's a BIG night tonight for us here as the Cardinals play game two... The Hockey Blues have their home opener, and my beloved Missouri Tigers take on Big Bad Nebraska! I'm heading down to the game with oldest son, Andrew, and friends. It looks like we're going to be soaked from the rain! UGH! I'll talk to you again on Monday, God willing... So, have a Thunderin' Thursday today, and a wonderful weekend ahead... Go Tigers!

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

Yet Another Jobs Jamboree Friday!

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

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In This Issue..

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

And Now... Today's Pfennig!

A Jobs Jamboree Friday!

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Time To Remove Stimulus?

Chuck Butler — Thu, 03 Sep 2009 15:40:00 GMT

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In This Issue..

* Chinese stocks rise 5%!
* Risk Assets follow!
* OECD forecasts faster global growth...
* Gold & Silver kicking sand again!

And Now... Today's Pfennig!

Time To Remove Stimulus?

Good day... And a Tub Thumpin' Thursday to you! Let's hope it remains a Tub Thumpin' Thursday later today, as I head downtown to watch my beloved Cardinals play a day game! For those of you who are baseball fans, you know what I mean when I carry on about how baseball should only be played during the day!

OK... Before I get to the currencies, economies and the dolts in the world, I wanted to briefly talk about the SEC, who made an announcement yesterday that they had done an investigation of the Madoff audits, and did not find any fraud... Just mistakes... Really? Mistakes? That's what they call them? Even Bernie Madoff himself says that he was "astonished" that the SEC failed to shut him down after interviewing him in 2006!

Well... The currencies, led by the euro, have scratched and clawed their way back to levels they traded at before Tuesday's sell off... The European Central Bank (ECB) is meeting this morning, and while the markets are not expecting rates to move here, they are holding out hope that ECB President, Trichet, will announce that the economic growth expectations have been raised. So... With these thoughts going through the markets, it's no wonder the euro is back to 1.43 this morning.

However, not knowing what Trichet might say, opens Pandora's Box of risks for the euro... For if Trichet does not talk glowingly about the economic growth expectations for the Eurozone, the euro will be hung out on a line. So... Let's hope, Mr. Trichet had a good breakfast, and is feeling spry today!

But for now, it's all skipping in the sun for the euro... The ECB rarely ever ends their meeting before I hit the "send" button on the Pfennig, so... I guess we'll take it all up tomorrow!

The euro isn't the only currency that has scratched and clawed back against the dollar... Yesterday, I told you how the Aussie dollar (A$) was rallying on the back of a stronger than expected 2nd QTR GDP report... Well, now that the euro has joined in, the A$ is really making tracks higher, trading right now, within spittin' distance of 84-cents...

And... Not to gloat or anything... But, let me go back to yesterday's Pfennig and quote something I said... This is from the Pfennig 9/2...

"Talk about getting "dumped" that's what happened to the Brazilian real yesterday... Yes, most of the currencies sold off... But real was really sold off! That makes some sense in that real had out performed most currencies this year, and therefore, the selling, or profit taking would be on a larger scale... I think this selling was overdone though, and I would look for the real to make an attempt to come back today..."

Well... Guess what happened yesterday? That's right! The real came back with a vengeance! Yesterday morning the real was trading 1.9140... This morning it's trading 1.8850! OK... It's not that I'm auditioning for some kind of "spot trading" position... Geez Louise, no! I like to sleep at night! I just wanted to show that sometimes even a blind squirrel can find an acorn! (with me being the blind squirrel, in case that was confusing!)

The real, and not Brazilian real, but real winner in terms of moves VS the dollar yesterday were the Precious Metals of Gold and Silver... Kicking sand in the face of the dollar, and laughing! Gold and Silver are both stronger again this morning too!

There's a great report going around by Frank Holmes, CEO and CIO of U.S. Global Investors. I had dinner with Frank Holmes in Las Vegas about 5 years ago, and run into him at conferences throughout the years... Any way... Frank Holmes put together a strong report on how September is the best month for Gold... "The gold price has risen in 16 of the 20 Septembers since 1989, by far the best success ratio of any month of the year." My good friend, David Galland, has the full story in his daily letter from yesterday... I think you can sign up for it here... http://www.caseyresearch.com/casey-services/free-publications/caseys-daily-dispatch/

OK... Chinese stocks rose 5% overnight, and that has the risk takers coming out the woodwork! That's quite a rebound for Chinese stocks. With all the talk going around about how it's time to get out of stocks before the BIG sell off, one has to wonder if this isn't akin to a star burning out... It's burns brightest just before going dark...

The Swedish krona got hit with a blow to the mid-section yesterday when the central Bank (Riksbank) announced that they were going to keep rates at historical lows until the 3rd QTR of 2010! What? How can they say that? I mean I know, they open their mouths and begin to use their voice box... But what I'm talking about is what backs up what they are saying? How do they know that? What a bunch of dolts! I used to think the Riksbank was a good Central Bank, but this blows it for them! (Not that they will be worried that the Pfennig no longer believes them to be a good Central Bank!) So... These are the cards that have been dealt to the krona... Too bad...

So... The Fed is tossing around the idea of removing pieces of the stimulus... Treasury Sec. Geithner, a.k.a. the cheater, and not the song by Bob Kuban and the In Men from the 60's! (if I recall correctly that was printed on the Pepsi label!) Any way, Geithner doesn't agree and has stated that he believes it to be "too early" to exit stimulus strategies... Geithner is getting ready for the G-20 meeting of finance ministers and Central Bankers beginning tomorrow in London, and had this to say... "We've come a very long way but I think we have to be realistic, we've got a long way to go still."

Well... That's the most intelligent thing I've heard him say so far!

Hey did you see that bond king, Bill Gross of PIMCO, chimed in on this... "To the extent that we have had a trillion dollars worth of stimulus, from the standpoint of deficits, and more, the government basically has to continue to do that and to add to that in order to keep the economy chugging along," he said. "To the extent that that's limited, to the extent that they pull back on some of those stimulus programs -- 'Cash for Clunkers' and those types of things -- then the double dip moves into the realm of possibility."

Yes... Double dipping... It's my call for this economy... And I've said that for a lonnnnnnngggggg time now!

The OECD... The Organization for Economic Cooperation and Development, issued a report yesterday that says the global economy is emerging from its worst slump since WWII, and much faster than the OECD forecast just 3 months ago!

That's nice...

You know... Whenever the currencies rally, the dollar and yen get sold, and vice versa... But... Sometimes, the yen rallies alongside its currency brothers, which is an indication of a real rout on the dollar. And that's what we've got going on this morning... The Japanese yen has joined the "dark side" and is rallying alongside its currency brothers...

Well, yesterday's data cupboard printed a stronger than expected Productivity number here in the U.S. So, doesn't that make you feel better, that you probably had to work longer hours at the same wage, because 1 in 5 American workers are out of jobs, and you have to take up the slack? That's the root of Productivity folks... Sure there are other things like technology, etc. but at the root... It's all about you...

That's why I don't like this report... So now I've given it more Pfennig space than it deserves! UGH!

Today, we'll see the Weekly Initial Jobless Claims as usual on a Tub Thumpin' Thursday, and we'll also see the color of the "services" piece of the ISM... Tomorrow is the Big Kahuna though, with the Jobs Jamboree for August...

Last week, I told you that the U.S. had to deal with another large amount of Treasuries to auction off... Last week it was $197 Billion... And no word of problems dealing with these... But, have you noticed that the 10-year yield, which just a few weeks ago was 3.80%, has fallen to 3.34%? Hmmm... I wonder how that happened? It means that the price of the 10-year has been rising, which would only happen if there was a truckload of buying... Hmmm... I had better go to the Big Finish here before I blow out a gasket!

Currencies today 9/3/09: A$ .8395, kiwi .6785, C$ .9090, euro 1.4310, sterling 1.6380, Swiss .9460, rand 7.7650, krone 6.0270, SEK 7.20, forint 192, zloty 2.8820, koruna 17.8720, RUB 31.67, yen 92.40, sing 1.44, HKD 7.7510, INR 48.91, China 6.8305, pesos 13.57, BRL 1.8850, dollar index 78.22, Oil $69.15, 10-year 3.34%, Silver $15.75, and Gold... $984.50

That's it for today... Yesterday, I talked about the number "6" and went into a silly saying... It was a local funny, in that it's a commercial on TV that does this rap about the number "6"... So, sorry if it confused everyone outside of the St. Louis area... So, I guess all the kids have gone back to school by now... When I was a kid, we didn't start school until after Labor Day... Now they start in the middle of August! My little buddy Alex, was sent home from school sick yesterday, but ate like a horse at dinner, so I expect him to be back at school today. The College Football season begins tonight! YAHOO! So.. Was this Tub Thumpin'? If not, what are you going to do to make it Tub Thumpin' today?

