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Another HUGE Currency Rally!

ChuckButler — Mon, 29 Dec 2008 23:43:17 GMT

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In This Issue..

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

And Now... Today's Pfennig!

A HUGE Currency Rally!

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The NBER Finally Says So!

ChuckButler — Tue, 02 Dec 2008 16:16:46 GMT

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In This Issue..

* RBA cuts 100 BPS...

* It IS a recession!

* Paulson to ruffle feathers?

* Yen to rally hard?

And Now... Today's Pfennig!

The NBER Finally Says So!

Good day... And a Terrific Tuesday to you! Quoting one of my all time fave Christmas songs, Baby, it's Cold Out There! Winter has arrived, and I had to drag out the big heavy winter coat this morning. So... The seasons pass us, which is a good thing, because without winter, we couldn't have spring, and spring training!

OK... Right out of the starters blocks this morning, the Reserve Bank of Australia (RBA) pulled the rug right out from under the "high yield status" of their economy, with another HUGE rate cut overnight... This time, the RBA cut 100 BPS, to an internal cash rate of 4.25%. This brings the total since September to 300 BPS! WOW! Talk about effectively unwinding seven years of tightening! The statement following the rate announcement leads me to believe that the RBA is probably finished cutting rates for now... It will be a wait-n-see what happens globally, before the RBA entertains any talk of further rate cuts... At least that's my opinion!

Had a long talk with the legal beagles yesterday... The just don't like what / how I say things. This all stems from complaints we've received that claim that, "I give investment advice". Of course when the currencies were going up, up, up and away, in my beautiful balloon, for 6 years, we didn't hear of any complaints or claims that I was "giving investment advice"... Any way... It is what it is... I call it "Market Commentary"... And everything I say is "Chuck's opinion" not that of EverBank's and the last time I looked... Opinion is: not to provide investment advice or to manage your money - THOSE ARE DECISIONS THAT YOU HAVE TO MAKE.

Well... Now that I've said all that... Guess what finally happened yesterday, that I've said was the case since January? Yes, the National Bureau of Economic Research (NBER) finally came clean and said that the U.S. has been in a recession since December, 2007. Here's where I could go totally sophomoric on you and say, "I told you so!" but I won't, no wait, I already did! But, that's not my intention. I only carry on about his because recently I've had a few people tell me that I have no foresight, and that I merely react to things... Hmmm... I said this was a recession 11 months ago, long before the un-dynamic duo of Paulson and Bernanke would admit it, and long before your friendly neighborhood economist would admit it, and way before the NBER, the official arbiters of this call, admitted it.

The currencies remained in a very tight range yesterday with a bias to buy dollars, with the Huge stock sell off... The stock jockeys didn't fall all over themselves on this news, and that surprised me... Here's why... You see, most times, in the past, by the time the NBER gets around to calling a recession, the recession is either over or about to be over. So, knowing this, I figured the stock jockeys would be falling all over themselves, calling out that the light at the end of the tunnel could be seen...

The problem with that mentality is that not all recession calls by the NBER have signaled the end of the recession. Take... The recession that started in July 1981, which was announced in January 1982, and that recession ended 10 months later in November 1982. That's the scenario I'm afraid that we are going to revisit this time. I've already said that I believe 4th QTR GDP will show a negative -5% figure, so that's right now, and there's no way, the economy rebounds from a negative -5% drop in a heartbeat... This is going to be a long, protracted recession, but then, the song remains the same here for me... I've said that for a long time now!

We heard from Federal Reserve Chairman Big Ben Bernanke yesterday... Big Ben said "further interest-rate cuts are "certainly feasible," but he warned there are limits to how much such action would revive an economy likely to stay weak well into next year."

Mr. Bernanke also said the "Fed's powers don't end with the federal funds rate, and its ability to inject liquidity into markets through its balance sheets "remains effective."

I guess, that was the wink and nod that interest rates are going lower, and that... The Fed is going to continue to take in toxic securities on their balance sheet...

OK... There's a story on the news wires this morning that according to the charts at the Bank of Tokyo, yen could push to 79.75 VS the dollar. WOW! I think these chartists should go back and check their angles again, because that's a phenomenal move in yen, and I can't believe the Bank of Japan (BOJ) wouldn't be in the markets intervening (selling yen) to keep that from happening... But for what its worth... There you go!

