Search results matching tags 'Ben Bernanke', 'Australia', and 'Bailout'

Waiting on the FOMC meeting...

ChuckButler — Mon, 15 Dec 2008 15:11:05 GMT

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

Gold and silver prices are down.

For a simple and inexpensive way to own gold or silver, consider the non-FDIC insured Pooled Metals Select Account from EverBank®. This economic alternative to buying actual bars or coins lets you "pool" your metal with other investors, saving you from costly storage or maintenance fees.

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

Apply online. Simply go to EverBank.com, mouse over "Products" then select "Precious Metals." For important disclosures visit: http://www.everbank.com/001MetalsTBLegal.aspx?TB_iframe=true&height=400&width=700

......................................................

In This Issue..

* FOMC to cut further...

* Bernanke turns his back on inflation...

* Kiwi and Australia rally...

* Gold continues to shine...

And Now... Today's Pfennig!

Waiting on the FOMC meeting...

Good day...and welcome to another week, hopefully the currency markets can continue their assault on the dollar which began a few weeks ago. The dollar index peaked back on November 21, and with the exception of a few days around the beginning of December, the greenback has consistently fallen vs. most of the major currencies. Friday was no exception, and the dollar continued to give back gains over the weekend with the Euro climbing back over $1.35 for the first time in two months.

This morning the markets are focusing on the Fed's Open Market Committee meeting and rate announcement which will come tomorrow. It is widely expected that Bernanke and his compatriots will push US interest rates close to just 0.5%, the lowest on records dating back to July 1954. From everything I've read over the weekend, this 50 basis point cut is pretty much a done deal, and currency traders are actually more interested in what the Fed's statement will say about 'alternative easing measures'. The rate announcement will come tomorrow at around 2:15 pm EST after a two day meeting. The FOMC meeting had originally been scheduled for just one day, but was extended so policy makers could study options for unusual steps to spur the economy. I guess they finally figured out that they are running out of room with the interest rate cuts!

The Feds newest weapon against the falling economy is 'quantitative easing', which the Bank of Japan used in the 1990's. This non-traditional method of easing centers around pumping money back into the financial markets as quickly as possible. The Fed has already started down this path by allowing its balance sheet to more than double in size after pumping over $1 trillion into financial markets. The markets are now expecting the Fed to announce it will start purchasing private sector mortgages to drive down home loan costs. By purchasing these bonds, the Fed would narrow the spread between their yields and yields on US Treasuries, and theoretically allowing banks to offer home loans at lower rates.

But the Fed has already pumped trillions into the banks in an effort to get them to start lending, so I'm not sure having the Fed narrow mortgage spreads will get these same banks to open up their lending windows. And even if the banks lower mortgage rates, they won't be lowering credit standards. Unemployment continues to rocket upward as more and more firms lay off workers. Do you think these banks are going to be willing to refinance someone who has just lost their job?

And what will be the long term impact of all of this 'quantitative easing'? The Fed is mashing on the money supply accelerator, totally ignoring the inflationary results which all of this will bring down the road. Ben Bernanke is smart enough to know the risks of the path he is speeding down, but right now he is choosing to ignore the consequences in an attempt to keep the economy from falling off the abyss. Some at the Fed believe they will be able to pull all of this added liquidity back out of the markets as soon as the economy starts to recover. But this is a very difficult thing to do, as the Fed would have to start pulling liquidity and increasing rates just as the economy is starting to turn. I think it is pretty obvious the 'experts' have a tough time calling the turning points, as it took them almost a year to call the recession!! And the consequence of missing the timing on pulling the liquidity back out of the market is much more drastic than mistiming the entry into the recession. Hyperinflation is waiting on the other side of this short term deflationary pause, and the Fed is currently looking the other way.

This weekend, President Bush announced that he is thinking about spending some of the TARP money which was set aside to stabilize the financial system to bail out the auto industry. This announcement caused a further sell off of the dollar as it is quickly losing its status as a safe-haven currency. Chuck was busy this weekend, but still found time to send me his thoughts:

"Well... We went to cut down our tree today, then watched Alex's basketball team get smoked! Put the tree up in a spiffy, with one of the greatest inventions of man kind, the swivel stand... And now I'm off to tell you what I've read about this weekend...