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

Magical Currency Tours!

Chuck Butler — Thu, 04 Jun 2009 15:26:08 GMT

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In This Issue..

* Currencies get whacked by Geithner!
* Big Ben wants the budget deficit cut!
* BOE and ECB meetings today...
* I told you this was going to get ugly...

And Now... Today's Pfennig!

Magical Currency Tours!

Good day... And a Tub Thumpin' Thursday to you! Yes... Tub Thumpin' because I said so! Yesterday was absolutely a 10 on the crazy meter, and We the People, just continue to sit and take whatever the Government and media tell us is "best for us in these uncommon times"... I've got some interesting words on this later in the letter... It's time for me to get on my soap box once again, so... At least I've prepared you! But first... Some currency news!

Well... Yesterday, I left you with the thought that the currencies were selling off, after the Asian Central Banks all made statements regarding their support of the dollar as the world's reserve currency... Here are some further thoughts on that...

Roll up, roll up to the Mystery Tour... The Magical Mystery Tour is waiting to take you away, Waiting to take you away.

Yes... U.S. Treasury Sec. Geithner's Magical Mystery Tour, which should be re-named the Magical Currency Tour! OK... Remember yesterday I told you about the Asian countries of S. Korea, India and Japan all made comments regarding the U.S. dollar as the world's reserve currency, etc, etc. Well... Now we know more about why they all decided to make favorable comments about the dollar on the same night! They were behooved to do so by Geithner!

Well, at least the dollar bulls have a someone that they can get all excited about! But, the jury is still out on whether or not Geithner's Magical Currency Tour, will last very long... But yesterday, it carried a lot of weight! The currencies lost some major ground yesterday, as it certainly looked like a coordinated effort to pick the dollar up from the canvas, after spending 3 months in the ring with Rocky Marciano!

Because... In addition to Geithner's Magical Currency Tour, we had Big Ben Bernanke on "the hill" telling lawmakers to "cut the budget deficit"... And the markets reacted as if... As if the lawmakers could do something about the budget deficit train that has already left the station! But the markets did react, and react favorably for the dollar...

Hmmm... You don't think that... Nah... I don't want to say it, because the last time I did, I got ambushed on that cable station that I refuse to mention by name! But this all smells of yesterday's fish! So, I'll just keep it as I said... That it was a coordinated effort to pick the dollar up from the canvas...

So... The Big Dog, euro, was sent back to the porch, and chained to the porch column. The euro, which had traded up to 1.4320 on Tuesday, saw those gains and previous gains wiped out yesterday, as the single unit was pushed back to 1.41 and change... The rest of the little dogs followed the Big Dog back to the porch, and their kissin' cousins Gold and Silver got taken to the woodshed!

But if you think that the move in euro was wild... You should have been in the driver's seat here on the currency desk to witness the move in the Emerging and Commodity currencies! (Aussie, Brazil, South Africa, kiwi, Canada) Yes, they outperformed every other currency on the way up, and when the tables were turned, they led the way to underperform / lose more ground than every other currency! UGH! But... Hey! Didn't I warn about these Emerging Markets as being volatile? You have to strap yourself in, and remember to keep your arms and legs inside the car at all times!

The euro had recovered a bit overnight, moving back to a 1.42 handle, but once again has given that up, as the European Central Bank (ECB) is meeting as I write. The inner struggles at the ECB have really weighed on the euro the past two days... In Blue corner, we have the likes of Spain and Italy that want, and think they need, Quantitative Easing, along with further rate cuts. In the Red corner, we have Germany's central bank, the Bundesbank, and they want neither! Let the markets be! Is their mantra... And I have to say, that I agree with the Bundesbank!

The ECB President, Trichet, has his hands full of Big Babies, whining about this, that, and the other thing, but mostly about how the "other Central Banks are doing Quantitative Easing." If I were Trichet, I would use the line I've always used with my kids, when they would tell me that the other kids were doing something... "But don't you want to be better than the other kids?"...

And, so... Trichet should tell the likes of Spain and Italy that the ECB wants to be better than the rest of the kids / Central Banks!

Unfortunately, I'm not convinced that Trichet has the intestinal fortitude to do that... So... The Quantitative Easing question hangs over the euro like the Sword of Damocles this morning... What's it gonna be boy? Spain and Italy or Germany's Bundesbank that wins this tug-o-war!

The Reserve Bank of Australia (RBA), who earlier this week, kept their interest rates steady as she goes, warned the other central banks that cutting rates too low was dangerous... RBA Gov. Stevens said, "policy makers must be cautious about lowering borrowing costs too far. Cutting interest rates further may be counterproductive as that might encourage some borrowers to take on debt they can't afford."

The Bank of England (BOE) is also meeting this morning... Not much can come out that meeting, as they've already cut interest rates to the bone, and implemented Quantitative Easing measures.

Getting back to the ECB meeting... I think the markets are going to be looking for any indication from Trichet that the ECB is "uneasy" with the recent upward moves of the euro. If he doesn't mention it, the euro gets to go past "Go" and collect its $200... If he does mention it, the euro will not get to pass "Go" , not get to collect its $200, and go straight to jail... Let's hope it has a Get Out Of Jail Free Card!

I think it does, and it's called being the offset currency to the dollar... But some pain will have to come before it gets played...

And here's one of the reasons I think the Get Out Of Jail Free Card will get played is the fact that the deficit spending in the U.S. recently got some very bad news, that you won't hear on the TV news... Here's the skinny...

The budget Deficit this April was $20.9 Billion, the first deficit in this "tax-paying" month in 26 years! Can you imagine that? In April when taxes are paid, we recorded a deficit? That's pretty amazing folks... April 2009 tax receipts dropped 44% compared with those in April 2008. OK... I also read where the money collected by taxes is only going to cover half of the fiscal 2009 federal budget, requiring the government to borrow and print more than $1.8 Trillion to fund it. And that's not the end of it... There are equal-sized deficits looming for fiscal year 2010 onward. (read entitlement programs) Tax receipts fell 50% during the Great Depression. Now eight months old, this depression is already rivaling that drop!

Did you know that we as a country were in the red during April? Do I have to tell you what's next for Jean and Joan and who knows who? Higher Taxes! You won't hear the lawmakers running around screaming that they need to cut Government spending! Instead, you'll hear them screaming that they need to increase revenue! HEY! Cut the spending Jack!

Bill Gross, founder of Pacific Investment Management Co (PIMCO), is advising holders of U.S. dollars to diversify before Central Banks and sovereign wealth funds ultimately do the same amid concern about surging deficits!

You know... Bill Gross is like the old E.F. Hutton commercials (sorry youngsters, this will go right over your heads!) When Bill Gross talks... People listen! I suggest you do too! Here's more, from Bill Gross speaking about Geithner's statement to the Chinese about shrinking the budget deficit... "I think he'll (Geithner) fail at pulling a balanced rabbit out of a hat. They are talking about, once the economy in the U.S. renormalizes, the move back toward balance or much less of a deficit. I suspect that will be hard to do."

Big Ben Bernanke was right on one thing he talked about yesterday... And that is "a prolonged deficit will choke economic growth"... He said it! But, that's almost like me saying it... He can't do a think about the deficit, and neither can I! He can try to be influential, I can't even do that! So... I just think Big Ben is seeing the writing on the wall, and wants to be able to point out in a few years, that he "told lawmakers to cut the budget deficit, and they didn't listen to him, see how smart I was!"

OK... Now, I saw some news flash across the TV yesterday that just made my blood pressure rise quickly... OK... Remember when I told you that the Gov't owning banks was a baaaaaaaaaddddddd thing? Recall me telling you how banks would be directed by lawmakers to make loans in the lawmaker's districts, when it would not meet the Bank's requirements for a loan? This among other things would be very bad...
Well... Skip ahead to the Gov't bailout of carmakers... Guess what? The lawmakers are going after the carmakers for closing dealerships in the lawmaker's districts! That's right... It's happening right now! Let the Gov't put their foot in the door, and, the next thing you know, the Gov't is making out your grocery list and telling you where you can shop!

