Search results matching tag 'Riksbank'

Time To Remove Stimulus?

ChuckButler — 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

A Lost Decade?

ChuckButler — Thu, 02 Jul 2009 15:08:57 GMT

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In This Issue..

* An Up and Down day for currencies...
* Jobs Jamboree moves to Thursday today...
* China to buy more Gold!
* Sweden cuts rates!

And Now... Today's Pfennig!

A Lost Decade?

Good day... And a Thankful Thursday to you! I'm reminded that we all need to be thankful for the patriots that led this country to victory and thus our freedom. The freedom for me to write a letter like this, each day, that allows me to say what I want to say (well, with the governor of the legal beagles of course!). And since this weekend we will celebrate our Independence, I thought this to be a good time to have a Thankful Thursday!

Patriots... You know, the ending story for those 56 Patriots that signed the Declaration of Independence is not a happy story... So, when we learn of their collective fates, we realize that freedom does not come free...

OK... This time of year, always stirs up the emotions, that are burning all year...

Two things have happened in the past 24 hours that have moved the currencies and caused some very wild swings... So, let's look at the "two things", eh?

When I left you yesterday, the currencies had rallied back and were waiting for more data... The data that printed was not very good, led by the ADP Employment Report for June, which came in with a greater number of job losses than was forecast (-473K VS -395 forecast)... So, according to ADP the bleeding continues... Now we have to wait for the Jobs Jamboree that will print later this morning, to see what "games people play now, every night and every day now"...

So, the currencies moved a bit more with the data printing and showing continued rot on the vine... For instance, the ISM Manufacturing Index remained below 45, which is recessionary to me... But the real blow to the dollar yesterday came when G-8 Sources announced that CHINA HAS ASKED FOR G8 ITALY SUMMIT TO DISCUSS ISSUE OF NEW GLOBAL RESERVE CURRENCY...

You should have seen the dollar selling at that point! OUCH! The euro climbed to 1.4175, and took the rest of the currencies along for the rides! This was HUGE folks! There it was... On the G-8 Agenda!

However, seeing the damage that this announcement had done so quickly, the Chinese had to do something quick... And quick they were... China's Vice Foreign Minister said he is "not aware of any plan to discuss alternative reserve currencies at next week's G-8 meeting." And the turn-around was on!

So, overnight, the dollar is firmer, and the euro has lost that 1.41 handle once again... These probes to the 1.41 handle are becoming more frequent, but with little staying power. So... There you have it... One item made the currencies soar... And the denial made them come back to earth, all within 24 hours... Jack Bauer would be proud!

While I'm talk about China, I was wondering if you all caught the interview on Fox (I didn't, of course, it was pointed out to me by a reader!) where U.S. Rep. Mark Kirk, was interviewed and asked questions about his accompanying U.S. Treasury Sec. Geithner on his Magical Currency Tour last month to China... In a private discussion with Chinese officials, Kirk was told that the Chinese were extremely concerned about the likely near term decline in the dollar because of the "explosion" of government debt. And... As a reaction to this concern, the Chinese Gov. was creating a "fund" / reserve to buy oil... And another $80 Billion worth of Gold!

OK! And did you see Gold trade higher yesterday by $15? Well, it's lost $8.50 of that gain overnight... Profit taking, and the denial by the Chinese has caused this sell-off...

The euro is also seeing some pressure this morning, as the European Central Bank (ECB) is meeting and most likely will have to admit that they will keep rates at ultra / record lows for some time to come, as the Eurozone remains in a recession.

As I explained on Monday this week, the Jobs Jamboree was moved to today, to avoid the markets being thinned out tomorrow. Apparently, the Bureau of Labor Statistics (BLS) wants everyone to see their work! HA! The "experts" believe that the Jobs losses will have increased in June, adding 20,000 lost jobs to May's "BLS adjusted" number of -345,000... I would have to think that if this prints as forecast, that the "risk takers" will be happy enough, and continue adding risk assets like stocks, currencies, precious metals... Anything greater would probably put a lid on their propensity to spend on risk assets... For now, at least!

Oh... And one more thing on the job losses for June that will print this morning... If the "forecast" number of lost jobs prints... It would mean that the number of people working today, in 2009, would be about the same number of people that were working in May of 2000! Talk about a Lost Decade! I wonder if the major media will pick up this fact? Now wouldn't that be a big surprise to all those folks that were surveyed last week for Consumer Confidence? It surprised me to see that fact! The Lost Decade... Strange but true...

The strangeness of today though will be the fact that the Weekly Initial Jobless Claims will print, and probably show that over 600,000 jobs were lost last week, and unemployment claims were filed... So... How does the BLS come up with "only" 365,000 jobs lost for the month, when one week was 600,000? The games people play now... Every night and every day now... Never meaning what they say now... Never saying what they mean... And they wile away the hours... In their ivory towers... Till they're covered up with flowers...In the back of a black limousine... - Joe South...

I've gone over the do goody-good bull of the BLS so many times in the past it makes my head spin, so I won't go there again today... But, it makes no sense to me what-so-ever that the BLS still uses a stupid "survey" when they have the ADP and Weekly Claims at their disposal... I think I know why... But again, it just doesn't make sense to me!

So... Keep an eye on the Jobs Jamboree for today...

Recall earlier this week I told you that Sweden's Riksbank would meet on Thursday, and I said that: "With internal rates at just .50%, I guess they could cut, but what would be the point?" Well... The Riksbank surprised the markets this morning, and did cut 25 BPS bringing their internal rate to just 25 BPS or 1/4%... I would think that any good that Swedish krona buyers saw in the past 5 days, will be wiped out by this news, as the rate cut at this time has to signal "bad stuff" for the economy... The only thing left for the Riksbank now is to implement Quantitative Easing, which if they aren't afraid to cut rates to 25 BPS, they certainly won't have any "moral" problems with Quantitative Easing...

