Daily Pfennig

German Business Confidence Slides...

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

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In This Issue..

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

And Now... Today's Pfennig!

German Business Confidence Slides...

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Silence Is Golden...

Chuck Butler — Mon, 09 Nov 2009 15:27:51 GMT

..But First, A Word From Our Sponsor..
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* 4 BRIC currencies: Brazilian real, Russian ruble, Indian rupee, Chinese renminbi
* High upside potential
* No market risk to deposited principal
* Low $1,500 minimum deposit

Don't miss this unique opportunity. Deadline to buy the BRIC MarketSafe CD is Dec. 3rd, 2009. Apply today or learn more at http://www.everbank.com/001CertificatesMSBRIC.aspx?referId=11808
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In This Issue..

* A HUGE dollar sell off overnight...
* BLS admits the Birth/Death model was wrong...
* The 20th anniversary of the fall of the Berlin Wall...
* Kiwi is best performer overnight...

And Now... Today's Pfennig!

Silence Is Golden...

Good day... And a Marvelous Monday to you! A Spectacular weekend, weather wise, here in the Midwest... And Indian Summer, is what my dad would have called it. The news from the Sports teams wasn't so spectacular, but we had the weather going for us!

Welcome to Monday's edition of A Pfennig For Your Thoughts... I'll start off today with a note about the currencies, then do a recap of Friday, and then a look ahead to the rest of the week... So... Strap yourself in, and make sure to keep your arms and legs inside at all times during the ride!

I checked the currencies last night, as is my tradition of taking a peek at the Japanese open... And the dollar was getting sold... I thought to myself, self... I bet G-20 got things going here! And then this morning, when I turned on the currency screens, I saw that the dollar really got sold overnight, and in the morning session of Europe. The Big Dog, euro is flirting with 1.50 again, the Aussie dollar (A$) is flirting with 93-cents, and the Swiss franc is not only flirting, but holding hands with parity against the dollar!

So, what's behind this big move in the currencies VS the dollar? Well... The move has been fueled by G-20... And it's not anything that the G-20 members said... In fact, G-20 said nothing, nada, zero, zilch, a great big goose egg, on the currencies... Traders are taking this to mean that the G-20 member nations don't have a problem with the weak dollar, and that's akin to giving them the green light to sell the dollar further... Proving once again that Silence is Golden... (to non-dollar currency and precious metals holders!)

I had said in one of my recent videos that I do for the Sovereign Society and my "paid for" Newsletter, The Currency Capitalist, that I truly believed that the weak dollar and the rise of the non-dollar currencies would be a "hot topic" at the next G-20 meeting... So, I was wrong with that thought... So, since G-20 was given the reins of the currencies, they haven't said a word... I find this to be very significant folks... You know, it's not like if G-20 said the dollar's fall was too deep, they could do anything significant about it... But the fear of something would be enough to wrap a tourniquet around the dollar's bleeding. But... They didn't! And so we go on with the dollar selling, which in reality is what the U.S. Gov't really wants anyway! A general slow depreciation of the dollar is the way the Gov't would like to see the trading go...

So... There we have it! A non-dollar currencies rally, that's wrapped around G-20's silence on the weakness of the dollar.

Friday... We saw the Jobs Jamboree, really surprised on the "good side" of the job losses which according to the BLS (Bureau of Labor Statistics) was "only" 190,000 for October... Now, that's quite the fall from the +500K job loss months we saw 6 months ago... The Unemployment Rate, however, spiked to 10.2% in October... The first time the Unemployment Rate has been above 10% since the recession of the early 80's...

And then there was this, regarding Job losses... Chris Manning of the BLS stated last month that payrolls were overestimated in the twelve months ending March by 824,000. The source of this error was the birth/death model. BLS used "plug" numbers for the number of births and deaths. These "plug" numbers were wrong. They led to estimated positive contributions to employment that were too high. Most of the error (675,000 out of a total 824,000 jobs) occurred in the first quarter of this year. The birth/death model was adding significantly to payrolls when all other payrolls were falling. In reality the contribution from net births and deaths was in fact negative.

How long... has this been going on? (A great old song!) But, haven't I ripped this Birth/Death model for years now? And here you go! Even a BLS employee says they were wrong to add these jobs!

So... The question is when do this job losses get posted? Well... I don't think you'll see that folks... It's just the way the Gov't does things... Hides them, cheats you, and then says, "we made a mistake" and goes on about their business of hiding and cheating you!