Well... As usual, I hold the Pfennig from going out on these first Thursdays of a month, to see if I can include the results of the BOE And ECB meetings. I usually get the BOE in before hitting send, but being an hour later, the ECB meeting get left out until tomorrow. And... Here it is! Talk about timing! The BOE kept rates unchanged and refrained from expanding their Quantitative Easing, like the Fed Reserve did at their last meeting. This should be constructive to sterling... But you never know with these crazy markets these days! OK... So onto the Big Finish!

Currencies today 6/4/09: A$ .8025, kiwi .6325, C$ .9020, euro 1.4140, sterling 1.6350, Swiss .9340, rand 8.0775, krone 6.2925, SEK 7.6320, forint 203.40, zloty 3.1960, koruna 19.05, yen 96.60, sing 1.4430, HKD 7.7515, INR 47.17, China 6.8336, pesos 13.35, BRL 1.9645, dollar index 79.43, Oil $67.15, Silver $15.32, and Gold... $968.60

That's it for today... A wild day yesterday, let's hope for some semblance of calm today! I forgot to tell you yesterday about my time with my beautiful granddaughter on Tuesday night... Her and I sang "you are my sunshine" together... Just like her momma used to do when she was a little girl. I would pull out my guitar, and Dawn would immediately want to sing with me. She liked "sunshine", but her favorite was an old Hank Williams song, Hey Good Lookin'! Sappy stuff, I know... But after all the hootin' and hollerin' I do about things, this is the stuff I do when I get home! No one there wants to hear me talk about this stuff, as they've heard it for years! And the neighbors? They all change the subject as fast as lightening! So... My dear readers get all my thoughts, aren't you lucky? HAHAHAHAHAHAHA! OK... Gotta go... I hope your Thursday is Tub Thumpin'!

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

Dollar Shows Additional Strength...

Chuck Butler — Mon, 20 Apr 2009 14:19:05 GMT

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In This Issue..

* Euro at one-month low...
* Trichet talks rate cuts...
* Riksbank & Bank of Canada this week...
* The Mogambo on a Monday!

And Now... Today's Pfennig!

More Dollar Strength...

Good day... And a Marvelous Monday to you! Today is a special day, in that it is the Big Boss Frank Trotter's birthday! Happy Birthday Boss! Actually Frank is more of a very good, long time friend, mentor, and then boss. We've worked together for a very long time... I tell people at shows that Frank and I do together, that we've been working together for so long... The Dead Sea wasn't even sick when we began working together! HAHAHAHAHAHA!

OK... A bad day a the office for the euro and other currencies on Friday, and then last night in the overnight markets... European Central Bank (ECB) President, Trichet, once again deep-sixed the euro with talk of further rate cuts. He did attempt to water down the message by saying that "any rate cuts would be measured 25 BPS cuts" Memo to Trichet... It doesn't matter what the size of the debasing is, as long as you are going to debase your currency, the markets will make you pay for it!

So, the euro is at a one-month low VS the dollar this morning... Of course, remember what I told you over a week ago regarding the earnings season for U.S. Corporations, and how the currencies needed to break the link to stocks before those earnings began hitting the news wires. Unfortunately, besides the one day break that we saw, an earnest break hasn't happened, and now the stocks are going to weigh heavily on the currencies... I know, I know, the couple of banks that have announced, have announced some very nice surprise earnings... But you must draw a line between those that have received billions in aid, and those that have not! As I've said before, look under the hood at these banks / financial institutions, and tell me their earnings would have been as good without the billions of stimulus...

The other thing the euro has to deal with right now, is what I talked about last week, and that is getting bogged down with the split among ECB ministers as to how monetary policy should be administered to combat the recession. There's been no resolution to this disagreement, and so the euro suffers.

But don't forget what I told you about the euro on Friday... If you keep that in mind, that the ECB is fully aware of what's going on in the U.S. with the deficit spending and money creation, and what it's going to do the dollar eventually. They don't need the euro taking off VS the dollar too soon... So, this is all "noise"... As I said before, you may be spinning, sliding uncontrolled toward the guardrail on that icy road, you know you're going to make impact, it's just a matter of time before it happens... The dollar is spinning, sliding toward the guardrail too... It's just a matter of time before it happens...

Well, we have a couple of Central Bank meetings this week... The first will be the Bank of Canada (BOC), which will meet and discuss rates. I believe they'll be discussing something else at the meeting as well... Quantitative Easing (QE)... In fact, I think the BOC will leave rates unchanged, but announce how they will introduce QE to their markets... That means there's another currency on the list of ones that have seen their respective countries take on QE... And you know what that means don't you? It means that I cross them off my list of currencies that are eligible to be on Chuck's Hit Parade!

Sweden's Riksbank will also meet this week... I do expect them to cut rates. The krona has been a very disappointing currency in recent times, and the size of their rate cuts explains it all... When the Riksbank meets tomorrow, they will most likely cut 75 BPS to .25%, basically zero... And if they talk about "doing whatever is necessary to save the economy" then they will be setting the table for future QE...

Geez Louise! Doesn't anybody want to have a strong currency any more? The Swiss National Bank (SNB) said last week that they don't think that it's a competition to see who can devalue their currency the quickest... Hmmm... Sure seems that way to me!

Gold had a very tough week along with the other non-dollar assets. I just look around at what's going on in the U.S. and the world, with all the crack-pots running around acting like they've spent a day in the drug den, and think to myself, that Gold should be trading much higher, and not suffering through weeks like last week. I read a piece from my friend the Mogambo Guru over the weekend regarding this very topic, and thought it to be a good thing to add to the Pfennig this morning...

The Mogambo Guru -- "Laurence Meyer, a former Fed governor (and so he ought to know) admitted to Bloomberg that the Federal Reserve "is 'running a laboratory experiment' on what drives inflation: the money supply or the output gap."

The fact that we already know the answer to this experiment is what makes me stand at the window and shout at passersby that they should "Buy gold, silver and oil right now, you pedestrian morons, because your Congress is spending the 'too much money' that is being created by the Federal Reserve just for that sinister purpose, and which will burn you alive in the painful fires of inflationary hell!"

That Mogambo... He certainly has a way with words! HA! He's one of my faves folks, and can be read every Monday on the Daily Reckoning: www.dailyreckoning.com along with the Pfennig!

There's a whispering campaign going on among "those who know" or "think they know" that all this deficit spending and money creation should deep-six the dollar eventually. One of those people is another of my fave writers, William Pesek, who had this to say on Bloomberg. (this is just a snippet)

"It's a bit rich for U.S. politicians to berate Treasury Secretary Timothy Geithner for not labeling China as a currency manipulator.

Perhaps Senator Lindsey Graham, a South Carolina Republican, hasn't seen a newspaper in the last 12 months. With near-zero interest rates, the likely issuance of trillions of dollars of government debt and massive taxpayer-funded bailouts, the U.S. will soon make China look like a manipulation piker.

Memo to Graham and his ilk: Your economy has lost any moral high ground as it drags the world down with it. That will be even truer as the dollar eventually pays the price for ultra- loose monetary and fiscal policies. And it will."

I do this from time to time, so that you're not always just hearing from me on this stuff... I don't want to look like the boy who cried wolf...

Chris Gaffney, who will be very bummed out this morning as his Blues lost again last night, sent me a story on Friday from the Economist. COM, regarding China... I thought that the story was very good in that it said quite a few of the things I've been saying about how China's stimulus is working, and that China should be the first to come out of the global recession. (not that they've had a recession, but a slowdown)... There was one point the writer made that really hit home, and I hadn't thought of... China's stimulus is working because, the Chinese had complete control on where it went and how it was spent... Not the willy nilly spending going on here, and elsewhere like the U.K. and Japan...

OK... The data cupboard is relatively empty this week, with only Leading Indicators today, and Existing and New Home Sales along with Durable Goods later in the week. So... It appears that Corporate earnings will take center stage this week, and that's not a good thing, in my opinion...

I'll head to the Big Finish right after I mention that bank lending is just not happening... The Wall Street Journal reports that analysis of Treasury Department data, the biggest recipients of taxpayer aid made or refinanced 23% less in new loans in February, the latest available data, than in October, the month the Treasury kicked off the Troubled Asset Relief Program. Hmmm... What they don't mention is how many loan applications were denied! Look, it's not just the banks fault for not lending right now... With 600,000 in job losses for 5 consecutive months, and unemployment running in the double digits (probably around 16%), and consumers leveraged up to their eyeballs, not many applying for loans are going to get approved given this scenario.