And like I said for the U.K., Switzerland, and U.S. when they announced their Quantitative Easing... "Hey, Japan's been doing it for over a decade now, and look how well it's worked for their economy!" I shake my head in disgust, that anyone with an ounce of brain power would go down the same road as Japan with regards to how they responded to their economic meltdown of the 90's... But we have... Step for step... Beginning with the $150 Billion in stimulus checks... And moving on to larger sized measures from there...

I've told you all this before, but for new readers they might not know... That in the 90's I was a currency and foreign bond trader... I watched the Japanese introduce stimulus after stimulus, and budget gadgets after budget gadget! And, like I said, look at how well it worked in their economy? History may not repeat itself, but it rhymes according to Mark Twain... And what we're doing with our economy rhymes with what Japan did in the 90's...

Oh! I know, the rose colored glasses wearers will say, "but Chuck, we reacted "much earlier" in the recession than the Japanese did" Yes... We did, so, what does that mean? That instead of a greater than decade economic funk that we'll experience something shorter in time? OH, so a 5 year economic funk is worth adding Trillions to our National Debt? I don't think so...

With regards to the interest rate policy that adds to these woes... Janet Yellen, president of the Federal Reserve Bank of San Francisco, went further than other policymakers in assuring that the Fed is not likely to push its interest rate up in the near future. Ms. Yellen was speaking to reporters and said." it is "not outside the realm of possibility" that the central bank will let the interest rate remain close to zero for several years."

Oh great! Just go ahead and fuel that future inflation... And rack up the deficits... We can go on like this forever, right? NOT! There's no way this can go on forever! And... If the markets were doing their job, it wouldn't be going on now, without major pain in the yield on Treasuries and the value of the dollar! When out of the 29 largest nations in the world, the U.S. has the worst debt/GDP ratio, you've got to take a step back and say Whoa, there partner! Unfortunately, no one (except Ron Paul) in Washington D.C. is doing that... This is getting completely out of control, folks... Completely out of control!

The markets always do what the markets should... Just not always when they should... I learned that a long time ago, from my old, old boss, Ed Bonawitz, and I'm reminded of that all the time...

Like remember when I was calling for an end to the Carry Trade, and a Japanese yen rally, 2-3 years before it finally happened? The markets finally did what they were supposed to do, it just took 2-3 years!

Well... The euro has been in a steady downward move since I came in this morning. I turned on the screens and the single unit was trading just below 1.41... It's now moved down to 1.4060... No biggie, but a steady downward move in the past two hours...

A long time reader sent me a note yesterday regarding yesterday's Pfennig... "Uriah Heep, The Ventures, Soros, Rivlin, Sylvester, and Lucy! All in one Pfennig" It caused Cranium Spin!

Yes, I was on a roll yesterday... I don't think I was on quite the same roll today...

And while I don't like to head into the Big Finish on a "down note", I'll have to today, as it's beginning to get late... The "down note" is from "down under" (get it?) Australia's Trade Deficit widened in April to A$556 million ($448 million worth), as coal exports fell... This news caused a weakening in the A$ overnight... But remember, this is from April... And in April, China was just beginning to show signs of their stimulus working... I'll bet a dollar to a Krispy Kreme that next month this number will be narrower and if not, then the following month we'll see the narrowing... So, no need to be alarmed here, there's nothing to see here, move along! It does provide cheaper levels of the A$ though!

And... I just noticed this, so I won't end it on the A$ story... The price of Oil fell out of bed yesterday, moving from over $71 yesterday morning to $67.85 this morning... WOW!

Currencies today 7/2/09: A$ .8030, kiwi .6360, C$ .8685, euro 1.4070, sterling 1.64, Swiss .9230, rand 7.8050, krone 6.3635, SEK 7.70, forint 190.60, zloty 3.1040, koruna 18.2885, yen 96.60, sing 1.45, HKD 7.75, INR 47.96, China 6.8312, pesos 13.10, BRL 1.9320, dollar index 80.09, Oil $67.85, 10-year 3.55%, Silver $13.50, and Gold... $933.75

That's it for today... So... The U.S. has begun a military offensive in Afghanistan... I wish for safety for those soldiers... Little Delaney Grace came for a visit last night... What a cutie! And she's beginning to really talk, which is cute, but she never stops talking! She was copying everything I did at the dinner table, cracking me up! The Streets of San Francisco aren't as safe any longer... Karl Malden has passed away at 97 last night... Colby Rasmus bangs a walk off homer in the 10th for the Cardinals, and today is our Jen Mclean's son, Drew's 2nd birthday! Happy Birthday, Drew! And with that, I'm going to head to the high school where my son, Alex, will be playing in a jazz concert this morning, and he has a guitar solo... Wouldn't miss that! Time to hit send, and be thankful on a Thursday!

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

Riksbank Holds Off On QE...

ChuckButler — Tue, 21 Apr 2009 13:34:22 GMT

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In This Issue..

* Currencies trade in a tight range...
* German Investor Confidence rises!
* Thoughts from Jim Rogers...
* Kohn on the economy...

And Now... Today's Pfennig!

Riksbank Holds Off On QE...

Good day... And a Terrific Tuesday to you! I'm staring at all this white space on the Pfennig template, and I absolutely drew a blank... I couldn't think of, or can't think of a thing to say! Whoa there partner! That can't happen! There's got to be something, anything, to talk about... OK! I'm back now, I really have no idea where that was going, it was an out of body experience! HAHAHAHA!

OK... The currencies traded in a very tight range yesterday, after the dollar had ambushed them on Friday and in the Sunday night trading sessions. It's been a week since we saw currency strength, other than Japanese yen. So, we should be due for a bounce. There continues to be more whispering about the eventual dollar weakness, but for now, it's not enough to get us back to where the dollar should be trading on a fundamentals basis.