Oh... And one more thing here regarding the Jobs Jamboree... According to BLS, payrolls fell at a 188,000 a month rate over the last three months. But their own household survey says employment fell at a 589,000 a month rate.

I shake my head in disgust... But, shoot Rudy, we all know how "the game is played" so, we just adjust our numbers and go on...

So... I guess you heard that the House passed the Health-Care Overhaul Bill this past weekend... I'm not going to go into this for this would be a "hot button" for a lot of people... I just want to know what this is going to cost, and don't believe anyone in the Washington D.C. that tells you that it won't cost anything! Their track record on that stuff is horrendous! Which also means that if they tell you it's going to cost $1 Trillion, it's going "really cost" double or triple that!

So, we just keep adding on to our deficit, folks... The people in D.C. are so worried that they need to spend more, instead of reducing spending... I really think that anyone that voted for this new spending program, needs to get "fired" the next time their term is up...

OK... Enough of that! The Data Cupboard is empty today, and doesn't really get re-stocked with Tier 1 data until Thursday... So... The data isn't going to help the dollar out the front-end of this week.

The IMF issued a report this past weekend that isn't helping the dollar... The IMF said that there are "indications that the U.S. dollar is now serving as the funding currency for Carry Trades" was one of the things that hurt the dollar... The other thing was that the IMF felt that the dollar was still "overvalued"... Which in anybody's book means it can fall further!

The IMF also said that the euro had "experienced the most appreciation among major advance economy currencies and that it remains on the strong side of its equilibrium."

Hmmm... So... First it was the silence by G-20, and then the slap in the face by the IMF that has the dollar on the run this morning... I wonder what direction this will go once the New York traders arrive at their desks, and see what the overnight markets have done to the dollar... My guess is they will first take some profits, and then add on to the dollar's woes... But that's just a guess, who knows what those "fickle" traders will do!

So, like I said above, the euro, A$, Swiss are all moving higher VS the dollar... But the "winner" for best performing currency overnight is the New Zealand dollar / kiwi! At one point overnight, kiwi traded at 74-cents... It has since given back some ground, but the move overnight was impressive! Kiwi got a nice bump when Dairy Giant Fonterra raised their forecast dairy payout... With farmers' incomes representing .7% of the GDP, this was good news for the economy, and thus the thoughts begin to switch to a rate hike by the Reserve Bank of New Zealand (RBNZ), which just last week was downplaying any such rate hike... This might change their mind...

Today is the 20th anniversary of the fall of the Berlin Wall... That was HUGE in our lifetime wasn't it? I'm reminded of President Ronald Reagan telling the Communists 2 years earlier to "tear down this wall"...

And... Chris Gaffney left me this note from Friday...

"The government extended the first time homebuyers $8,000 tax credit on Thursday. While this tax credit was intended to help alleviate the glut of housing left by the credit crunch and resulting downturn, housing analysts have found the tax credit did little for home sales. Between 80 percent and 90 percent of the people who have bought homes using the credit would have purchased those homes without it. Sounds a lot like the cash for clunkers program; Taxpayer money wasted in order to try and make the data look good in the short term.

But not only did they extend the first time homebuyer's credit, they also approved what I think is a really stupid addition. The expanded program introduces a $6,500 tax credit for people who already own homes but want to buy new ones. Unlike the cash for clunkers program, the old homes which these buyers now occupy will not be destroyed; they will be placed onto the market. So what does congress think this $6,500 credit is going to accomplish?? It isn't going to decrease the number of homes on the market. It will help the banks, title companies, and mortgage lenders, who make money on the transaction. But it won't help the homeowners who are facing foreclosure, or the taxpayers who don't take advantage of."

Yes, Chris... That's what's going on here... And again, people are still wondering why China has such a problem with the direction of the U.S. and our deficit?

And Gold... The shiny metal reached $1,100 on Friday... And with the dollar weakness overnight, Gold has moved even higher... I know it sure seems to be that Gold has moved really quickly through the $1,000 level, and it did! I'm still waiting for the "correction" to buy some more... But, right now, it looks like that correction might not every materialize!

Speaking of this... I'm also still waiting for a decoupling of the risk assets... Getting back to the fundamentals... It could be happening right now, folks... We can only hope!

And then there was this... I received an email the other day from a reader, who said to me that he thought I enjoyed seeing these things happen in the U.S.... WHAT? I do not revel in these things I talk about... I merely point out what I think will happen given a tax cut, or more deficit spending, or protectionism, etc. It doesn't take a rocket scientist to figure these things out! And... Besides... I live here, my kids live here, my granddaughter lives here... I think in some way that as long as I point these things out, and ways for people to profit from them, that I'll make things better for them...