First though... A quote from Ronald Reagan... "The most terrifying words in the English language are: I'm from the government and I'm here to help"

OK, with that in mind, I wanted to discuss the bailout for the automakers, GM and Chrysler.

First of all, I know it will be tough for the autoworkers should they be laid off, especially at this time of the year. But, the problem here is the fact that the automakers have run their respective companies very badly, and now they expect the taxpayer to bail them out.

It was reported on Friday that the Gov't is "looking into" using TARP money for the automakers bailout since the Senate voted "no" to the $14 Billion plan.

First of all... Congress said nothing about helping carmakers, or any other non-financial business, in October when it authorized the $700 billion Troubled Asset Relief Program, or TARP. But yet, it is being discussed as the "funding source of funds"...

That fund was never designed to rescue manufacturing companies with long-term operational issues. It was designed to shore up confidence in the banking system in order to thaw the world's credit markets.

Our own David Nicklaus of the St. Louis Post Dispatch has this to say, which makes a whole lot of sense to me! "The Detroit Three have been losing market share for decades, and their bloated cost structure makes it difficult for them to turn a profit even in good times. They have too much debt, too many models, too many dealers and, sad to say, too many workers.

Congress seemed to view an auto bailout as a jobs program, and TARP is nothing of the sort. In fact, the Treasury has invested in Bank of America, which is eliminating 35,000 jobs, and Citigroup, which is slashing 52,000.

The Treasury program, as it's been used so far, at least lacks one of the worst features of the failed auto bill. Nothing in the TARP legislation allows the government to name a car czar."

Yes, a Car Czar... Those Czars worked out well for the Russians, eh?

But the thing that really gets my blood boiling folks, is the fact that if bailout had gone through with the Car Czar, it would have been one more nail in the free markets / business coffin, just another opportunity for those that want to run the country toward the socialist side of the ledger..."

That is one of the things I love about Chuck, you don't ever have to wonder where he stands on something!

As I started to say before I went off on my FOMC tangent, the dollar continued to give back ground vs. just about all of the major currencies over the weekend. The Euro was up over 1.2% vs. the dollar, and broke through the $1.35 handle. The only two currencies which sold off over the weekend were the South African rand and Brazilian real, which were down just slightly. In addition to the FOMC meeting and announcement, we will get the TIC flows, Empire manufacturing number, Industrial Production, and Capacity Utilization numbers today. Tomorrow will bring the CPI numbers along with housing starts, building permits, and ABC Consumer confidence. Wednesday will be a light data day with just the Current Account Balance reported, and Thursday will close out the data with the weekly jobs numbers along with Leading indicators.

The Australian and New Zealand dollars rose on speculation the FOMC will be cutting US interest rates. These two currencies will benefit from their higher rates with the US cutting rates to near zero. The currency markets have started to move back toward trading on fundamentals over the past few weeks, and interest rate differentials are one fundamental which favors the NZD and AUD. If the Fed's statement makes it known that interest rates will remain low for a long time, the dollar would likely fall further vs. the Aussie dollar, as the RBA has signaled that it is close to the end of its rate cutting cycle. Benchmark rates are nearly 400 basis points higher in Australia and New Zealand when compared with the same rates here in the US.

In a break with the recent trading pattern, the Japanese yen rallied along with the New Zealand and Australian dollars. A former Deputy Governor of the BOJ said Japan is probably not going to lower rates further; "with the interest rate already so low, a further reduction would have only limited impact." The central bank's Tankan survey today showed confidence among large manufacturers fell the most in 34 years as a deepening global financial crisis crimped export demand, forcing companies to pare production and fire workers. The yen's recent surge to a 13 year high has compounded woes for manufacturers.