Today, we'll see U.S. Treasury Sec. Paulson speaking about the U.S. / China economic strategy... Hmmm... I wonder if old Hank, will ruffle a few Chinese feathers with his speech, or will he go quietly? I think that after yesterday's .75% drop in renminbi, followed by a "regular" .30% drop last night, which puts renminbi at a 5-month low, that Paulson will be in a feather ruffling mood, especially, given the thought that he only has about a month left on his Treasury Sec. watch...

Remember about a month ago, I told you all about the early part of this decade, when the global economies were all fighting with recessions, and that the currencies were getting rewarded whenever a Central Bank cut rates to promote growth? I said then, that we could very well relive that scenario, and each time the RBA gives us one of those "mega rate cuts" I notice the A$ rallies... I guess, after we get through the next two weeks of Central Bank rate cuts, we'll have a better idea if this is going to play out again, but for now, it sure is beginning to look like it will...

Looks like the airlines are "hurtin' for certain" as I saw two different ads in the weekend paper for $49 flights... Southwest and American Airlines were promoting those discount flights... Of course there were tons of "terms and conditions" but the key here is the offer of discount flights...

I see from the U.K. Telegraph that AIG is beginning to sell off assets in an attempt to pay back the $153 Billion "loan" the Gov't gave them. And I see where JP Morgan Chase is going to lay off 9,000 employees. And that there are rumors that Britain is entertaining thoughts about joining the euro again... They can forget about that! The people of Britain are NOT going to vote for that to happen... At least that's how I see it from the cheap seats.

And yesterday... The piece of data that "told me" we were in a recession, the ISM (manufacturing) Index printed... And the index number fell by a greater margin than the "experts" forecast, and brought it to the lowest level (36.2) since 1982! Again, folks, this is a very "telling" piece of data, and confirms my belief that we're in for a long, protracted recession, as this looks like the early 80's recession and not those willy nilly ones of the 90's and 2000's!

The only data we'll see today, is the vehicle sales, which is expected to fall again... I see where Ford is going to announce that they are going to change their focus to small, fuel efficient cars instead of Trucks and SUV's, hoping that will "win over" Congress to give them a loan... I also see where Ford is offering "employee prices" plus a rebate for a select group of their cars... (that "employee pricing" is a bunch of bunk if my opinion any way!)

So, there's a collection of some of the items that's will drag on the U.S. economy... And eventually the dollar, once we get past this credit crisis...

Next on the rate cut block is the Reserve Bank of New Zealand, (RBNZ) who meets tonight... I think the RBNZ will play a game of poker with the RBA, and say..."I'll see your 100 BPS, and raise you 50 BPS"... That's right, I think we'll see 150 BPS rate cut from the RBNZ... Like I've said a few times now, rates are going lower all over the world folks, we should all get ready for this!

I sure ruffled a few feathers yesterday when I printed a comment from someone else about the Energy Dept... Folks... The point was simply that we don't need the Gov't operating private businesses, like banking... That's all it was...

The Retail folks are "happy" with the sales figures from the first weekend of Christmas sales... But, "happy" isn't "giddy"... And that's going to be a problem for the retailers this Christmas... They'll see sales... But they won't be "giddy"... And wasn't that a shame in NY where a Wal-Mart worker lost his life in a store opening stampede? That's a shame, it really is... It's not like Wal-Mart was giving stuff away free! I'll stop there, the story is sad enough...

Time to head to the Big Finish...

Currencies today 12/2/08: A$ .6480, kiwi .5345, C$ .8040, euro 1.2670, sterling 1.4940, Swiss .8290, ISK 230, rand 10.38, krone 7.0875, SEK 8.3175, forint 206.35, zloty 3.0160, koruna 20.2860, yen 92.20, baht 35.50, sing 1.5285, HKD 7.75, INR 50.14, China 6.8875, pesos 13.55, BRL 2.30, dollar index 86.85, Oil $49.23 ( I paid $1.84 for premium gas this morning, YAHOO!), Silver $9.44, and Gold... $778