The euro got a lift this morning when German Investor Confidence as measured by the think tank ZEW, rose to the highest level in nearly two years during April. WOW! The index rose to 13 from a -3.5 in March... Quite the turnaround, eh? It is reported that Investor Confidence rose due to the Gov't's efforts to revive the economy. Don't know if you follow this or not, but European stocks just posted their 6th consecutive week of appreciation... You have to wonder if the stocks are telling us something here... Like, has the financial crisis in Europe bottomed out and is now on the recovery path? Don't know... And like I always say, one report doesn't make a trend, just like one swallow doesn't make a summer.

Sweden's Riksbank met this morning and surprised the markets (and me) by cutting only 50 BPS (75 BPS was the consensus), and in the other more important announcement... Riksbank Gov. Ingves said, "measures such as buying bonds were not on the cards at the moment". So, no Quantitative Easing (QE) for Sweden, just yet... But, unless things turn around soon in Sweden, the Riksbank will have to come back to decide on QE at sometime in the future... But for now, the krona is seeing a nice bid, and rallying on the news...

You know... Yesterday I talked about Canada, and how I "believed" that the Bank of Canada (BOC) was going to introduce QE, and IF they did I would mark them off my Hit Parade... But, I didn't say that the BOC was going to do that for certain! So... They could put it off like the Riksbank did... We'll just have to wait-n-see! Of course, I certainly fully expect them to go that route now, rather than later... But, I'm just saying, you never know...

Fed Head Kohn, was speaking yesterday, and said something that I sort of agree with... Kohn said the, "U.S. economy may stabilize this year, and begin a slow recovery". Hmmm... Well... By the end of the year, I see unemployment, by BLS accounting methods, at 10%, maybe 11%... Of course if you count all the people that have seen their unemployment benefits expire, or people that are working part time jobs because they can't find full employment, the unemployment rate is probably somewhere around 16% now... And heading to 20% when all the heads are counted as unemployed that should be counted as such.

So... With that in mind, I have to wonder how the economy "stabilizes"... Credit will still be hard to find, and so on... But, I do believe that our -6% GDP now, will turn to something better by year-end... Maybe -1 or -2% or, we might even squeeze out a small positive number, which you would then hear the media and politicians claim, that "we're out of the recession"... HOGWASH! But, that's just my view on it... But, I liked the fact that Kohn at least sounded a bit worried, and with caution regarding the economy. Apparently he left Big Ben Bernanke's rose colored glasses at home!

Even with a small gain in GDP, the Fed will keep interest rates at current levels, as they can't appear to smashing the golden egg too soon...

The high flying high yielders, which basked in the early spring sun during March, have retreated to their dressing rooms, as risk aversion has cast a shadow on the high yielders. Risk Aversion is a result of the earnings season for equities. So, that means the like of Aussie, kiwi, rand, real, are all softer and not looking as perky as they did a couple of weeks ago. But... Once currencies and stocks hit splitsville, and get back to fundamentals, investors looking for any yield, no matter how small, as long as it beats the paltry yields they get now in the U.S., Japan, and most of Europe, will look to these high yielders... So... That could mean that buying them now, when they are cheaper than they were a couple of weeks ago, just might be the ticket! But who's to say that they won't get cheaper? Ahhh grasshopper, that's the dilemma we face everyday with every purchase we make, weather it be the Aussie dollar, or auto tires, or new computers... You see my point, I'm sure...

Speaking of the Aussie dollar... The Reserve Bank of Australia (RBA) just released their minutes of the last meeting, where the RBA voted to cut interest rates 25 BPS... It appears that the decision was a close one between no cut and 25 BPS. RBS Gov. Stevens believes the Aussie economy is well placed to rebound... All this has helped the A$ to remain above 70-cents overnight and this morning.

OK... I've been champing at the bit all morning to get to this interview in Barron's with our long time friend, and investment guru, Jim Rogers... I can't get to all of the interview, so I pulled out a few quotes that plays well with what I've been talking about... Here's Jim Rogers!

"Yes, politicians are making mistakes. In Japan, the problem has lasted for 19 years. I hope that it doesn't last 19 years in the U.S. The approach that works is to let them (U.S. banks and automakers) collapse and clean out the system. The idea that phony accounting is the solution (through changes in mark-to-market rules) is ludicrous. And the idea that a debt problem and an excessive spending problem can be cured with more debt and more spending is ludicrous.

It's laughable on its face, but politicians think they've got to do something. Unfortunately, they are doing the wrong things and they are going to make it worse."

He then talked about something that I've been talking about for a couple of months now... The Treasury bubble... Let's listen in...

"I am anticipating shorting bonds -- the U.S. long bond. It's about the only real bubble around that I can see right now -- other than the U.S. dollar. I am not shorting bonds at this moment because I've shorted plenty of bubbles in my day, and I have learned that you better wait because they go up higher than any rational person can anticipate. But my plan is to short the long bond in the U.S. sometime in the foreseeable future."

Isn't that amazing... I just talked about this again the other day!

So... The Gov't's "stress test" results are going to be revealed beginning this Friday... It will be interesting to see what the results are... But, I wouldn't get too excited about all of this, as I don't think we'll get a chance to look under the hood at these financial institutions... Not that I want to or have the time to anyway! But I'm sure there are those out there that would love to get that chance... Buzzzzzzzz, wrong answer! Thank you for playing, there's a nice parting gift for you at the door!

Yesterday, Leading Indicators for March printed worse figure than forecast, but the previous month's -.4% initial print was revised to -.2%... March's figure was -.2%... So... Leading Indicators is still telling us that there will be more pain to suffer through ahead... Hey! That's why they are called "Leading Indicators!"

The U. of Michigan preliminary reading of Consumer Confidence for the first two weeks of April, printed stronger than expected at 61.9, up from the previous month's total of 57.3... Of course when this report was compiled, stocks were still in rally mode... Before earnings season, etc. I doubt the final report will be so pie in the sky...

No real data to deal with today in the U.S. or Europe... So... Once again, focus will be on the earnings... We will get some more Fed speak this morning from Fed Head Hoenig... And then mid morning will see U.S. Treasury Sec. Geithner testify before the oversight panel... Would that be oversight on TARP or Tax returns? HAHAHAHAHA!