Gold continued to rise over the weekend, pushing back up to an eight week high in London. The dollar's fall has spurred investors to move back into gold as an alternative investment. News that President Bush was looking to tap the bank bailout fund to keep GM and Chrysler out of bankruptcy spurred further purchases of gold. With the tremendous growth in the US money supply, and the FOMC turning their back on inflation concerns, precious metals should continue to gain ground. Gold is traditionally one of the best hedges against rising inflation.

Currencies today 12/15/08: A$ .6635, kiwi .5523, C$ .8138, euro 1.3473, sterling 1.4969, Swiss .8534, ISK 218, rand 10.1985 krone 6.9051, SEK 7.9963, forint 197.97, zloty 2.9644, koruna 19.428, yen 90.79, baht 34.88, sing 1.4773, HKD 7.75, INR 48.0512, China 6.85, pesos 13.5138, BRL 2.387, dollar index 83.15, Oil $48.52, Silver $10.36, and Gold... $827.60

That's it for today... The roads were a bit icy this morning, as we got a small taste of the ice storm which hit the Eastern states so hard over the weekend. But my drive into work was fantastic, as the 6 mile stretch of interstate running from my home to the office was reopened over the weekend. Some of the schools are closed this morning, so we will be shorthanded on the desk. Better get to work, hope everyone has a Marvelous Monday!!

Chris Gaffney, CFA

Vice President

EverBank World Markets

1-800-926-4922

1-314-647-3837

Turning Japanese?

ChuckButler — Wed, 24 Sep 2008 14:24:17 GMT

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

The FX University Seminar Series. Learn from foreign currency experts-then invest like one.

Plan on attending this enlightening one-day seminar on currency investing, hosted by the Sovereign Society. You'll mingle and learn from experts from: Jyske Global Asset Management, Black Swan Capital, Sovereign Society, Philadelphia Stock Exchange, and of course EverBank®. You'll leave with expert foreign currency know how. All this for just $99.

Coming to a location near you:

. 10/13 - Chicago

. 10/14 - St. Louis

. 10/16 - Philadelphia

. 10/18 - Ft. Lauderdale

. 10/20 - Jacksonville

Don't miss this exclusive event-you owe it to your portfolio. Visit http://www.sovereignsociety.com/Portals/0/landing/pfennig.html to find out more and register.

EverBank is a Member FDIC and Equal Housing Lender.

......................................................

In This Issue..

* Profit taking in the currencies...

* German Business Confidence falls...

* More talk of the bailout package...

* A strong statement on Aussie dollars...

And Now... Today's Pfennig!

Turning Japanese?

Good day... And a Wonderful Wednesday to you! Another crazy day not only in the markets but on our trading desk, where the phones continue to light up. There's a ton of volatility in the markets these days, as witnessed by the roller coaster ride stock jockeys take every day, the no direction is a good direction course of currencies, and the ups and downs of bailout plans. It's all a little too much for yours truly some days, but I carry on...

Take this morning... Please somebody take this morning! The euro was showing signs of wiping out yesterday's profit taking session early on, only to see its gains wiped out by a weaker than expected German Business Confidence report. Yes, German Business Confidence, as measured by the think tank, IFO, declined more than expected this month, to the lowest level in almost 3 years. I would say that with lower Oil prices, and weaker inflation, these German Business people's attitudes will be changing soon... The German economy, other than this report, is showing signs of strength, which is bang on what I've been trying to tell everyone that was throwing darts at the Eurozone economy... Remember 80% of trade in the Eurozone is among the Eurozone members...

So... Yesterday we saw some swings in the currencies as the "un-dynamic duo" of Paulson and Bernanke were on "the Hill" pleading with members of Congress to accept the bailout package they had presented... At one point in the proceedings, Big Ben Bernanke admitted that the U.S. taxpayer will get caught in the middle, or something like that... Let me tell you this, so listen to me now, and hear me later, the $700 Billion plan is not nearly enough to deal with this problem as a whole!