Ok... That was good to get out of the way this morning... Let's go to the recap and then the Big Finish, eh?

To recap... G-20 was silent about the currencies and weak dollar, which has given traders the green light to sell the dollar further. The IMF didn't help the dollar either, saying that the dollar was still "overvalued". The BLS admitted the Birth/deal model had made HUGE errors in the past years, and

Currencies today 11/9/09: American Style: A$ .9280, kiwi .7380, C$ .9280, euro 1.4990, sterling 1.68, Swiss .9395, European Style: rand 7.43, krone 5.62, SEK 6.87, forint 181.75, zloty 2.8140, koruna 17.0975, RUB 28.7525, yen 89.90, sing 1.3850, HKD 7.75, INR 46.4475, China 6.8263, pesos 13.34, BRL 1.7045, dollar index 75.10, Oil $78.44, 10-year 3.51%, Silver $17.71, and Gold... $1,108.40

That's it for today... A tough weekend for our football teams... My beloved Missouri Tigers lost again, while the undefeated high school Flyers and the 8th grade Flyers became undefeated no more... UGH! Oh well, on to wrestling for my little buddy, Alex! I took my beautiful bride to see an old band mate of mine Saturday night! Old buddy, Preston, was still quite the showman on stage, with his drums! The band sounded great! My spring training buddies, made tentative plans for our annual trip to Jupiter on Friday... 16 weeks till pitchers and catchers report folks... And with that... It's time to see what's on my desk from Friday, and get going on today's trading! I hope you have a Marvelous Monday!

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

Dollar drifts lower....

Chuck Butler — Fri, 06 Nov 2009 15:30:36 GMT

..But First, A Word From Our Sponsor..
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Don't miss this unique opportunity. Deadline to buy the BRIC MarketSafe CD is Dec. 3rd, 2009. Apply today or learn more at http://www.everbank.com/001CertificatesMSBRIC.aspx?referId=11808
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In This Issue.

* Dollar drifts lower...
* Looking for silver linings...
* NOK to increase rates...
* Aussie dollar continues to move up...

Dollar drifts lower....

Good day... And good morning to everyone. I wanted to start out this morning's Pfennig by saying my thoughts and prayers go out to all of the families of the fallen soldiers and civilian at the tragedy down at Ft. Hood. It is tough enough when we here about losses of our soldiers overseas in the 'combat zones'; but such a large loss of life right here in the US is deeply saddening.

The dollar moved lower throughout the trading day on Thursday as investors felt more confident with the global recovery and the US stock market climbed back above 10,000. Yesterday's weekly jobs numbers were slightly better than expected, and set the market up for this mornings monthly jobs report which will probably show fewer job losses in October compared to September. But there will still be job losses, not gains; and the 'official' unemployment number will inch closer to double digits. We all know if you count those individuals who are underemployed (part time workers who would like full time jobs) and those that have given up on their job search, the actual unemployment number is more like 16%.

Another number which was encouraging for economists was the large jump in non-farm productivity. US worker productivity spiked up an annualized 9.5% in October as employers found ways to squeeze more work out of existing employees instead of hiring new ones. This jump demonstrates one of the positive aspects of a severe economic slowdown. Contrary to what some reader's of the Pfennig seem to believe, neither Chuck nor I are happy that the US continues to be mired in this economic recession. But business cycles are inevitable, and the more we 'spend to extend' the longer it will take for the recovery to take hold. The jump in productivity is one positive which comes out of an economic downturn. In the good times, companies become fat and happy, with many companies becoming very in-efficient. The severe slowdown causes companies to rethink all of the processes, and worker productivity increases. This need for higher efficiency also encourages innovations to the manufacturing and service sectors.

Another piece of data due out this morning will illustrate another positive aspect of the economic slowdown. US Consumer credit is expected to show another $10 billion drop. The highly leveraged US consumer is continuing to draw in their purse strings, ignoring calls from the administration to resume their old borrow and spend attitudes. While some of this belt tightening has been forced on consumers by the credit crunch, hopefully we will see this adjustment continue. This isn't good news for retailers as we approach the holiday season, but if the global imbalances are to be corrected, US consumers are going to have to continue to increase their savings rate and decrease debt.

So there are a few silver linings to the economic cloud hanging over the US. The United States will eventually emerge from this economic storm with a leaner and meaner manufacturing sector and a much weaker dollar enabling it better compete in the global arena.