Currencies today 4/20/09: A$ .7075, kiwi .5615, C$ .8150, euro 1.2975, sterling 1.4580, Swiss .8550, rand 9.0440, krone 6.7834, SEK 8.57, forint 230.50, zloty 3.3750, koruna 20.85, yen 98.70, sing 1.5090, HKD 7.75, INR 50.25, China 6.8335, pesos 13.23, BRL 2.1930, dollar index 86.43, Oil $48.25, Silver $12.04, and Gold... $873.70

That's it for today... Except to say Happy Birthday once again to Frank! I'm feeling better this morning, I rested most of the weekend. But I'm not out of the woods just yet on this... Got to see a great performance by Paul Simon on Saturday night. Slip out the back, Jack! The St. Louis Marathon was held yesterday, and the runners had to endure a day of rain... I believe our little Christine was running a 1/2 marathon, but I'm not sure... If so, it should bring back memories of when she ran a whole marathon about 5 years ago, in weather just like yesterday's! I hope this pneumonia is out of my system before I leave for Bermuda this coming Saturday. Yes, I'll be speaking 3 times at the Sovereign Society's Total Wealth Symposium which will be held beginning Sunday and into next week. I've never been to Bermuda, so this will be exciting for me! Well... It's that time again... So, thanks for your time, this time, till next time, and I hope you have a Marvelous Monday!

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

The Euro Gets Bogged Down...

Chuck Butler — Fri, 17 Apr 2009 13:28:23 GMT

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

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In This Issue..

* A split among ECB ministers...
* Trichet walks a fine line...
* China and gold and copper...
* Canada's economy has a pulse...

And Now... Today's Pfennig!

The Euro Gets Bogged Down...

Good day... And a Happy Friday to one and all! A Fantastico Friday as well, as all our prayers were answered once again, and my scans were clean! YAHOO! They did see something in my lung... It's called pneumonia! I knew this "thing" I had was more potent than anything I had ever had before... So... The proper medicine was dispatched, and hopefully in about 4 days I'll have this whipped! I've got the whole weekend to rest, and drink plenty of fluids! Now if I wasn't sick, that last sentence would take on a whole new meaning, if you get my drift!

OK... Now that we have that housecleaning out of the way, it's time to go to work! Well, the currencies traded in a very tight range yesterday, only to see the euro lose ground in the European session, this morning, as ECB President Trichet, deep sixed the currency this time!

Recall, yesterday I told you how European Central Bank (ECB) minister Axel Weber, confused the markets with a statement that left the markets scratching their collective heads. Well, this morning, ECB President Trichet, failed to calm the markets, and their fears of a split in the governing body of the ECB is weighing heavily on the euro. Trichet has got to get these split factions of the ECB together...

In one corner, we have Weber, who does NOT want to see interest rates fall below 1%, and does NOT want Quantitative Easing.

In another corner, we have the Greek contingent, that DO want to see deeper rate cuts, and Quantitative Easing if needed.

And then finally we have Austria's Nowotny, who agrees with Weber on the rate cuts, but believes that Quantitative Easing makes sense.

If Trichet can't get these factions to come together, then the euro is going to get bogged down in all this mess, for nothing will get done... Trichet tried to put on the "company face" and tell reporters in Tokyo this morning, that "we have a very united Governing Council"... But he must not have been convincing enough...

So, with the Big Dog, getting weighed down, the rest of the little dogs have to remain on the porch, and that means dollar strength folks... Shoot Rudy, even the Japanese yen lost ground last night, reversing what had been the trend for the week, with the high yielders backing down, and yen ratcheting up... But not last night and this morning! The dollar has walked into the saloon, and told the bartender to "spray the infield" with dollar strength! I say this because, this is what he told reporters in Tokyo... "to say the euro was weak would not reflect the current situation" and that he "agrees with the US' Strong Dollar policy" Hmmm... First time I've ever heard an ECB President talk about a strong dollar policy... He must have something up his sleeve, ala Bullwinkle, or... He's drank the kool-aid that the U.S. is serving...

If you want to know what I think about Trichet's venture into the strong dollar policy land, read on... If not... Skip to the next paragraph! I think Trichet is just trying to keep the euro from exploding higher here... All the talk on the street these days is that the U.S. will have no other choice but to continue to debase the dollar in order to finance debts... Now, Trichet can't have the euro, which is the offset currency to the dollar, going off on a rampage from people selling dollars right now! If Trichet were to say what he really feels, he say, "The euro is strong, and will remain strong as the dollar retreats"... But a politically inspired euro surge against the dollar would deepen the Eurozone recession, and most likely really spike the already sensitive feelings among some members about the strong euro... So... I think Trichet is playing his card here... So far, the markets are "all-in" with that card... Now, if I were some BIG TIME market mover, the markets would read this and call Trichet's bluff... But, I'm not... So... We have to deal with euro weakness for now... I think Trichet should be listening to the old song by Max Frost and the Troopers... Nothing Can Change The Shape Of Things To Come!

OK... For those of you who skipped the previous paragraph, you missed some of my best stuff in years! HA! Well, let's get jiggy with the rest of the currencies! Since the dollar is stronger this morning, let's take a look at just why that is...

Well, it couldn't be the data that's printed this week, that's not the stuff that a strong currency is made of, for sure! Yesterday, for instance... Realty Trac issued a report that painted a really sad picture, folks... Let's take a look... In the month of March we saw a record level of foreclosure activity - the number of households that received a foreclosure filing was more than 12% higher than the next highest month on record - Realty Trac. Aye-Yi-Yi!

San Fran Fed Head, Janet Yellen, was in the news last night... She came out and said that "allowing Lehman Bros to fail was a mistake." She went on to say, "Lehman Bros was too big to fail and its bankruptcy caused a quantum jump in the magnitude of the financial crisis."

Hmmm... I wonder what her boss, Big Ben Bernanke will have to say about this statement... Now, that would be really something to see the Fed Heads air their dirty laundry with Big Ben... Talk about causing problems! YIKES! It will be interesting to see how this "coming clean for Yellen, plays out"...

Gold sure got whacked yesterday... I looked up at one point in the day and saw it down $15, and it's down another $5 at the London Morning Fixing... UGH! Silver is barely hanging on to the $12 handle too... It's been an ugly week for the precious metals.

OK... There was a great story on the UK Telegraph the yesterday www.telegraph.co.uk by Ambrose Evans-Pritchard, regarding China and Gold... Here's a snippet of the story...

"Hard money enthusiasts have long watched for signs that China is switching its foreign reserves from US Treasury bonds into gold bullion. They may have been eyeing the wrong metal.

China's State Reserves Bureau (SRB) has instead been buying copper and other industrial metals over recent months on a scale that appears to go beyond the usual rebuilding of stocks for commercial reasons.

Nobu Su, head of Taiwan's TMT group, which ships commodities to China, said Beijing is trying to extricate itself from dollar dependency as fast as it can.

"China has woken up. The West is a black hole with all this money being printed. The Chinese are buying raw materials because it is a much better way to use their $1.9 trillion of reserves. They get ten times the impact, and can cover their infrastructure for 50 years."

Now, that's interesting! The article goes on to suggest that the Chinese are also doing this with their reserves so that they don't have to continue to push their currency higher VS the dollar.

I've said for some time now that Treasuries are a bubble. And that bubble was probably about ready to pop, when the Fed announced that they would be buying Treasuries... But, that just prolongs the inevitable in my opinion... And now, if this story has any legs, the Chinese could be backing away from the Treasury auctions... I'm back on the Treasury bubble popping wagon... The Fed may have kept the bubble floating for 6 months to a year, but haven't' we learned with past bubbles, the longer you keep them floating, the bigger they get, and the nastier the mess is when they pop!

I noticed the other day, that the Canadian dollar / loonie, had rebounded to 82-cents and change, and yesterday with all the dollar strength, the loonie held its ground at 82-cents... Yesterday we saw Canadian manufacturing sales in February rise for the first time since July 2008 increasing a strong 2.2%! So... There's a pulse here, at least!