That's it for today... My little buddy, Alex, was writing a paper on the Revolutionary War last night, and we were talking about "taxation without representation", and thought for a moment before going to bed, that, I kind of feel like that's what we're receiving now, today! Today is my long time friend, Ed Bonawitz's, birthday! Happy Birthday Ed! Ed and I began working together at the old First National Bank of St. Louis in 1980... I don't think the Dead Sea was even sick yet, then! There's a HUGE black out here in the St. Louis area this morning... We have electricity here are work, otherwise I would have turned around and gone back home! But, there will be a few people here affected by it, and the kids in those blacked out areas are jumping for joy this morning, as schools are closed where there is no electricity. Not my kids... My two oldest, Dawn and Andrew are teachers in the school district that they attended as youngsters, and my little buddy, Alex, goes to the same school district... And it's not affected! I can hear Alex complaining now! Oh well... Time to go... Hope your Tuesday is Terrific!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837

King Henry Keeps His Cash!

ChuckButler — Wed, 19 Nov 2008 15:24:56 GMT

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

Gold and silver prices are down.

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In This Issue..

* Paulson says no to automakers...

* Currencies trade in a tight range...

* Richard Russell on a Wednesday!

* TIC Flows improve...

And Now... Today's Pfennig!

King Henry Keeps His Cash!

Good day... And a Wonderful Wednesday to you! OK... Are you up on these "pirates" stories going on right now? That's pretty unbelievable, eh? And... We are all fans of "pirates" here on the Currency Trading Desk, but these guys now are giving "our pirates" a black eye!

The currencies range traded yesterday in a very tight range, as Treasury Sec. Paulson, didn't give in to the lawmakers and allocate $25 Billion of the TARP (Troubled Asset Relief Program) funds to automakers. King Henry said, "The rescue (read bailout!) package was not intended to be an economic stimulus or an economic recovery package. The $700 Billion TARP was designed to stabilize financial markets and the flow of credit, and it not a panacea for all our economic difficulties."

Well... For once, I'm not going to take King Henry to the woodshed... The lawmakers were banging on him and Fed Chairman Big Ben to dole out funds to anyone that was in dire straits... But they held their ground... And therefore did not cast any "unknown" shadows over the markets. But U.S. stocks didn't like it, and sold off after the testimony and questions on Capitol Hill.

The thing to think about with these automakers is the fact that they have become such HUGE finance companies, which is where, I believe I read, they "really make the money"... Shutting them down because they haven't run their businesses correctly over the years isn't the issue... It's what to do with those financing companies... I could be totally wrong here, off base and picked off by a wily veteran lefty, but it's the way I see it...

OK, well, for the currencies... Like I said above, they were stuck in the mud, in a tight range, with no where to go and no one to see. I was reading a note from well respected and famous analyst, Richard Russell yesterday... Let's listen in to see what Mr. Russell had to say...

"Please remember, all these billions of dollars that the government is throwing at entities - all this money represents additional DEBT.

How the US dollar will hold up against this building-tower of debt is the question.

Ultimately, the trillions of newly-created dollars could lead to hyper-inflation."

Yes... But the question that I keep getting asked, and I would ask of anyone that makes a statement like that is "when?" When do the markets wake up and smell the coffee? When do the markets realize that they're on the wrong side of the road? I keep saying that it will all happen when the credit markets get unlocked... But that certainly doesn't look like it's going to happen any time soon... I just getting frustrated by all this... The signs are there for dollar weakness... It's like they are glowing neon signs in bright colors, pointing to the dollar with exclamations like "should be weak"...

Remember when I used to write about how the debt level in New Zealand would come into focus once the hype over the high interest rates and Carry Trades were history? And for years people would write me and cuss at me about how they sold their kiwi because I said it would be in trouble when the interest rates and Carry Trades were history... But I held my ground, then... And I'll hold it now... In fact, I've got company... By good friends over at Casey Research, including the guy that inspired me to write more and more, David Galland, had this to say yesterday....

"The foreign debt of New Zealand, which includes private debt, is a serious problem for them and is why their currency has fallen from NZD 0.80 to NZD 0.60 to the USD>

What will happen when the world finally realizes that the U.S. government debt (that is not even accounting for private debt) is already in excess of $10 trillion and well on its way to exceed $12 trillion in 2009? This is at a time when our $13 trillion GDP is sure to contract by a couple trillion. I am afraid the U.S. chart next year will not be that different, which bodes well for gold as the only real substitute to the fiat currency that will be created to cover the deficits."