I did it again last week... I placed the kiss of death on a currency by talking nice about it! This time it was Indian rupees... Last week I talked about how the rupee had performed nicely / stealth like, under the radar... But, the rupee has now given back all that stealth-like gain! In the past, a move like this would have the Central Bank's hands all over it (with intervention)... But this move might just be associated with the high yielders, and the risk aversion.

Gold rebounded nicely yesterday, up about $15, and has added $3 this morning... Just didn't see right to see it getting sold like that last week... Maybe calmer, cooler, more intelligent heads took over!

Well... It's time to head to the Big Finish. We have a birthday girl here today, and I've got to get to work on my presentations for Bermuda! UGH!

Currencies today 4/21/09: A$ .7005, kiwi .5540, C$ .8075, euro 1.2950, Sterling 1.4535, Swiss .8555, rand 9.13, krone 6.80, SEK 8.63, forint 231.90, zloty 3.4125, koruna 20.90, yen 98.10, sing 1.5080, HKD 7.75, INR 50.41, China 6.8317, pesos 13.39, BRL 2.2375, dollar index 86.58, Oil $45.87, Silver $12.18, and Gold $888

That's it for today... Except to say a Big Happy Birthday to our accountant magnificent, Mary Owens... Mary is not only a magnificent accountant, but also a magnificent quilt maker! It's down to the last 5 hours for my fave show 24... It's so intense! Did you see the Washington Nationals' jerseys they had on Friday night? Nationals was spelled Natinals... How embarrassing, and they wore them! That's a shame, Washington waited so long for a baseball team, and now they have one that can't win, and a marketing department that can't spell! Crazy! The NFL Draft is this Saturday. Our Rams have the second pick... I sure hope they don't blow it! This team needs help! Good luck to our Blues tonight, they are down 3 games to none. Their goal is almost impossible.. Slim and none, and Slim just left town... But... You have to believe! I hope you have a Terrific Tuesday!

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

Dollar Shows Additional Strength...

ChuckButler — 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

Geithner's Plan Disappoints...

ChuckButler — Wed, 11 Feb 2009 15:19:14 GMT

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In This Issue..

* Trade Deficit to narrow further...
* Currencies rally, then sell off...
* Obama's stimulus loses backers...
* Riksbank cuts 100 BPS unexpectedly...

And Now... Today's Pfennig!

Geithner's Plan Disappoints...

Good day... And a Wonderful Wednesday to you! Well... Tim Geithner didn't experience a Terrific Tuesday, as I had wished for him... And now, it looks as though the shine is coming off the new President as more and more individuals are "not buying" his appeal to the nation to get a stimulus package passed... The currencies rallied and then sold off after Geithner gave the details of his "new and improved" plan... We've got some potential market moving data printing today and more! So... Let's go to the tape!

Front and Center this morning, we have some data that could potentially move the currencies today. I'm talking about the Trade Deficit for December. The "experts" have forecast a narrowing of the December Trade Deficit from $40.4 Billion in November, to $35.7 Billion. Now, that all sounds wonderful, as this is one of the twin deficits that I have banged on for years now. But the resolution is completely different than what I wanted to see. I wanted to see U.S. exports bring the Trade Deficit down... Instead we have a complete collapse of demand for imports... And with the dollar stronger than it was 7 months ago, exports are falling like a house of cards.

Now, here's the potential market moving piece of this data... Last month (January) when the November $40.4 Billion Deficit printed, it was more narrow than forecast, and sparked the dollar to a 1.5% gain in one day. But that's not all, the rest of that week the dollar gained 2.5% (in the dollar index)... So... While this isn't the path I would have liked to see the Trade Deficit narrow, it is narrowing...

Unfortunately, for the Twin Deficits, the other Deficit, that resides in the Budget, is taking up the slack... I now figure that the Budget Deficit could very well hit $3 Trillion this year... We already have $1.2 Trillion from the Congressional Budget Office, $838 Billion in the "new and improved" stimulus package the Senate passed yesterday, and don't forget the $350 Billion in TARP money that was carried over from last year, that will be spent this year... And you know, there will be "another" spending package coming in the future, because people like you and me are calling out this "new and improved" stimulus package...

A recent poll by Pew Research Center found that a narrow majority of Americans, just 51%, support the stimulus. And that's down from 57% in January. Even worse for the administration, support seems to be dropping among people who say they've learned more about the stimulus:
Notably, support for the proposal is now much lower than it was in January among those who have heard a lot about the economic stimulus. By 49% to 41%...

And here's something in the plan that I bet you didn't know was a part of it. I thank a dear reader for bringing this to my attention. He's a doctor, so I believe he knows what he's talking about here folks...

"This past weekend and Monday I took the time to read "The Obama Stimulus Plan." I will leave politics to the side and will leave my interpretation from an Economic perspective aside ( I double majored at Bucknell in Chemistry and Economics ). What I will NOT leave to the side is what is buried in "The Bill" from a health care standpoint. YOU NEED TO KNOW.....the "stimulus bill" is a Trojan Horse.....hidden in "this horse" is the legislation to NATIONALIZE HEALTH CARE."

So... Do I have your attention now? Here's a link to the story by Betsy McCaughey on Bloomberg...
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aLzfDxfbwhzs

OK... I won't carry on about that... I've given you the information to do with as you please.

Back to the task at hand... The Geithner Plan was a bust according to the markets... Here's what the Wall Street Journal had to say about the stock sell off... "Financial stocks led a broad move down in the market on the heels of Geithner's unveiling of the Treasury's bank-rescue plan and Senate passage of the stimulus measure. The Dow Jones Industrial Average dropped by roughly 350 points, or 4.2%, reaching its worst levels of the day in mid-afternoon trading. Bank of America and Citigroup experienced double-digit percentage losses."

Currencies followed along with stocks, like they have for a couple of weeks now. The euro, which had traded up to near 1.31, fell back to yesterday morning's figure of 1.2975, as if nothing had happened. The high yielders like Aussie, kiwi, and Brazil, had all been trading higher this week on hopes that the Geithner Plan would bring the risk takers back to the markets. But that didn't happen, as Geithner really disappointed the markets with his plan...