The negativity in the overnight markets toward the currencies has lifted a bit since I came in and turned on the screens. The High Yielders like rand, real, Aussie are all coming back strong right now... I'll do a quick look around the playing field to see if there's anything behind this move by the High Yielders.... OK, I'm back now, didn't see anything right now.

OK, before I head to the Big Finish I wanted to share with you something Tim Smith thought of yesterday... Capacity Utilization was so bad, that maybe we could shorten it to CAPUT!

Currencies today 4/17/09: A$ .7210, kiwi .5725, C$ .8270, euro 1.3070, sterling 1.48, Swiss .8585, rand 8.9275, krone 6.7250, SEK 8.4525, forint 225, zloty 3.29, koruna 20.49, yen 99.20, sing 1.5010, HKD 7.75, INR 49.84, China 6.8325, pesos 13.10, BRL 2.17, dollar index 85.79, Oil $49.75, Silver $12.01, and Gold... $868.15

That's it for today... My beautiful bride told me yesterday morning that she thought I had pneumonia... I said, "no way"! But as Wayne says to Garth... "Way"! Nice win in Chicago yesterday for my beloved Cardinals. A long 4-game series in the Windy City should make for some good baseball watching this weekend. We've had some miserable weather here in St. Louis, but today, it's supposed to be 70 degrees and sunny! YAHOO! I received a note from our travel person extraordinaire, Gena, yesterday, reminding me that it's time to plan for the Las Vegas Money Show! Yes, the Las Vegas Money Show scheduled for May 11-14, at the Mandalay Bay Conference Center. Time to eat my apple, and get ready for the trading day... I hope your Friday is Fantastico, and your weekend is wonderful!

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

Gold As An Inflation Fighter!

Chuck Butler — Thu, 05 Feb 2009 19:50:03 GMT

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In This Issue..

* BOE to cut rates today...
* ECB will wait to cut for now...
* Black clouds forming for India?
* German factory Orders plunge!

And Now... Today's Pfennig!

Gold As An Inflation Fighter!

Good day... And a Tub Thumpin' Thursday to you! Day One at the Orlando World Money Show (WMS) went well. My room for the presentation was packed! It was standing room only, and the good part was the fact that there were only about 30 Pfennig readers in the crowd. I say that not because I have something against Pfennig readers, oh Lord, they are dear readers! The reason I say that is I like to know how many of the non-readers I can convert to Pfennig readers!

Well... As you know, when I'm on the road like this, I'm not sitting in the saddle back home, and watching the markets all day long, and reading stories about what's happening, etc. So, the "road Pfennigs" tend to be a bit shorter. But as my friend, and once editor of our monthly newsletter, David Galland, used to tell me... "you've got to get it out every day, no matter what!"

So... From what I can tell this morning, the currencies traded in a very tight range after the sell-off from the previous night that I told you about yesterday. Japanese yen is a bit weaker, from yesterday morning's currency round-up, but other than that small move in yen, the levels look like they are wearing the same clothes as yesterday!

Today we have the Central Banks of England and the Eurozone meeting to discuss rates. As I said earlier in the week, I truly believe the Bank of England (BOE) to cut rates aggressively once more to bring their internal rate to 1/2% or 50 BPS, just like here in the U.S. The forecast is for the BOE to cut to 1%... But I'll go out on that limb and say they'll be even more aggressive. Here's the thing that just gets my goat though... The more aggressive the BOE is in cutting rates, the better pound sterling will trade. Now this should be the opposite, as a rate cut is a true debasing of one's currency. But the mental giants in today's trading world don't see it that way. They see it as a plus for the economy and so for the currency.

I could really go off on a tangent now about how trading desks are run by Ivy leaguers that got that job right out of grad school and don't carry the same "valuation tools" as old timers... And quite frankly could very well be one of the reasons we're in this mess today... But I won't go there, as that's too touchy of a subject!

The European Central Bank (ECB) will also meet today, but ECB President, Trichet, has pounded it into everyone's heads that the ECB will NOT cut rates today, and to look to the March 5th ECB meeting as the next "chance" for a rate cut.

Here's another example of not carrying the same "valuation tools"... The ECB is being prudent and waiting to see the results of previous rate cuts, so as to not "over cut" and get in trouble with spiraling inflation, etc. Why debase the currency when you don't have to? But.... NOOOOOOO! The mental giants these days are punishing the euro because they believe the ECB is now "behind the curve" with regard to rate cuts. See how crazy this has all become? Crazy... I'm crazy for thinking about you... I'm Crazy... Crazy for feeling so blue... Ahhh, the soothing voice of Patsy Cline... Now, I can get back to writing without carrying on about "valuation tools"... Or as the kids say nowadays those guys are "tools"... HAHAHAHAHAHAHAHAHAHA!

Yesterday, I told you about the surprise Pending Home Sales report, and how maybe it's a sign of better times, but I needed to be shown more before I would commit to saying that it's a true sign. Well, my friend, Bill Bonner, author, and Daily Reckoning fame (www.dailyreckoning.com) had this to say yesterday about this very subject...

"Our guess is that the little light investors thought they saw will turn out to be another torpedo blowing up. Millions of homeowners and stock market investors have gone down already...but there are many still afloat.
And many torpedoes that still haven't found their marks.

In Japan, for example, property prices began falling in 1991. They fell for the next 13 years...reaching a low in 2004 equal to where they had been in 1973!

If that pattern plays out in the United States, the housing market won't hit bottom until 2020...when you'll be able to sell your house for what you paid for it in 1989."

Our old Fed Chairman, who is highly regarded for his inflation fighting in the early 80's, Paul Volcker, spoke last night and he's none too happy with the delay in starting the economic advisory group that the new President, Obama, set up. Obama picked Volcker, but Volcker isn't seeing any moving forward with this advisory panel. Volcker wants to help, and I believe we need his voice, but no one wants to "include" him... Hmmmm... I wonder what's going on there... Does the new administration believe they don't need Volcker's voice? I sure hope that's not true!

In another sign that the German economy has fallen into a recession, German Factory Orders for December fell -6.9% bringing the annual number to a staggering decline of -25%, according to the report I saw this morning... This is just another reason why the euro no longer trades at 1.60...

I saw a report this morning regarding India and the rupee... I don't talk about India very often, because not much in the way of market moving news comes out of India... But, this report is talking about black clouds hovering over India, so I thought I had better fill you in... An advisor to the Prime Minister said last night that the 2009 Budget "may" reach 7.5% of GDP! The forecast is for 2.5% of GDP. If this is true, the writer believes that the rupee could sell off from today's level of 48 and change to 52... If that all holds true, then holders of rupees will be thankful for the above market interest rates to cushion that blow... But again, this is all based on a "may" and could turn out to be a boy crying wolf!

I'll end today's letter with a "feel good story"... Gold rallied to $915 yesterday... Gold traders say that they believe Government spending will spur inflation, the dollar will weaken, and gold will take off on the strength of its inflation fighting make up.

Goldman Sachs Group, Inc. (which probably has so many research people you can't count them with stick) said that they believe Gold will reach $1,000 within three months. And a commodity analyst at Dresdner Bank said this, "expectations of future inflation and dollar depreciation are driving the market right now."

I told the crowd at my presentation yesterday that Gold IS an excellent inflation fighter... And not to listen to those that preach otherwise, as they use the high of the 80's at $800 and say Gold hasn't done a very good job of fighting inflation since then! But! Not so fast Tim! I say you have to go back to when President Nixon closed the Gold window, and took the dollar off the gold standard. Gold was trading then at $35 an ounce... Now follow Gold's price through the years to the present at $915... Now... That's what I call an inflation hedge!

And finally on Gold... Kristin sent me this note that she came across... "Short term, said Tom Pawlicki, of MF Global in Chicago, "Investment has been a key supporting factor for gold," and thus "Passage of the stimulus package in its current form would likely be inflationary and bullish for gold while a Senate filibuster would be bearish."

On to the Big Finish! Wait! There's been a nice move up in the currencies since I got up this morning! WOW! Alrighty then, let's go to the currency round-up!