OK... Let's talk about what's going on in the markets right now... Not the future, which is unknown to all of us... We can only speculate about the future based on the data we have now, and the knowledge of history... What's going on, as Marvin Gaye used to sing, is simply that the sentiment in the markets right now is so terrible and fragile, which is keeping the risk takers on the sidelines and investments centered around risk aversion on the burners. Any time the risk takers go out on the limb, another deep, dark, dangerous piece of data prints, or our "leaders" (read Paulson and Bernanke) make some stupid comment, which leads to a dollar rally, and the risk takers get squeezed.

Speaking of deep, dark, dangerous data prints... How about the news that Citigroup is liquidating its CSO hedge fund after it lost 53% of its value last month? This news won't be looked at as anything but deep, dark and dangerous!

Speaking of data... Today, we'll see the stupid CPI (consumer inflation), some Housing data, and the last FOMC meeting minutes... I would think the Fed Heads wouldn't have any surprises in their minutes, like the Bank of England (BOE) did in theirs... The BOE's minutes showed that the 150 BPS rate cut that was delivered earlier this month (which also begs the question as to why the BOE can issue their minutes within two weeks, while it takes the Fed over a month?) Anyway, the BOE minutes showed the 150 BPS rate cut was unanimous... Plus... There were quite a few calls to go to 200 BPS! WOW!

So... Ok, the stupid CPI, I've beaten this horse to death (no animals were hurt!) here with why I feel that CPI is stupid... And when those that have payments tied to CPI see today's print they will fully agree with me. CPI is expected to have fallen .9% YOY... To 4%... Of course you and I, and those on the payments ties to CPI believe that inflation is really around 10% or more!

The Housing data today is the October Housing Starts, and Building Permits, of which both are expected to be weaker than September's data...

I met Dan Ferris a year or so ago... A quiet, soft spoken guy, that when you look at him you just know he's got a lot of brain matter... Real intelligent! I follow his writing from time to time, and Ty Keough sent me a note from Dan... This was in the Stansberry Research letter... "The money we use every day in the U.S. is debt. It is lent into existence. This record level of Treasury borrowing is the inflation engine itself, tank filled with gas, hood popped up, revving into the red zone right before your eyes."

OK... I just saw / read a story that came across the Bloomie, that Bank of America (BOA) and Barclays Capital, are calling for a Aussie dollar rally next year, as they believe Australia will skirt a recession, that Europe, Japan and the U.S. are mired in. They even called for a rise to 70-cents in the next 6 months. Hmmm... I guess they're of the opinion that the Carry Trade unwinding is coming to an end.

I, on the other hand, don't believe that the Carry Trade is anywhere near an end... So, do with this information in your individualistic manner!

The data yesterday, saw PPI fall -2.8% in October... Which was mainly made up by the fall in oil prices... The TIC Flows showed the improvement I said we would see in this data, as the October flows showed an positive balance of $66 Billion, VS the $21 Billion in Sept. This still does not cover what's needed to finance the Current Account Deficit, and Federal Direct Investment. And should have been expected to be so robust, given the flight to safe haven Treasuries...

Currencies today 11/19/08: A$ .6480, kiwi .5495, C$ .8115, euro 1.2650, sterling 1.5080, Swiss .83, ISK 182, rand 10.38, krone 7, SEK 8.02, forint 214.75, zloty 3.0425, koruna 20.3390, yen 96.80, baht 35, sing 1.5280, HKD 7.75, INR 49.99, China 6.83, pesos 13.19, BRL 2.3590, dollar index 86.98, Silver $9.45, and Gold... $738.30

That's it for today... Well... Anheuser Busch is no longer, as the InBev deal closed yesterday... I was so focused on getting the Pfennig out yesterday that I totally forgot to send some love and congratulations toward Albert Pujols, the National League MVP for 2008! Way to go Albert! And... Hey! This IS HUGE NEWS! The good folks at Agora sent me the news yesterday that the movie I.O.U.S.A. has made the cut from 94 Documentaries to the final 15 that will be voted on for an Oscar! WOW! And to think I was interviewed for that movie, but was left on the cutting room floor! Congratulations to my good friend Addison Wiggin, and the other folks at Agora that had the idea to put this together in the first place! No improvement in the eye yet, still some pain to deal with, but I have to believe it will get better! Thanks so much, once again, to all of you dear readers that sent along good wishes and prayers for me. I feel bad that I have to keep announcing this stuff, but it is what it is, and life goes on. God willing... OK... Time to go... I hope your Wednesday is Wonderful!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837

The Junk Yard Dog Bites!