It was reported yesterday that economic advisors for Obama were in a tug-o-war with Geithner on this Plan, and that Geithner had won... Given the reaction by the markets, I think I would like to see what the Advisors had planned, to make a choice between the two! Maybe Geithner is swayed by the old regime at the Treasury, given he had his hands in there helping the old Treasury Sec. Paulson, with his bailouts and TARP last year... Hmmmm... Makes you wonder...

I read the text of the Geithner Plan... And was very disappointed... I will say that the Treasury's plan to make this all transparent is good... In fact you can follow the money trail at this website: www.finacialstability.gov But, the rest of it was the same old, spending taxpayer funds on shoring up financial institutions... Could go up to $1 Trillion!

You all know where I stand on this spending that we can't afford, and placing the burden of paying it off on our grandchildren... It's downright immoral! Let the financial institutions that can't cut the mustard sell themselves to someone who can, or close, and when all the dust settles, we'll be left with the financial institutions that are strong and ready to grow! But that won't happen, as my friend Bill Bonner (www.dailyreckoning.com) says about the Fed and Treasury propping up these institutions... He calls them "the meddlers"... Great term!

So... As I said above, the Geithner Plan rubbed the markets the wrong way, and stocks and currencies hit the skids... Bonds had a banner day... Of course you knew they would after I talked about how they had started the year off with the worst performance since 1980! UGH! And... As always, well for the past 6 months... As the risk takers took their high yielders rally and went home... Japanese yen, rallied... There was another currency that rallied along side yen yesterday... Swiss francs... But that didn't last through the night...

One of the biggest losers (to use the name of the TV show my beautiful bride can't miss each week), was the Swedish Krone, as the Swedish Central Bank, the Riksbank, made a larger than expected rate cut of 100 BPS (50 BPS was forecast). The Riksbank also basically outlined their plan to cut rates further in future meetings.

British pound sterling lost ground too, when the Bank of England's (BOE) Gov. Mervyn King made some statements about the U.K. being in a "deep recession" and that it will "probably require lower interest rates and an increase of money supply"....

Now, the lower interest rates aren't what put the kyboshes on the pound's recent strength... It was the comment about increasing money supply... Which in my book of how to value a currency is one of the top valuation indicators. You see, inflation in the U.K. has fallen to .05%, 1.5% below the ceiling target for inflation, and lowering the interest rate is one thing, but increasing money supply? I truly believe that increasing money supply places the velocity of money rule in place, and inflation can spiral when that happens... It's akin to "playing with fire"... Somebody is going to get burned!

And here's a sign that a country's currency is on the downward slope... Mexico's Central Bank said that it will "continue to intervene to support the peso"... UH-OH! Let's see what this intervention has gotten the Central Bank so far this year... The peso is down 4.7% this year, and lost 2.3% of that yesterday! The Central Bank bought $1.1 Billion worth of pesos last week to prop up the currency... Their foreign reserves now stand at $82 Billion worth, so they could play this game for some time... But, in the end, the markets have deeper pockets, and if they smell blood in the water, like I think they do now with pesos, they will test the Central Bank's willingness to spend those foreign reserves!

The folks over at Citigroup, issued a report on China yesterday, and they are bucking the trend to downplay China in 2009... Citigroup believes China will surprise on the upside, and their currency, the renminbi, will continue to gain VS the dollar in 2009 to 6.6, from current levels of 6.83... So... This is one of the few reports that follow along with my general feeling of China...

The Geithner Plan was good for Gold, as the shiny metal gained $20 yesterday, and is up another $10 this morning, and is trading at $924.69... I gave a long interview yesterday regarding deflation and inflation. I tried to explain how the deflation we are seeing right now is asset deflation, not your ordinary monetary deflation, for that would require a contraction of money supply... I was asked what assets perform well in a deflationary cycle... Cash... And while Gold is the same as cash... Gold! I have a new term that I came up with for Gold... An "uncertainty hedge"... How do you like that one? Everyone is uncertain as to what's going on and what will happen with all this spending going on, and what performs well? The "uncertainty hedge"!

And on that note... I think I'll head to the Big Finish! And don't look now but the price of Oil is falling again....

Currencies today 2/11/09: A$ .6530, kiwi .5230, C$ .8025, euro 1.2950, sterling 1.4360, Swiss .8655, rand 9.8980, krone 6.7175, SEK 8.2430, forint 227.50, zloty 3.5140, koruna 22.0850, yen 89.90, sing 1.5060, HKD 7.7510, INR 48.69, China 6.8330, pesos 14.60, BRL 2.2890, dollar index 85.60, Oil $37.84, Silver $13.39, and Gold... $924.69

That's it for today... I tried and tried to get "something" out of the Geithner Plan last night, but it totally lacked specifics, and I understand why the markets began to circle the bowl. Speaking of last night... I tried to watch our Blues play hockey, but they were just not playing well, so I switched it off, and began to research for today's letter! Now that's how bad the Blues were playing! Lots of young talented players, but it looks like they won't make the playoffs again this year. UGH! T-minus 3 days left till Valentine's Day... Are you ready? Tomorrow is Lincoln's Birthday... His 200th birthday! WOW! Can anyone explain to me why he doesn't have a holiday? That putting all Presidents into one holiday, is a bunch of bunk in my book! OK... Suzy Q just arrived, so that tells me it's time to get this all wrapped up in a bow and sent! I hope your Wednesday is Wonderful!

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

Buying Buicks Instead Of Bonds...

ChuckButler — Thu, 04 Dec 2008 15:04:11 GMT

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In This Issue..

* Currencies trade in a tight range...

* Another new plan to help homeowners...

* RBNZ and Riksbank slash interest rates!

* The Governorator speaks!

And Now... Today's Pfennig!

Buying Buicks Instead Of Bonds...