Currencies today 2/5/09: A$ .6485, kiwi .5130, C$ .8125, euro 1.2875, sterling 1.4515, Swiss .8615, rand 9.9765, krone 6.83, SEK 8.2625, forint 230.32, zloty 3.62, koruna 21.98, yen 89.70, sing 1.5050, HKD 7.7540, INR 48.77, China 6.8367, pesos 14.44, BRL 2.3075, dollar index 85.60, Oil $40.44, Silver $12.71, and Gold... $915.80

That's it for today... I had a very nice dinner last night with current colleagues and one old colleague... It was nice to see Walter Meyer again! I'm going to have dinner with one of my faves, Mary Anne Aden tonight! Mary Anne is in the "house"! She'll be giving a main stage talk today... Me? They send me off to the side rooms! Hey! At least I fill the side rooms to the brim! My publisher and editor of the "other" monthly newsletter that I write, the Currency Capitalist, are in town for meetings with me today. Sure hope they didn't come here to give me a pink slip! Nah.... They "love" me, they really "love" me... (I'm doing my Sally Field here)... OK... Time to hit the send button and get ready to meet Chris for breakfast... He's probably already gone out and run 10 miles this morning! He's amazing! Oh, well, that's not for me, I'd rather spend my time with you dear reader! On that note, I hope you have a Tub Thumpin' Thursday!

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

Retail sales disappoint even more…

Chuck Butler — Thu, 15 Jan 2009 16:16:31 GMT

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In This Issue..

* Retail sales disappoint....
* Chuck's views on the Lone Prop...
* Waiting on the ECB...
* Emerging market currencies sell off...

And Now... Today's Pfennig!

Retail sales disappoint..

Good day... The big news yesterday was the retail sales numbers, which fell twice as much as expected. Chuck predicted a tough Christmas season, and the BHI was right again. Sales dropped 2.7 percent according to yesterday's report from the Commerce Department. The falling home prices, rising job losses, and tighter credit have all combined to finally force US consumers to adjust their spending habits. No matter how low retailers slashed prices during the recent Christmas season, US consumers just weren't buying. The economy is forcing consumers to wean themselves off of the dangerous drug of easy credit. In spite of Bernanke and Paulson's attempts to get consumers borrowing and spending again, the economic slowdown is forcing the US consumers to reign in their spending. But while this change in consumer habits is good for the longer term economic health of the US, it only serves to drive the economy even further into recession over the short term.

And the bad economic data just keeps rolling in. U.S. foreclosure filings spiked by more than 81% in 2008, a record, according to a report released Thursday, and they're up 225% compared with 2006. The total foreclosure filings in 2008 topped 3 million and showed no signs of slowing down in spite of the efforts of both the government and banking industry to slow them down. Foreclosure filings actually accelerated in the 2nd half of the year, increasing 17% in December over November of 2008.

The Fed gave us a glimpse of their view on the markets yesterday with the release of their Beige Book. Nothing in the report was a surprise, as respondents from the 12 Fed districts portrayed a gloomy economic scene. The report suggests the Fed may need to implement further measures to restore credit markets. The Fed districts reported more job losses, hiring freezes, and reduced hours. The New York district reported that 'substantial' job reductions have yet to show up in payrolls data. Doesn't sound good for the US economy in 2009.

Today we will continue to get negative news on the US economy with the release of Producer Prices and the weekly jobs numbers. Producer prices will bbe down and initial jobless claims will probably top 500k. We will also get the very volatile Empire Manufacturing and Philadelphia Fed numbers showing further rot on the manufacturing vine.

The dollar actually rallied with these numbers, as investors turned back to it as a 'safe haven'. This move is similar to the moves we saw in the latter half of 2008 as the dollar rallied in the face of poor US economic data. Chuck sent me his thoughts on this latest 'safe haven rally' and wanted me to share them with you all:

"Reuters reported Wednesday night that the U.S. is close to extending Billions of more aid to Bank of America... Citigroup, as reported yesterday, is selling off units to raise capital... I wonder if Big Ben Bernanke and Hank Paulson drink more than 7 cups of coffee a day... Researchers show that drinking more than 7 cups of coffee a day may trigger delusions...

What does the rot on the vine at BOA and Citi have in common with delusions? Well... I think that Big Ben and King Henry are drinking more than 7 cups of coffee a day, if they believe their "stimulus" / TARP is going to get these two ginormous banks back on terra firma!

Remember the Lone Ranger? Remember a couple of years ago, when the dollar was propped up by Fed rate increases, and the tax amnesty for U.S. Corporations doing business overseas? Those props were pulled away one at a time, and for the next 2 1/2 years the green/peachback fell flat on its face... Well, it came up with another prop this summer... However, this time... There's only one prop... The Lone Prop, I'm going to call it from here on out... It's called the "Safe Haven" prop... And it has done the dollar well since July...

But just like in early December when I smelled a Santa rally to year end, and it happened... I'm seeing chinks in the dollar's Lone Prop's armor... The Fed has just about run the course of things it can do to get this economic engine revved up again, to no avail... And just like I said a couple of weeks ago, Paulson and Bernanke are like the King's men, who tried to put Humpty Dumpty back together again! Their stimulus plans, their money supply injections, their guarantees on debt, their taking over the Commercial Paper biz, to their putting their hands in bank's cookie jars... Nothing has worked... And why? Because, it's not nature's way to interfere! One of my all time fave songs, by Spirit (Randy California) called, "It's Nature's Way"... It's nature's way of telling, something's wrong... It's nature's way of telling you in a song.... It's nature's way of receiving you... It's nature's way of retrieving you... It's nature's way of telling something's wrong...

It's obvious they were singing about something else... But I would say if sung today, it would be sung to the economy... One of these days, these mental giants will figure out to leave well enough alone, and let markets take their course... But that's not happening now, and I'm sure it's not going to happen any time soon, given the news that President-elect Obama wants control of the remaining $250 Billion in TARP money, and then wants to push through a stimulus package that will be anywhere between $800 Billion and $1 Trillion as soon as he takes office!"

Chuck is pretty amazing, he had another tough day at the doctor's office yesterday, but still found the time to send me his thoughts on this recent move by the dollar.

The Euro sold off a bit yesterday as currency traders were waiting on the ECB which will likely cut 50 basis points this morning. Some actually began predicting a 75 basis point cut, but the noise on the street is confirming a 1/2% cut. But the markets will focus more closely on the press conference following the rate announcement. Many are expecting the ECB to signal more cuts are on the horizon, but I disagree. The leaders of the ECB have a hawkish tilt, and Trichet has continued to illustrate his desire to not follow the US Fed's ZIRP (Zero Interest Rate Policy). A 50 basis point move would put interest rates at the lowest levels since 1999, and a further move would be unprecedented. Trichet said last month that there is a limit on how far the ECB can cut rates and will likely push for a pause after today's cut.

But recent data out of Europe shows their economy continues to contract, and inflation is being held down so Trichet will face mounting pressure to drop rates further. If Trichet can hold the line, the euro will likely benefit vs. the US$. The euro rose 10 percent vs. the dollar in December, after Trichet said he wouldn't be trapped with borrowing costs too low. The European economy is slowing, but will likely be able to weather the financial tsunami better than the US.

The emerging market currencies of Brazil and South Africa slid yesterday with 'risk aversion' back in vogue. The Brazilian real sold off to a two week low on concern over a further deterioration of the US economy. The South African rand sold off in concert with a drop in the price of gold and commodities. The higher yielding currencies of New Zealand and Australia also fell vs. the US$ as investors turned back toward the 'safe haven' of the US$. But don't expect this dollar strength to last, as this lone prop of 'safe haven' will be kicked out from under the dollar.

On to the currency wrap up:

Currencies today 1/15/09: A$ .6632, kiwi .5379, C$ .8033, euro 1.3170, sterling 1.4602, Swiss .8928, rand 10.1408, krone 7.2099, SEK 8.3956, forint 212.64, zloty 3.2109, koruna 20.6965, yen 89.11, sing 1.4957, HKD 7.7598, INR 49.0175, China 6.8365, pesos 14.1862, BRL 2.3841, dollar index 84.253, Oil $37.80, Silver $10.50, and Gold... 812.35

That's it for today... I see where the ECB did cut 50 basis points, which was widely expected. I can look forward to another full day of meetings on the new computer system we are looking to install later this year. I'll be heading out to Colorado tomorrow for a 'guy's weekend' of skiing. Hope everyone has a Terrific Thursday!!

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

A Jobs Disaster!

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

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In This Issue..

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

And Now... Today's Pfennig!

A Jobs Disaster!

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Santa rally for the currencies...

Chuck Butler — Tue, 16 Dec 2008 18:46:53 GMT

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In This Issue..