I was reading a letter that Mr. Martin Weiss was preparing to send to the members of Congress and in it he details why the $700 Billion plan falls way short. I can't go into it more than that, as Mr. Weiss' letter is a "paid subscription" letter, and if you want to read his wise words, you must pay for them. But I will say that Mr. Weiss really did a great job of presenting his points... Now, if only someone in Congress will read it and understand it enough to act!

You see, I'm banging on Paulson and Bernanke for adding taxpayer burden, and at the same time I'm banging on them because the package isn't large enough! Talk about a catch 22! I just cringe when I think about this not being large enough to deal with the problem... Because, once again, it reminds me of the goings on in Japan during the 1990's... One stimulus package followed by another, and then budget plans, and bailouts... It all led to one disastrous decade for the Japanese. This is all too eerily familiar to me... I could sing, well... I'm turning Japanese, yes, I'm turning Japanese, oh yes I think so...

I can't believe that I'm the only person on earth, right now, that is seeing this unfold and relating it all to the Japanese mistakes they made in the 90's. My friends, Bill Bonner, and Addison Wiggin describe this in their book, Financial Reckoning Day, which was written in 2003... But they couldn't have foreseen the goings on in 2008 then, or could they?

The main story yesterday however, was the news after the market closed, of a $5 Billion investment into Goldman Sachs by the sage of Omaha's Berkshire Hathaway. Goldman also announced that they would raise another $2.5 Billion in a public common stock offering. Nothing like diluting the outstanding shares, eh? Oh, well... It's their company, I'm not in it, so why would I care?

And in other news... The Fed announced a $30 Billion swap line with Australia, Sweden, Norway, and Denmark... Remember this news... For it might come back to us sometime in the future. But for now, it was put in place to provide Central Banks of these countries, more cash to lend out. This might lead to increased Carry Trades in my mind... But, I'm sure that wasn't the Fed's intentions!

Big Ben Bernanke goes back to "the Hill" today to speak, and then later will join his "buddy" King Henry Paulson in an attempt to get the bailout package passed. Big Ben did tell Congress yesterday that the bailout plan needed to get passed quickly, as any delay could cause the U.S. economy to go into a recession. Ahem! Memo to the "un-dynamic duo"... We're already in a recession!

You know, the other thing about this plan that sticks in my mind, and nips at me like one of those little dogs nips at your ankles, is the fact that I can't believe someone doesn't stand up and say... "Why should we believe you now, when you've told us that: 1. that it was only a sub-prime thing. 2. that the mortgage meltdown wouldn't filter out into the rest of the economy, and 3. that the housing meltdown had bottomed in August of 2007!!!!!!!!!!

But then, I'm reminded that former Fed Chairman, Big Al Greenspan, had a horrible forecasting record at his firm before being named Fed Chairman, and that one senator actually called him out for this horrible track record, and guess what they did? They appointed him anyway! UGH! SERENITY NOW!

So... As I suspected, the dollar gets a little McLovin while King Henry Paulson and Big Ben talk about how everything will be right as rain once this bailout package is passed. You see, the markets like to think that "everything will be OK" and they can stick their heads back in the sand and go back to Happy Days again... So, any time Gov't officials talk about seashells and balloons for the economy, the dollar gets bought...

And trust me on this one... I truly hope that it can be the end-all for what ails the economy... Wouldn't it be nice, if we could wake up in the morning, when the day is new, no wait! Wouldn't it be nice, if we could all just get along? No wait, Wouldn't it be nice if this plan is the end-all for the economy?

But you know me... I just don't see how it can be, and in the end... The money supply grows... Inflation rises... Eventually interest rates rise to levels that hurt... Dollars get cheaper to pay back debt and interest on debt... And... Yours, and my purchasing power gets reduced over and over again...

Other Central Banks around the world have announced that they WILL NOT follow the Paulson-Bernanke model of creating the RTC-like institution to buy bad debt... Do they know something that our lawmakers should know before they make a decision? I think they do...