Good day... And a Tub Thumpin' Thursday to you! It's going to be a Tub Thumpin' Thursday in Europe for sure, given the Central Banks of England and the Eurozone are meeting and will probably cut interest rates to levels that haven't been seen in a while! The automakers are in deep dookie folks, according to them, and are in need of funds / bailout money right now! The head of Ford believes his company can withstand the recession, but fears for GM and Chrysler... The UAW has made some concessions to help the automakers, but it could be a case of too little, too late...

Well... Another day of doldrums in the currencies, with the bias, what little there is, to buy dollars. The stock jockeys received some manna from heaven yesterday when it was announced that the U.S. Treasury Department is considering a plan to halt the slide in home prices that would lower mortgage rates using Fannie Mae and Freddie Mac. The plan could reduce rates for newly issued loans to as low as 4.5%.

Here's a snippet of the story that ran in the Wall Street Journal yesterday..."Government officials are under pressure to stem foreclosures, which underpin much of the current financial crisis. Treasury has struggled for months to come up with a plan that would ease the market without appearing to bail out homeowners and lenders.

Under the plan, Treasury would buy securities underpinning loans guaranteed by the two mortgage giants, which are temporarily under the control of the government, as well as those guaranteed by the Federal Housing Administration. Fannie and Freddie guarantee a large proportion of all new home loans made in the U.S."

OK... So they came up with a plan... I have to think about this a bit, as I see the "good" it could do, but there's always a "bad" to these things too, and once again, I'm sure it circles around the fact that Gov't is going to be in the mortgage business... We inch closer and closer, all the time to socialism folks... It all began when they mandated that in a free country we HAVE to wear seat belts... Now don't get me wrong, I wear them because I believe it's the safe / right thing to do, but shouldn't that be MY choice and not the mandate of the Gov't? Any way, please don't flood my email box with notes telling me how wrong I am on this... It won't help, this is what I believe, period!

Whew! I really went off on a tangent there, eh? OK, before you begin to think I'm a nut case... Let's get back to currencies and economies!

The Reserve Bank of New Zealand (RBNZ) did cut rates, as I suspected, by 150 BPS yesterday... This brings the total of rate cuts by the RBNZ since September to 325 BPS! I think the RBNZ truly believes that global inflation is taking a major step backwards... And it probably is to a degree, but the RBNZ had better be ready to go the "other way" once this slide in inflation tips back... Of course I don't believe we'll see that for some time (6-months at least), so go ahead and frolic in the sun with rate cuts while you can RBNZ... Just be ready, that's all I'm saying...

Bond holders of New Zealand issues have to be frolicking in the sun for sure, and their "locked in yield to maturity" is now, at least 150 BPS, if not 325 BPS higher than new issues, which makes their bonds "more valuable"...

U.K. Prime Minister Gordon Brown unveiled a scheme to allow borrowers experiencing a temporary loss of income due to the downturn to defer mortgage interest payments for up to two years. The U.K. Gov't will guarantee the lenders against the risk of loss from the deferred payments... That's going to be quite interesting to see how that plays out... But shoot Rudy, if the Gov't is going to let you go Ollie, Ollie, oxen free on your mortgage payment for two years, with NO bad stuff happening to you and your credit, I can see the mortgage holders lining up on the right for this!

The U.S. Fed Reserve's Beige Book that usually gives us an indication of what to expect in the next FOMC meeting, which will take place December 16th, printed yesterday... And it could be probably listed on Amazon under "horror" books! Put away the sharp objects folks, for it's not just me ranting about these problems any longer, the Fed Reserve, your Central Bank, you know, the people that are supposed to be protecting the value of our currency, by providing price stability, and full employment (and are failing miserably at both!), now are ADMITTING that the problems are real... Here's a short review from the Beige Book...

Based on data collected prior to November 24th, the Beige Book painted a grim picture of the outlook for growth in the fourth quarter. Lenders tightened standards for loans and lending contracted over the period. Several districts noted increases in delinquencies and defaults.

Consumer spending, which played a lead role in the growth downturn in the third quarter, was reported to have weakened.

Hey, this little tidbit came across my screen yesterday... The number of days that the S&P 500 has moved up or down by more than 5% during the Trading Day...

1950 - 2006 34 days...

2008 44 days! With 22 of them coming since October 1st!

Talk about volatile! WOW!

OK... One of my fave economic writers, Caroline Baum, wrote a piece on Bloomberg that caught my eye... Hey! That makes sense now, since I really can only see good out of one eye! Anyway... Here's a snippet of the story by Caroline Baum, titled, "Bernanke should buy Buicks instead of bonds"...

"It tells you just how far we've come when the headline, "Fed May Buy Treasuries," gets a reaction.

Buying Treasuries is the age-old way of adding reserves to the banking system, setting in motion the money-creation process.

Historically, these so-called permanent open market operations were designed to have no impact on the shape of the yield curve. The goal was simply to satisfy the banking system's demand for reserves.

Treasury securities used to make up the lion's share of the Federal Reserve's balance sheet. No longer. As of Nov. 28, the Fed held $476 billion of securities carrying the full faith and credit of the U.S. government, less than a quarter of its balance sheet. One year ago, the comparable figures for the Fed's Treasury holdings were $780 billion and 90 percent.

When the banking system starts functioning again, and the Fed has to mop up all the excess reserves banks are holding instead of lending, the reality is "it doesn't have enough Treasuries," said Paul Kasriel, chief economist at the Northern Trust Corp. in Chicago.

Banks were holding $605 billion of reserves in excess of the amount required as of Nov. 19. "Maybe the Fed will have to raise reserve requirements," Kasriel says. "It'll be 1937 all over again."

Many Great Depression scholars, including the late Milton Friedman and Anna Schwartz, point to the Fed's doubling of reserve requirements in 1936-1937 as triggering the second leg down in the economy, which was recovering in the mid-1930s."

OK, back to me... All this talk today is causing me to search for something "fun" to talk about, because it's all been gloom and doom, eh?