* A Santa Rally for the currencies?...

* Waiting for the FOMC...

* AUD and NZD rally...

* China to try and keep growth above 8%...

And Now... Today's Pfennig!

Santa rally for the currencies...

Good day...It was actually a Great day for the currencies yesterday as the dollar index dropped another full point. The Euro moved past $1.35 and then blew through $1.36 to end the day over $1.37. And the Euro wasn't even the best performer, as the New Zealand dollar rallied over 2.1% vs. the US$ to take the title of best performing currency against the greenback. The South African rand was the only currency turning in a negative performance yesterday with the other commodity driven currencies of Norway and Brazil just barely holding their ground vs. the US$.

The currency rally caught Chuck's eye and he fired off the following email for me to include this morning:

"Quite a day in the currencies again... Looks like that Santa Rally for the currencies that I first mentioned on December 8th, is coming to fruition. Of course "I didn't know this would happen" I was just giving market commentary on what looked like was happening!

So... 1.37 and change for the euro, the move from 1.27 and change has been swift and fast. And why not? I've said all along that the dollar's rally was just a bear market rally. Now, we'll have to see if this can continue, which I believe it will, or if this was just a false dawn.

Well... It's Christmas time, so the giving is going on... And it looks like we'll see the Gov't "give" more once the calendar turns to 2009. What was once a $150-200 Billion stimulus package that would be sent through in January when the new lawmakers take their oath, now looks as though it will be in the neighborhood of $600 Billion, that is according to Nancy Pelosi who made that announcement yesterday. Shoot Rudy! What's another $400 Billion among friends?

By my calculations, that will put us nearer to $3 Trillion in bailouts and stimulus packages... There's a total of over $8.5 Trillion that has been allocated with funding facilities, but the actual output of cash is around $2.5 Trillion before the next deal in January gets done.

No wonder the dollar is getting pummeled once again!

I did a 1 hour interview yesterday... It was a "the world according to Chuck" interview... Long time readers all down about what I probably had to say, but it was cool getting to go "free form" and just let it all hang out. I will go to my darling daughter's (Dawn) kindergarten classroom tomorrow and read to them... Dawn has always been a fan of the way I read, The Night Before Christmas... And her kids always get a kick out me doing this, most of them think I AM Santa Claus!"

Chuck loves the holidays, and I think reading to the kindergarten class is one of his favorite parts!

Today the markets will be awaiting the FOMC rate decision and the accompanying statement which should be released around 1:15 CST. As I stated yesterday, a cut of 50 basis points is already cooked in, but noise from the street indicates we could actually see a 75 basis point cut. The market is currently trading Fed Funds at .125%, so a drop of 75 basis points would move the target very close to where the market is trading. But as we have said in past Pfennigs, the FOMC has almost used up all of their interest rate ammunition, and will have to look for other ways to try and steer our economy out of the recession. The markets will be looking at the accompanying statement for any guidance as to the direction the FOMC will take next. 'Quantitative Easing' will be the big buzz words of the next few weeks. We will just have to wait and see just how creative our Fed is going to get.

The Fed will start to use its balance sheet as the key tool for monetary policy. Since he can't cut rates much further, Ben Bernanke will likely start channeling credit directly to businesses and consumers by further enlarging its $2.26 trillion of assets. Bernanke and his compatriots will have to try some new experiments to manipulate the supply of money to try and prevent the worst recession in a quarter century from turning into a depression.

The data released yesterday continued to indicate the US economy is faltering, as the Empire manufacturing and Industrial Production numbers showed pretty large losses. Industrial Production decreased by .6% during November, as US manufacturing output continues to fall. Production has now decreased 7 out of the last 11 months, and the more important Capacity Utilization number also fell. We won't be seeing the manufacturing sector pull us out of this recession any time soon, as the utilization number shows we are only using 75% of our manufacturing capabilities.

The manufacturing numbers were bad, but these negative numbers were largely expected. The surprise of the day came as the Net Long-term TIC flows for October were released. TIC flows were expected to be right around $40 billion, just slightly below what is necessary for us to fund our deficits. But the actual TIC flows were barely positive at just $1.5 billion. Could the rest of the world finally be tiring of our US Treasuries? Actually, foreigners continued to purchase treasuries, but sold a record amount of debt issued by mortgage-finance companies Fannie Mae and Freddie Mac and other agencies, offsetting the treasury purchases.

So investors were shortening up the duration of the US$ holdings, selling longer term securities to buy short term treasuries. This has to have the Fed shaking in their boots, as no investor buys short term paper at near zero rates with a plan to hold them. This money is being parked short term, and will move out of the dollar as soon as the markets start to calm down. China remained the biggest foreign holder of US Treasuries, after its holdings rose by $65.9 billion to nearly $653 billion. Japan is the second largest holder with nearly $586 billion of US debt.

For those of you who may be wondering why the TIC data is so important, this is how we finance our deficits. As Chuck reported last week, the US trade gap unexpectedly widened 1.1 percent in October to $57.2 billion. Yesterday's numbers show we only were able to attract $1.5 billion of foreign capital to finance this gap. So the remaining balance had to be financed with additional debt. It seems we just keep digging the hole deeper and deeper!!

The Euro was helped out by ECB President Trichet who indicated he would pause interest rate cuts in 2009. Trichet told journalists in Frankfurt that ECB policy makers want to "concentrate at this stage on getting what we already decided to be really operational." He went on to say there is a limit to how far the bank can cut rates. "Do we have a feeling there is a limit to the decrease in rates? At this stage certainly yes." Sounds like the ECB doesn't want to follow the US into the zero interest rate environment. Maybe Trichet and his colleagues realize just how dangerous a zero rate policy can be with regard to future inflation.

Data released this morning caused the euro to back off its high of $1.3737 as reports showed European manufacturing and service industries contracted at the fastest pace in at least a decade. These reports showed the Eurozone faces some of the same challenges as the US, but in my opinion, their central bank has done a better job of dealing with the slowdown. With the FOMC cutting rates today, and the ECB indicating that they are going to pause, the Euro will likely continue to gain back some of the losses of the past 6 months.

The Australia and New Zealand dollars both rose for a second day on interest rate differentials. The Australian dollar extended gains after the central bank indicated it would slow the pace of further rate cuts. The Reserve Bank of Australia trimmed its forecast for inflation to 2.5 percent from a November prediction of 3 percent. Policy makers have a target range of 2 and 3 percent for Aussie inflation. With inflation in their target range and a simulative monetary policy, the RBA doesn't need to do much more with rates. Commodity prices have hurt both the AUD and NZD, and any increase in commodity prices during 2009 would have a big positive impact on both these currencies.

Any hope for commodity prices will center around the rebound of the Chinese economy. China's central bank Governor Zhou Ziaochuan continues to call for aggressive action to keep China's growth rate from dropping below 8%. The Chinese govt. pledged last week to boost liquidity after cutting interest rates last month by the most in 11 years to spur lending and consumption. China's economy has slowed, but will likely grow at 6 percent during 2009. This is still an excellent growth rate for the world's fourth largest economy, but below the 8% rate many believe is necessary to avoid social instability.

Currencies today 12/16/08: A$ .6694, kiwi .5589, C$ .8102, euro 1.3659, sterling 1.5246, Swiss .8661, ISK 218, rand 10.3118 krone 6.9629, SEK 8.0583, forint 195.84, zloty 2.9716, koruna 19.319, yen 90.01, baht 34.78, sing 1.4781, HKD 7.7502, INR 47.91, China 6.8457, pesos 13.3631, BRL 2.39, dollar index 82.16, Oil $45.02, Silver $10.49, and Gold... $832.77

That's it for today... We got another blast of winter weather overnight, with single digit temperatures and a mix of ice and snow. The weather is tough on commuting, but it sure puts you in the mood for Christmas! We were slammed on the desk yesterday, as Mondays are always busy and we were a little short handed. Looks like today will be much the same, so I better get logged into the phones. Hope you all have a Terrific Tuesday!!

Chris Gaffney, CFA

Vice President

EverBank World Markets

1-800-926-4922

1-314-647-3837

Chuck finally heads back home...

Chuck Butler — Thu, 23 Oct 2008 17:00:19 GMT

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

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In This Issue..

* Chuck's thoughts...

* US housing still a drag...

* Rate cuts push currencies lower...

* Yen rallies and is joined by some odd partners...

And Now... Today's Pfennig!