ChuckButler — Wed, 12 Nov 2008 15:13:13 GMT

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In This Issue..

* The dollar rallies big time!

* A dollar conspiracy?

* Bailing out the automakers?

* Weathering the storm in N.Z.?

And Now... Today's Pfennig!

The Junk Yard Dog Bites!

Good day... And a Wonderful Wednesday to you! Well, the Junk Yard Dog got a hold of the euro yesterday, and even though the U.S. Banks, thus the majority of currency desks, were observing Veteran's Day, the move down in currencies VS the dollar, led by the euro, was drastic!

The Junk Yard Dog I'm talking about is Jean-Claude Juncker, chairman of the Euro group... I stopped the euro in its tracks from its nascent rise in the past month, by saying the "euro's recent rise was undesirable"... He also deep sixed the euro, and thus all the currencies save yen, by saying he "didn't see any reason there couldn't be more rate cuts by the ECB"... (the ECB is of course the European Central Bank) Well... These two comments tore through any gains the currencies had mounted VS the dollar in recent weeks, like a Junk Yard Dog tears though some raw meat! It was a knife to the euro's heart...

And so it was to be, a massive dollar rally, on Veteran's Day. And it didn't get any better in the overnight markets, as Japan, and then early European trading has taken the dollar even higher and the euro drops to the 1.25 handle... A handle it thought it had left in the rear view mirror back in October... Boy! If comments from a guy that's not even the President of a Central Bank in the Eurozone, can deep six the euro like that, you have to sit back and wonder what's going on... Was it simply a case of watching the euro rally in recent weeks, and even get within spittin' distance of 1.31 last week, and needed to stem the rise? Well, if that's the case, the plan worked! And like Col. John "Hannibal" Smith used to say... "I love it when a plan comes together!"

And it just so happens that Bank of England (BOE) head Gov. Mervyn King added to the currencies' worries by announcing that the BOE policy makers are "prepared to cut interest rates again to prevent a recession pushing inflation below its target." All this on a day when most U.S. currency desks were absent... Hmmm... Sure seems to me as though this was a "planned" jawbone intervention to support the dollar...

So... Like I said above, the currencies, save yen, got whacked yesterday... But not Japanese yen! When things get really dark in the U.S. and with all the investment choices except U.S. Treasuries getting sold, that's when the dollar and Japanese yen shine... Which to me is still a strange phenomenon, that the dollar can be strong VS almost every currency on the face of the earth, but losing ground to yen. You would think that the other currencies would get some love just based on the dollar / yen cross!

Recall, I've explained the currency pairs and crosses before, and how one major pair's (like dollar / yen) usually carries over to the other currencies... But since the dollar and yen were the two major currencies used to fund the Carry Trade, they are getting bought at the same time, causing all kinds of ripples in the currency karma...

Looks like the good folks over at Bank of America, have been reading their Pfennigs each and every day! I say that because, there is a report out this morning that Bank of America (BOA) issued a report that; "U.S. dollar gains are increasingly at risk toward year-end as declining credit market rates switch investors' focus to the slowing economy."

WOW! If that's not just rewording what I've been saying in the Pfennig almost daily for a couple of months now, then I'm a monkey's uncle! The go on to say that, "A weak economy and declining stock prices are not a solid foundation for any currency over time. Persistent strength in the dollar is more related to the unwinding of long positions in the euro and pound and not a sign of optimism about U.S. economic prospects."

It's nice to see someone other than me, keeping my eye on the ball here... OK, I know all too well that it's not just me, but it sounds good, eh?