Both the ECB and BOE kept rates unchanged, just as Chuck had predicted. Officials at the Bank of England slowed the pace of bond purchases, but still approved the additional purchase of 200 billion pounds. A rebound in factory output, which rose 1.7% (the largest gain in 7 years) combined with a .2% increase in UK producer prices caused the change of direction by the BOE.

ECB President Jean-Claude Trichet signaled the beginning of the end of emergency stimulus measures in Europe. Trichet said next month's offer of 12 month loans would be the last. Data released yesterday was unable to paint a clear picture of the economic recovery in the Euro-area. German factory orders rose for a seventh month in September, as exports helped the recovery. But another report showed European retail sales fell for a 16th month, declining more than economists had predicted.

The Euro rallied a bit after the ECB decision, but Citigroup is predicting an even larger rally. A report by Citigroup stated that the technical trading patterns predict the Euro will climb to $1.5064 short term, and move up to $1.5285 over time. It continues to look like Europe will recover, and the euro will move higher vs. the US$.

The Norwegian krone also moved higher as Norway's central bank Deputy Governor Jan Qvigstad said it is 'most probable' the deposit rate will be moved another quarte point higher by the beginning of 2010. Officials of the Norges Bank are attempting to hold down some of the appreciation of the krone as Norway continues to increase interest rates to combat rising inflation. Norway's oil rich economy was one of the first to emerge from recession, so the central bank is also taking the lead on increasing interest rates. Yield differentials, along with a strong economy should keep the NOK among the world's top performing currencies.

Speaking of the top performers, I was updating the return charts for the currencies yesterday and was amazed at the returns on the Brazilian real and Australian dollars YTD. Brazil is up 31.42%, and the Australian dollar has increased 28.05% during 2009. The Australian dollar continued to strengthen yesterday as the central bank signaled it will continue to increase interest rates in the coming months. "A further gradual lessening of monetary stimulus is likely to be required over time," the Reserve Bank said in Sydney today. A rally in commodity prices, along with increasing interest rates will push the AUD toward parity with the greenback.

Yesterday was Chuck's Friday, as he took today off to spend some time with Alex who was off school. But before heading home, he asked me to include the following in today's Pfennig:

And then there was this... Yesterday, I totally forgot to mention my complete distaste for naming a designated hitter (DH) the MVP of the World Series... He doesn't play the field... And only batted 13 times during the Series... Baseball people like myself, just cringe when the DH is in play... Giving the MVP to a DH goes along with the thought that is prevalent in sports today... To give every kid a trophy... Oh well... Let's move on to other things because it's YOUR Friday!

I am a little late in getting this out, so I am able to tell you the official US Unemployment rate rose into double digits during the month of October, hitting 10.2%. This will probably give some life to the US$, as investors run away from risk and move back into US treasuries for temporary safe haven.

To recap... Silver linings of the current economic storm cloud: increased worker productivity and decreased consumer credit. The ECB and BOE kept rates unchanged. Aussie dollars continue to move closer to $1, and Chuck really doesn't like the DH!

Currencies today 11/5/09: American Style: A$ .9161, kiwi .7247, C$ .9342, euro 1.4881, Sterling 1.6587, Swiss .9848, European Style: rand 7.5482, krone 5.6747, SEK 6.9866, forint 184.70, zloty 2.8567, koruna 17.27, RUB 28.96, yen 90.60, sing 1.3925, HKD 7.75, INR 46.815, China 6.8274, pesos 13.29, BRL 1.719, dollar index 75.71, Oil $79.60, 10-year 3.5%, Silver $17.50, and Gold... $1,093.55

That's it for today... The Blues finally scored a goal at home, but lost to Calgary last night in overtime. The sun is shining again today, and apparently we are supposed to have a rain-free weekend!! The big EverBank sign went up on the new office building next door, we will be moving into our new digs in less than a month. Hope everyone has a Fantastic Friday and a Wonderful Weekend!!

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

Rates To Remain Near Zero...

Chuck Butler — Thu, 05 Nov 2009 15:19:00 GMT

..But First, A Word From Our Sponsor..
Gain exposure to currencies of emerging BRIC countries-and don't lose a dime on market risk

* 4 BRIC currencies: Brazilian real, Russian ruble, Indian rupee, Chinese renminbi
* High upside potential
* No market risk to deposited principal
* Low $1,500 minimum deposit

Don't miss this unique opportunity. Deadline to buy the BRIC MarketSafe CD is Dec. 3rd, 2009. Apply today or learn more at http://www.everbank.com/001CertificatesMSBRIC.aspx?referId=11808
.