Someone asked me yesterday, why I said that he Canadian dollar / loonie, would most likely be capped around parity to the green/peachback. Well... That's not set in stone... I was simply going back to the last time the loonie hit parity, and watched the Gov't and Central Bank freak out! These two made sure that parity didn't last too long, by talking down the economy, reducing interest rates, etc.

But, these two institutions had better watch out, and economic growth is stronger in Canada, and then yesterday we saw Canada's latest inflation report tick higher... Canada's all-items inflation rate was 3.5% in August, in line with market forecasts and the highest since March 2003. The inflation rate edged up from 3.4% in July. Canada's headline inflation rate was above the 3% target in August for the third month running... Think maybe that the Bank of Canada is re-thinking their decision to cut rates in step with the U.S. Fed Reserve last year? Nah... They'll give you 10 reasons from Sunday why those rate cuts were needed... But, now I'm saying that there are a few reasons to raise them again!

You know... Since the middle of July, the Aussie dollar has been taken to the woodshed, and only in the past week has it recovered a bit, gaining back 6% of its move down from 98-cents to 78-cents. I was dragged through the coals by a few people that said I misled them into believing the A$ would reach parity... Well, it got to 98-cents! But... Now I read an article that says that Citigroup is advising their clients to buy Aussie dollars once again, and once again they believe it will reach parity to the dollar. "The Aussie stands out as the currency within the majors that potentially has the greatest benefit. We still believe we are likely to see the Aussie get to parity." said, Tom Fitzpatrick, at Citgroup Global Markets, Inc.

So... On that note... I'll head to the Big Finish!

Currencies today 9/24/08: A$ .8380, kiwi .6845, C$ .9655, euro 1.4665, sterling 1.8550, Swiss .9190, ISK 95.11, rand 8.1750, krone 5.6150, SEK 6.58, forint 164.20, zloty 2.2660, koruna 16.57, yen 106.10, baht 33.95, sing 1.4220, HKD 7.7610, INR 45.96, China 6.8230, pesos 10.73, BRL 1.8460, dollar index 76.78, Oil $109.15, Silver $13.30, and Gold... $888.19

That's it for today... I received two wonderful gifts yesterday... A Beautiful flowered plant and an incredible edible fruit basket in recognition of me becoming a "Cancer Survivor"... That was very nice of the senders to do that! The kids on the desk ate up that fruit like it was going out of style! I told an audience last week that I preferred to be called a "Cancer Beater" ... Like I said though, the cancer wolf is always at the door, so I had better be careful. And thank you all once again for all your notes, and especially those that send along tips that have helped them after beating cancer. Today, is the newest member of the St. Louis Soccer Hall of Fame (along with our Ty Keough), Don Ries' birthday! I missed the induction ceremony last Friday night for these two ambassadors of St. Louis Soccer, sounds like I missed a good time had by all! Time to go... Hope your Wednesday is Wonderful!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837

Credit Woes Sink The Dollar!

ChuckButler — Tue, 15 Jul 2008 14:37:00 GMT

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

The currencies. The free expert insights. The latest global economic information-all in one place. And only in the new Foreign Currency Resource section on EverBank.com. Visit today for a detailed and timely look at over 20 major and emerging currencies. There's a page devoted to every currency we offer. And inside each page, read what Chuck Butler has to say about the currency. Everything you'll find, including Chuck's insights, is updated regularly so you can diversify with confidence.

Come see the products mentioned in "The Wall Street Journal" and "New York Times". Go to EverBank.com, click Research & Planning, then Foreign Currency Resources.

......................................................

In This Issue..

* No Bailout for Freddie and Fannie...

* The euro reaches a new record high!

* More risk today...

* Aussie hits 25-year high!

And Now... Today's Pfennig!

Credit Woes Sink The Dollar!

Good day... And a Tip Top Tuesday to you! I thought I would change it up there today... Well... Overnight, we've seen the euro reach a new record high VS the dollar, only to give some of that ground gained back on some weak German data. There was more news yesterday regarding the Freddie and Fannie saga, but I've grown tired of that talk, we dance now! Seriously, though, I have grown tired of all that Freddie and Fannie talk, that I'm going to go through an exercise explaining what GSE's are and then go on with life...