Sweden's Riksbank announced a 175 BPS rate cut this morning. WOW! Another Huge cut, makes you think that the Bank of England and European Central Bank might have something up their sleeves too! And in Canada, their Central Bank doesn't meet until next week, but Canada has other problems going on, as there are rumblings about a suspension of Parliament...

The Governorator, Arnold Schwarzenegger, has called a Fiscal Emergency for the state of California... I feel like he won't be the only governor to do so... You see, the Federal Gov't is giving all it's McLovin' to Financial Institutions right now, and the States are hurtin' for certain... The states that have for decades told the Fed Gov't to "get out of their business", will now be knocking on the Gov't's door, and be the next in line to ask for bailouts...

And then, one final thought before going to the Big Finish... I saw this yesterday, and almost fell out of my chair! (now that would not be a good thing!) Let's see what your take is on this....

I know that sure seemed as though the Fed and Treasury had found every last way of pushing off debt from one generation to the next, BlackRock's Peter Fisher has thought of a clever new one: a 100-year treasury bond. That way, the government can keep borrowing money to finance today's bailouts, and won't really have to start bleeding cash until after most of us are dead and gone...

Let's hope that thought by Peter Fisher doesn't even cross the minds of Paulson and Bernanke!

Currencies today 12/4/08: A$ .6470, kiwi .5365, C$ .7945, euro 1.2640, sterling 1.46, Swiss .8245, ISK 261, rand 10.2585, krone 7.17, SEK 8.3430, forint 207, zloty 3.0650, koruna 20.3425, yen 92.55, baht 35.70, sing 1.5275, HKD 7.7510, INR 49.85, China 6.8820, pesos 13.62, BRL 2.4790, dollar index 87.22, Oil $47.16, Silver $9.57, and Gold... $769.35

That's it for today... The snow that was predicted for us yesterday failed to materialize... That's fine with me! Our office coordinator, Danielle, put up my little Christmas Tree by my desk yesterday after I left. My tree is decorated with Missouri Tigers stuff! It's beginning to look a lot like Christmas... (got you singing that song didn't I?) We've been in our office here for 4 years today (I believe)... And we already outgrew the space that seemed to be HUGE when we moved in... So, we'll be moving next door in 6 months... I sure hope we run out of space again in 4 years! I go to see my kidney doctor this afternoon. He's a delightful man, that I truly enjoy going to see... My darling daughter, Dawn, sent us pictures of Delaney Grace on Santa's lap... They were hilarious, as Delaney wanted no part of the Big Guy! I used to be the Santa at my older kids' school and in the neighborhood. (it's the one thing I DO have the body for! HA!) I kind of miss doing that, instead I just go and read The Night Before Christmas to Dawn's kindergarten class... The kids love it, I love it, and it's over in about 10 minutes! Sort of like the reading time for a Pfennig! Speaking of which... I need to go... I hope you have a Tub Thumpin' Thursday!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837

Central Bank Meeting Day...

ChuckButler — Thu, 04 Sep 2008 14:15:58 GMT

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In This Issue..

* Euro fights back...

* Germany Factory Orders drop...

* BOE & ECB meeting today...

* Riksbank raises rates!

And Now... Today's Pfennig!

Central Bank Meeting Day...

Good day... And a Thunderin' Thursday to you! A rainy Thursday for us here in St. Louis, as the rains from Gustav reach this area. There's another Hurricane in the Caribbean now... There are two Central Bank meetings going on as I write this morning. The European Central Bank (ECB) and Bank of England (BOE) both are meeting this morning, and both are expected to leave rates unchanged. More on this in a bit, the Fed's Beige Book, and more this morning, so let's go!

Front and Center this morning, the euro spent yesterday on the rally tracks recovering from a 5-month low... When I turned on the screens this morning, the single unit was trading above 1.45 again, on expectations that the ECB would leave rates unchanged. But I've seen a softening in the euro, since arriving, that has come from an unexpected drop in German Factory Orders for the month of July.

However, the risk of inflation is seen as the greater of two evils as far as the ECB is concerned, which I might add is a gallant stand to make. Especially in these days of "let's see who can debase a currency faster"... Oh, that's the Fed playing that game all by their lonesome!

The BOE will probably leave rates unchanged too, because of the big bump they've seen in inflation recently... Yes, unfortunately for BOE Gov. King, inflation is rising at the fastest pace in more than a decade, and now sits at more than double the 2% target the BOE places on inflation... This "non-move" lower in rates only gets pound sterling a "stay in regards to the execution" in my opinion... The BOE will have to lower rates to hold off the economic recession wolfs...

The pound sterling has gotten tarred with the same brush that was used on the U.S. and it's housing problems, before the Fed and Treasury pulled the wool over the eyes of the markets with their "mortgage solution"... I say "pulled the wool over the eyes of the markets" because the legislature has been billed as the "end all" for what ails the housing and mortgage problems... Boy, are they going to get eaten by the wolf in sheep's clothing, when this all unravels... But for now... It's all seashells and balloons for these people... So, let them bask in their tanning booths, for the real sun is not shining on them, they just think it is!

Hey! Did you think that it was just the U.S. that "had a problem with the Chinese currency level?" Well, think again... The European Union, namely Germany, has been banging on the Chinese too... But they do it discreetly, not like U.S. Treasury Sec. Hank Paulson, or lawmakers, Schumer and Graham... Anyway, German officials met with the Chinese recently, and got the same smile, and agreement to "allow greater currency flexibility" that the U.S. always gets...

It was a bad day at the office for General Motors yesterday... First, the Wall Street Journal reported.... "GMAC Financial Services and its Residential Capital unit plan to close all 200 GMAC Mortgage retail offices and reduce ResCap's work force by 60%, or 5,000 jobs. ResCap, a large subprime-mortgage lender, lost $4.3 billion in 2007, and GMAC spent much of the year restructuring the firm, including job cuts and an overhaul of the business model. But the losses have continued to mount. GMAC, once a wholly owned unit of General Motors, is now 51% owned by private-equity firm Cerberus Capital Management."