Chuck finally heads back home...

Good day...Another big move up by the dollar and the Japanese yen last night. Really just another repeat of what we have been seeing each day of this week, dollar down, gold down, and oil down. And with the stock market falling dramatically yesterday, all of us on the desk were searching for something that was actually up yesterday. Our bond trader, Don Reis let me know that muni bonds rallied dramatically, along with US treasuries. So I guess investors are just continuing to park funds into the US fixed income markets.

Chuck is headed back home this afternoon, after spending the past two weeks traveling the country with FX University. I'm sure he will be happy to get to sleep in his own bed again tonight, and will catch up on his rest tomorrow. He sent me the following note to share with readers:

"Well... Another day and another dollar rally... I'd like to thank Chris for all his work on the Pfennig while I've been out... I'll talk to you all on Monday. But for now... Chris did an excellent job putting together all my different reasons for the dollar being so strong yesterday, didn't he? Since nothing's changed in that regard, and nothing probably will for months, I thought I would skip the dollar talk and go somewhere else...

First of all... Here's a quote by Thomas Jefferson that really struck a chord with me... (remember Thomas Jefferson wrote this over 200 years ago!)

""The central bank is an institution of the most deadly hostility existing against the Principles and form of our Constitution....Bankers are more dangerous than standing armies......(and) if the American people allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and CORPORATIONS that will grow up around them will deprive the People of all their property until their children will wake up homeless on the continent their Fathers conquered."

Now if that doesn't shake you up, and get you mad at all these dolts that have put our country in this mess, that's now spreading into Europe, I don't know what will... OH! Maybe it's this...

Yesterday, I came across a story regarding the audit of the credit ratings agency, Moodys... You see, the examiners are convinced that ratings Agencies employees were doing no good in rating those mortgage bonds so high... Well, in an examination of email they found this quote by an employee of S&P (according to the story on Bloomberg) "An e-mail that a S&P employee wrote to a co-worker in 2006, obtained by committee investigators, said, ``Let's hope we are all wealthy and retired by the time this house of cards falters."

And in an investigation over at Moodys... the Employees at Moody's Investors Service told executives that issuing dubious creditworthy ratings to mortgage-backed securities made it appear they were incompetent or ``sold our soul to the devil for revenue"...

Shame, shame, shame... Shame on all of you! But then, they haven't been convicted of anything yet, so in this country they are presumed innocent until found guilty..."

Chuck always calls it like it is! And he just sent me another message reminding me that the founding father of all of this mess, Alan Greenspan, will be on capitol hill today addressing the House Committee on Oversight and Government Reform. Big Al was very vocal in his aversion to increasing financial supervision as Fed chairman from August 1987 to January 2006. He said in a May 2005 speech that "private regulation generally has proved far better at constraining excessive risk-taking than has government regulation." During his term at the Fed's helm, Greenspan repeatedly warned lawmakers against inhibiting markets, such as by tightening oversight of certain types of derivatives.

Greenspan's office released a copy of the prepared testimony he will give to congress today, and in it the Former Fed head does a dramatic about face. He is now trying his best to distance himself from the free-market culture that he helped create. But during his testimony today, he will call for tighter regulation of financial companies. "Firms that bundle loans into securities for sale should be required to keep part of those securities," Greenspan will say in his testimony today. Other rules should address fraud and settlement of trades, he will say. I doubt if any of his buddies on Capitol Hill will really let him have it (they let the rating agency heads skate right on through yesterday). As usual, the individuals who were asleep at the wheel during the creation of this crisis will be let off the hook and left to enjoy their retirement while all of us taxpayers pay for their excesses.

I haven't written much about the data releases in the US this week as it has been a very slow data week. Today will be the most interesting piece of data as we will get the weekly jobs numbers along with the US house price index. Initial jobless claims will probably increase again this week, as the US economy continues to stumble along in a recession.

Yesterday we got more bad news on the US housing front, as US foreclosure filings increased 71 percent in the third quarter from a year earlier. Foreclosures are now at the highest on record as home prices continue to fall and stricter mortgage standards make it harder for homeowners to sell or refinance. As we have repeatedly warned, the government bailout on Wall Street will not have an impact on the housing market slide. All of the money given to the big Wall Street financial firms is being used to make up for the losses they have on the 'creative' investments they sold each other. All of the talk about how this bailout money will help homeowners is just a bunch of Paulson doublespeak.

Now the administration is finally starting to talk about giving homeowners some relief, with both the candidates and congress suggesting we come up with a second bailout package aimed at individuals. I guess the first $1.3 trillion just didn't do the job, or maybe it was just aimed at the wrong institutions. As we have been saying all along, this financial crisis still has a few surprises to spring on us, and it is far from over for the US taxpayers.

One of the reasons I have heard for the fall of the Euro is that currency traders expect the ECB to continue to cut rates to stimulate their economy. But ECB President Trichet has held to his commitment to combat inflation which continues to hold above the ECBs 2% target. But on this side of the Atlantic, officials are more than willing to ignore inflation and as our FOMC is expected to continue to be very aggressive cutting rates over the next few weeks. The FOMC will probably reduce the benchmark federal funds rate by half a point next week to just 1%, the lowest since May of 2004. The official rate has never been lower. So how can currency traders be taking the euro lower on the mere possibility of ECB cuts when the US has all but guaranteed even more aggressive reductions? It doesn't make sense to me, but none of the markets haven't been making much sense lately!

Both the Reserve Bank of New Zealand and the Riksbank in Sweden cut rates last night. New Zealand cut by a record 100 basis points last night in an aggressive move to stimulate their economy. The RBNZ did not express concern over the fall of the New Zealand dollar or imported inflation in their accompanying statement. The kiwi initially rallied on the cut, as markets had actually priced in an even more aggressive cut. But the short rally didn't last and the kiwi is opening up this morning down slightly from where it was trading yesterday.

Sweden cut its key lending rate by a half-point for the second time in two weeks and forecast another similar reduction within six months to cushion the economic slowdown. It also lowered forecasts for growth and inflation. "The interest rate cuts are aimed at alleviating the effects of the financial crisis on the real economy and at the same time attaining the inflation target of 2 percent." The cut was widely expected so it didn't have a dramatic impact on the Swedish Krona which is actually up a bit vs. the US$.

The yen continued to strengthen overnight, but was joined by some odd bedfellows. We are used to seeing the yen rally as currency trades are reversed, but over this morning the high yielding currencies of South Africa, Mexico, and Brazil have joined it. As I mentioned yesterday, expect the unexpected in these markets. Apparently the South African rand is rallying after the central bank assured investors that banks in South Africa are well-capitalized and won't need a government bailout. South African banks have very little direct holdings in US sub-prime related assets and do banking in a more traditional manner. The report from the Central Bank assured investors that the banking system in South Africa is very well regulated and 'safe and boring'.

The rand rallied in spite of another drop in Gold which is close to breaking below $700 per ounce. And I thought my purchase at $850 was well timed! We continue to have trouble buying coins or bars in either gold or silver, so the shortage of the physical metal remains. Apparently much of the selling of gold and silver is coming from institutional holders who are having to raise cash, and are using sales of these hard assets. I continue to believe that both gold and silver are cheap at these levels, as global inflation will spike as a result of the tremendous increases in global money supplies.

On to the currencies:

Currencies today 10/23/08: A$ .6603, kiwi .5879, C$ .7873, euro 1.2795, sterling 1.6185, Swiss .8570, ISK (No Quote), rand 11.18, krone 7.1741, SEK 7.8481, forint 222.26, zloty 3.0928, koruna 20.2269, yen 97.35, baht 34.63, sing 1.5029, HKD 7.7529, INR 49.82, China 6.8355, pesos 14.1105, BRL 2.5052, dollar index 85.67, Oil $68.10, Silver $9.3663, and Gold... $706.37

That's it for today...I will be happy to see Chuck back in the office next week, hopefully he will bring a little currency rally along with him. Blues lost a tough one last night, but are still off to a great start. My wife and I will be heading to the hockey game on Friday night, and Chuck will be going also. I just heard that Sarah Palin will be dropping the puck, so it should be a fun night. The markets continue to be crazy, and the phone volume has picked up again, so I'll have to jump now. Hope everyone has a Tub-Thumpin Thursday!!

Chris Gaffney, CFA

Vice President

EverBank World Markets

1-800-926-4922

1-314-647-3837