So... The euro reached a new record high overnight of 1.6038! WOW! This was reached based on the fears that credit problems in the U.S. are going to put the kyboshes on what little economic growth we now have. But the shine on the euro was rubbed out by a very weak ZEW... German Investor Confidence as measured by the think tank, ZEW, fell to a record low this month on the surging inflation problems, and rising interest rates. So for now, the euro is back below 1.60, but hear me now and listen to me later... This ZEW will soon be in the rear view mirror, and the euro won't have that albatross around its neck as it revisits its overnight high...

And don't look now, but the Aussie dollar is up to 98-cents! WOW! I've said for about 8 months that I wouldn't be surprised to see the A$ at parity to the green/peachback... It certainly has that parity look about it does it not? The last time the A$ was 98-cents was 1983... 25-years ago... 1/4 of a century, and all that!

The U.K. pound sterling is back to $2, which seems totally unlikely an event as possible, but it has happened, so, go on and crow if you thought I was wrong to say the pound was going to have problems once the Bank of England (BOE) started its rate cut cycle...

And the Canadian dollar / loonie has crept back to parity! It's been a long, time coming... It's going to be a long, time gone... (a little CSNY)...

And, the poor, downtrodden, Japanese yen, is at the bottom of the 105 handle, and looking like it wants to trade with a 104 next to it! I had to laugh at a story I saw flash across the screen... The title was... "Yen may gain as Bank of Japan (BOJ) is more likely to raise rates than the Fed". HAHAHAHAHAHA! Now that's funny! Ok, stay with me on this... A month ago, the dollar was getting bought like Pet Rocks because Fed Chairman, Big Ben Bernanke hinted that he was going to be an inflation fighter, thus interest rates would go higher... But here we are a month later, there's been on sign of Big Ben the inflation fighter, and now it's deemed that the BOJ could raise rates before the Fed! And the dollar bulls wonder why their currency is getting sold like funnel cakes at a state fair? Why don't the dollar bulls give Big Ben a call on the telly, and see if he can't help them out? Oh... That's right, Big Ben doesn't take calls from just anyone... According to our friend, Jim Rogers, on his Bloomberg TV interview yesterday morning... "Ben Bernanke and Paulson only take calls from their Wall Street Buddies"... HA!

Speaking of Jim Rogers... He was full of you know what and vinegar yesterday morning... He didn't pull any punches and said what was on his mind... You should have seen me here at the trading desk, Jim Rogers would say something, and I would clap and hoot and holler! At one point, Rogers said that the Gov't's plan to rescue Freddie and Fannie was "an unmitigated disaster"...

So... Remember early in the year when I kept telling you that there would be another "risk event" this year, and then we had the Bear Stearns meltdown, but that wasn't it for the "risk events" , and I kept harping that there would be more? Well... It's not like I was wishing, and hoping and thinkin' and praying for these things to happen... I was simply pointing out that the world today has too many "risk events" all over, and with the credit woes in the U.S. and the housing and mortgage meltdowns, I just figure it would touch here a few times.

Anyway... What I'm trying to get at here is simply that these are the things I kept telling people to protect themselves from by diversifying into currencies and precious metals... I also, recall, the wink, wink, I gave you when Gold was trading below $900 about a month ago... Today, Gold is $983!

OK, enough with all the "I told you so" talk! Let's talk about today... Well, today has "risk" written all over it! Big Ben goes to the "hill" to talk to lawmakers about the economy and Fed direction... You have to think that before the Meltdown last week of Freddie and Fannie (see more talk about them, I just can't leave them on the side of the road!), that Big Ben would go to the "hill" and talk the inflation fighter talk... But now... Not now... Not with the financial sector in meltdown mode... So this is a double-edged sword... If he doesn't go and sound hawkish, then the markets will take that as no rate hike is coming and take the dollar to the woodshed again... (you would think by now that the dollar would have gotten used to these beatings!)