Then, General Motors had to announce a 20% drop in auto sales last month... But then, Ford had a 27% drop, so it wasn't "that bad!" Shoot Rudy, even Toyota experienced a 9.4% drop in sales... So, it's not all SUV's and pick-em-up Trucks that aren't selling...

OK... Enough "car talk"... The Fed's Beige Book printed for everyone to see yesterday, and helped push the dollar lower. The Beige Book pointed to slowing growth and stubborn inflationary pressure. In one spot of the report the Fed Heads reported that, "the pace of economic activity has been slow in most districts. Many described business conditions as "weak", "soft", or "subdued"... They also noted that the impact of the stimulus checks appeared to be "waning", as consumer spending was referred to as "slow"...

That doesn't look anything like an economy that could withstand higher interest rates, does it? I don't think so, Tim! Today, we'll see the Weekly Initial Jobless Claims, the ADP Employment Change report for August, and one of my least fave economic reports... Productivity... Yes, productivity, which at one time probably was worth looking at, as we went from using an abacus to computers... But now, I feel it simply reflects that those that still have jobs are working harder!

None of this will be good for the dollar, so let's see if yesterday's dent to the dollar rally because of the Beige Book data, can continue today...

The Nordic currencies of Sweden and Norway have really gotten sucked down into the fray of the dollar rally... But there was good news from Sweden this morning, as the Swedish Central Bank, The Riksbank, raised interest rates 25 BPS to 4.75%. The Riksbank tried to curb the enthusiasm from this rate hike by saying that they believe growth and inflation will slow in the coming months... But who are they kidding? If they really thought that growth was going to slow, why would they raise rates now? I fully expect the Riksbank to leave rates at this level for the remainder of 2008, which should provide a nice underpin for the krona, once the markets get past the "statement" by the Riksbank.

I was reading a report yesterday in which the writer was of the belief that the dollar was staging a rally based on the thought that the Fed will be raising interest rates while the ECB begins to ease rates... Hmmmm... OK... I just talked about the Fed's inability to raise rates with the economy in the dumpster... But what about the ECB? Are they going to begin easing rates to help their stumblin', rumblin' fumblin' economy? Whew! That's a tough one! Because if the last 6 months tells us anything, the answer would be NO! The ECB has stated that they are more interested in fighting inflation that providing a background for growth.

Of course, that stance could change in a NY minute and without warning... So... We have to keep our finger on the pulse of the ECB press conferences that follow most meetings of which there is one today. So, I'll keep my eyes and ears open to what ECB President Trichet has to say today.

I was talking to someone yesterday and the question came up was... "when will we know that the housing debacle has bottomed?" I talked about the glut of inventory that had to be removed, and for that to happen house prices would need to come down more.... Then, this morning, I read a story that appeared on MarketWatch yesterday by one of my fave economists, Irwin Keller... Here's what he had to say...

"Since this whole mess started with housing becoming irrationally exuberant, it must end with a return to sanity in this key sector of our economy. And in spite of what you may have read or heard about the "unprecedented" decline in home prices, normal housing prices are still beyond the horizon.

According to the latest data from the Census Bureau and the National Association of Realtors, median home prices in July equaled 3.6 times median household incomes. This may be down from the peak of four times incomes set back in 2005, but it is still far above the 2.9 times of the 1980s -- when housing was more affordable and sales and construction grew at a steady pace.

In the halcyon days of the early 1970s, when home sales and construction were at their peaks both in absolute terms and relative to the size of the population, the ratio of home prices to incomes was less than 2.5.

To get back to the average of the 1980s, home prices would have to fall another 20%, on average. Add another 10 percentage points decline for housing to be as affordable as it was in the 1970s.

Of course, these ratios could be reached through a rise in household incomes. But this would take much longer, since incomes are growing less than 2% per year these days, owing to the drop in employment and the inability of workers to secure raises."

Irwin Keller's full article can be seen here: http://www.marketwatch.com/News/Story/Story.aspx?guid=e6ac18e5822848098610eafb5d486170&siteid=nwtam&sguid=4_Zk_zE6gESrwakLkKbqXg

OK... So, the German Factory Orders has brought about the "game on!" again, with the "who's economy is worse" game... And the euro is getting pushed lower... Already 70 ticks lower than when I came in this morning!

The emerging markets currencies of Mexico and Brazil, have finally succumbed to the dollar rally... These two had held their heads above water for some time, but are now getting caught in the undertow of the dollar rally... I had high hopes that of these two, Brazil could withstand the pressures... But the pull is just too strong right now... Time to head to the Big Finish!

Currencies today 9/4/08: A$ .8345, kiwi .6845, C$ .9415, euro 1.4465, sterling 1.7815, Swiss .9025, ISK 85.10, rand 7.8915, krone 5.5480, SEK 6.5575, forint 165.20, zloty 2.3425, koruna 17.15, yen 108.35, baht 34.44, sing 1.4310, HKD 7.8065, INR 44.36, China 6.8362, pesos 10.42, BRL 1.6775, dollar index 78.23, Oil $110.15, Silver $12.96, and Gold... $807

That's it for today... The NFL season kicks off tonight! WOW! All those Fantasy Footballers getting their lineups ready, etc. I participate in two Fantasy leagues, but I really don't get too excited about all of it... I got to sit in with one of my fave economic professors yesterday... I was "schooled" on CPI, which you know I say is "stupid"... Well... I still think it's "stupid" but I do know even more than I did before about it! Have you noticed that everyone is wearing those "green" sport jackets now... (not The Masters type green!) We used to have a funny saying that went, "if the customer wants a green jacket, sell him a green jacket"! But, now that these guys on TV are all running around with green jackets on, the saying isn't as funny any longer! UGH! I used to have green jacket back in the 70's! So... Welcome to the start of the new NFL season, and have a Thunderin' Thursday too!

Chuck Butler

President

EverBank World Markets

1-800-926-4922

1-314-647-3837