Well.. There's another "bailout" plan, although the media now calls them "rescue plans", being talked about... This one is for the automakers... The Speaker of the House wants the bailout package NOW! Unfortunately, for her, and the automakers, it doesn't look like a bailout package will be passed with this "lame duck" Congress... The "new guys" don't come into office until January 6th. Maybe, just maybe, this thought that every freaking business that runs into trouble because they didn't run their business correctly, and therefore "deserves" a bailout from the Government, which will mean in the end, taxpayers, will go away... I doubt it... But there's always a chance, somebody, someone, somewhere, at sometime, comes up with a hoola-hoop, and we don't have to go down this bailout road any more!

Hey! What ever happened to U.S. Treasury Sec. Paulson's "bazooka" that he threatened to aim at the U.S. credit crisis back in July? A quick check of the financial scorecard since then, shows that stocks are circling the bowl, the Fed has had to step in to conduct commercial paper operations, U.S. Consumer Confidence is at 1982 low levels, and loans are still difficult to get on the books... I'd say his bazooka was much like the bubble gum I used to chew as a kid, with the Bazooka Joe comic inside the wrapper... Sweet and satisfying at first, but soon petered out and the taste was gone, soon to be disposed of properly!

Speaking of Treasury Sec. Paulson, or King Henry, as I so named him during his ascent to the top of decision making with regard to the financial crisis, will be speaking today! King Henry will be giving an update on the Bailout packages... Should be interesting...

Our friends down under in New Zealand think they are far removed from the financial mess going on in the U.S. and Europe... But then, the European thought they were far removed from it too before the walls began crumbling down on top of them with bad debt! But, in New Zealand's case, I think they are on top of it... Mainly because the strong Central Bank... The Reserve Bank of New Zealand, (RBNZ) is big on fiscal discipline, and stated in their quarterly Financial Stability Review, that... "we are far from seeing the final impact of the financial and economic disruption. However, Kiwi banks and the Australian parents of the majors, are well positioned to withstand the economic downturn."

It would a HUGE feather in the RBNZ's cap, and further the kiwi's cap should the financial meltdown pass them by without causing major problems... The Kiwis get a glimpse at the state of their economy tonight when Sept Retail sales are printed.

Well... The euro is creeping back up as I get ready to head to the Big Finish this morning...

You know... On Monday I talked about the Chinese announcement to provide $586 Billion worth of renminbi liquidity to their economy, and how that had gotten the currencies around the world excited... And yesterday I talked about how that excitement dissipated... But there's one more thing to discuss here... And that's the fact that if the Chinese are going to focusing on keeping their economy going and their billions of citizens happy, they won't be focusing on buying U.S. Treasuries... And the funding problem that still exists, even though its not the markets' focus right now, will get even trickier for the U.S. and the U.S. dollar...

And... One more thing before I head to the Big Finish... Oil has fallen below $60 for the first time since March 2007! WOW!

Currencies today 11/12/08: A$ .6610, kiwi .5755, C$ .8260, euro 1.2590, sterling 1.5285, Swiss .8450, ISK 182, rand 10.45, krone 6.9830, SEK 8.0150, forint 215.50, zloty 2.9920, koruna 20.21, yen 97.30, baht 34.98, sing 1.5050, HKD 7.75, INR 49.25, China 6.8298, pesos 13.06, BRL 2.2665, dollar index 86.93, Oil $58.40, Silver $9.70, and Gold... $732.42

That's it for today... Mervyn King also said... "we are living in unprecedented times" Oh, thanks! Like we didn't already know that! It was a great day yesterday for catching up on email, etc. I also got a huge chunk of our monthly newsletter to clients, The Review & Focus, finished too... Hey! Chris has the conn on the Pfennig tomorrow, I will not be in the office. Don't know what the baseball writers were smoking, but they named Tim Lintecum as the National League Cy Young winner... Ahem... Brandon Webb won 22 games last year, Ahem... My darling daughter Dawn, phoned last night to tell me that my precious granddaughter, Delaney Grace, heard the song "Amy" on the radio and began to dance around and jabbering like she was singing... Dawn knows that I used to play that song on my guitar and sing it when friends would make me... I told Dawn, that Delaney Grace has good taste in music, she's like Me! HA! OK, enough... I hope your Wednesday is Wonderful!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837