Besides Big Ben, we get a ton-o-data today... PPI for June... Retail Sales for June... And Business Inventories for May... Retail Sales is the Big Kahuna of data today... And I would think that given the tax rebate checks that were still being mailed in June, Retail Sales would remain somewhat robust... Wait till July's number, I saw all the shopping bags from my beautiful bride's trip to Chicago this morning! But that's for next month! For now, PPI poses a treat to future Consumer inflation, so this one plays big too...

If any of this stuff comes in worse than expected, we could see the dollar not only get taken to the woodshed, but told to go pick the switch that it will get beaten with! (OK, that takes me back to the farm as a kid... If we were bad, we were told to go pick the tree limb (switch) that we would get smacked with... Talk about adding insult to injury!, but hey! Look at me! I grew up, didn't kill anyone, didn't rob my neighbors, didn't develop a drug addiction, and didn't hate my parents, wow! Now-a-days "they" would tell you that couldn't happen, not with getting spanked as a child! HA! What dolts!)

Oh... And rode my bike all day long from sun-up till sun-down without a helmet! OH NO! Of course some of you might say, see what happens! HA! Living dangerously, that was me! HA!

OK, enough of that! Today has "risk" written all over it, and I should stick to the facts here and not go off on tangents!

I said at the top that I was going to do a little 'xplainin' Lucy style, regarding these GSE's that keep getting talked about with regard to Fannie and Freddie... So... Here goes... Now, if you already know about GSE's, then go ahead and skip to the Big Finish...

First off... A GSE is... A Government Sponsored Enterprise... Here's the skinny on them...

The two largest housing GSEs of Fannie Mae (FNMA) and Freddie Mac (FHLMC) own and/or securitize upwards of 70% of the residential mortgage loans in the United States. Ginnie Mae (GNMA) is a government corporation that performs a similar function to Fannie and Freddie, and has the explicit backing of the full faith and credit of the United States government, although there is a perception (and a political reality) that Fannie and Freddie are "too large to fail" and, therefore, will be bailed out by the government should they get into financial trouble. This perception is reinforced by their line of credit with the U.S. Treasury and other benefits of GSE status, such as exemption from state and local taxes and use of the Federal Reserve as a transfer agent.

A GSE bond is perceived to have the same risk as a government bond, which is essentially near zero risk. While GSEs clearly state their securities are not backed by the U.S. government, the market largely perceives them to have an implicit government guarantee.

There you have it... All this and education too! And for free! WOW, where do I sign up for this letter? No wait, you dolt, I write it!

It looks like the selling from the German ZEW for the euro has already been put in the rear view mirror and the euro is back to above 1.60! That was quick!

Currencies today 7/15/08: A$ .9840, kiwi .7730, C$ 1.0020, euro 1.6020, sterling 2.0110, Swiss .9975, ISK 77.70, rand 7.6450, krone 5.0210, SEK 5.9250, forint 145.42, zloty 2.0370, koruna 14.56, yen 104.60, baht 33.48, sing 1.3460, HKD 7.7990, INR 43.20, China 6.8211, pesos 10.31, BRL 1.5970, dollar index 71.46, Oil $146.25, Silver $19.35, and Gold... $984

That's it for today... Tough day for yours truly yesterday, as the 4th week of treatment really kicked my tail... But I got through it, and today is starting out better, so I've got that going for me! The activity on the desk has really picked up in the last week, and rightly so, too bad these people are just now realizing that they need to diversify! Better late than never, I say! Next week, when I'm in Vancouver, the Pfennig will be at least 2 hours if not more later in the morning, due to the time zone... I didn't know that Chris was going to be on vacation during the Vancouver show, so I'll do it on the road, two hours later! What a show that Josh Hamilton put on at the Home Run Derby last night... WOW! He almost hit the ball out of Yankee Stadium! All-Star Game tonight, St. Louis Cardinal, Albert Pujols will bat cleanup for the National League! So... Watch out for all the risk today, and make it a TIP TOP Tuesday!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837