In This Issue..

* Dollar reverses sell-off...
* BOE & ECB meet today...
* New Zealand is not Australia...
* Funny accounting...

And Now... Today's Pfennig!

Rates To Remain Near Zero...

Good day... And a Tub Thumpin' Thursday to you! It's Tub Thumpin' because it's a Thursday and it's not raining! Yay for us! Well... Not only was I wrong, but the Bloomberg Economic Calendar was wrong too... The FOMC was not a 2-day meeting after all! Just one day, so no time to pull out the board games and cards...

I nailed that FOMC statement yesterday... WOW! You might begin to think that I have some inside info on the Fed Heads, the way I've been able to basically call every move they've made since the beginning of this whole meltdown in August of 2007! But that's not important here... The important thing is that the Fed said that "economic growth is not enough to hike rates, and therefore they will keep interest rates at near zero for an "extended period"...

Hmmm... Where have I heard that before? Any way, I thought that by continuing to use the words "extended period" that the dollar would get pummeled... And momentarily, it looked as though it might, as the offset currency to the dollar, the Big Dog, euro, raced to trade above 1.49... But a funny thing happened on the way to the forum, and the invisible hand reached down and reversed this move in a NY Minute! The work of the PPT? Probably... The Plunge Protection Team, probably stepped in to keep the dollar from a free-fall... That's my take on it any way!

Any way... With interest rates remaining at near zero levels here in the U.S. I thought it to be appropriate to pull out this new nickname for Big Ben... "Zimbabwe Ben"... (Thank's Ty!)

The rate hike decision ball gets thrown over to the "pond" to the Bank of England (BOE) and the European Central Bank (ECB) this morning for their versions of: Leave rates at present levels, but try to sound upbeat... I think you'll have the "tale of two Central Banks" here this morning. While both will keep rates unchanged, I think you'll see the BOE opt for more bond purchases in an attempt to shore up Britain's banking system... The ECB will NOT be making any such announcement.

In fact, I believe we'll hear ECB President, Trichet, announce that the ECB is moving closer to withdrawing stimulus from the economy! So, those of you who have the ability to go long euros VS sterling, this would seem to me to be the "trade o' the day"... What do I know, I'm not a short term "cross trader"!

So... With the FOMC finished... And the two European Central Banks on the docket today, somehow the Risk Aversion has crept back into the markets...

I received an email from a reader the other day, asking me why I prefer Australia to New Zealand, as the kiwi had outperformed its kissin cousin across the Tasman from 2002 to 2008.... Well... New Zealand enjoyed a wider yield differential than Australia during that time period, as it posted the highest interest rates in the industrialized world... Now that's saying something right there, and a good reason kiwi outperformed the A$...

But times have changed... And a very timely talk by Reserve Bank of New Zealand Gov. Bollard yesterday, helps explain why A$'s now over kiwi... Here's Gov. Bollard...

"Both countries have survived the crisis well, due to a mix of strong institutions and stimulative policies. However, their immediate prospects are different. Australia has avoided negative growth, and its prospects are driven by strong terms of trade, vast mineral deposits, the Chinese market, and rapid population growth.

New Zealand has had a recession, and the pick-up is slower and more vulnerable - a difference financial markets do not appear to appreciate.

Australia is a lucky country, but we could be a lucky neighbor.

Australia is entering a new minerals boom, investing heavily and encouraged by new finds, re-opening markets, bottlenecks and strong prices. Strong investment and export growth would mean big challenges for Australian policy. This all means an economy that looks less like New Zealand.

However, Australia's potential raised the prospects for New Zealand's manufacturers and services, which have a bigger share of exports than the same sectors in Australia."

OK... Back to me... So... Australia is a "lucky country" but New Zealand could be the "lucky neighbor"... Makes sense to me!

The Brazilian real rally took a walk on the wild side yesterday, gaining 2.5% VS the dollar in one day! But, that's relatively tame for some of the wild moves we've seen in recent times with the real... As long as you are not watching the currency like a hawk, and sweating out each pip move, this is no biggie... Keep your eyes on the horizon...

I find it somewhat humorous that the Brazilian Gov't officials have tried and tried to throw down road blocks for the real, and the investors just keep coming in droves... The 2% tax on Capital inflows did nothing to slow down the real's move VS the dollar, except for the day it was announced... After that, it was Wayne and Garth playing street hockey once more... "Game On!"

OK... I had a few callers and emails yesterday telling me that I was wrong about the Gold sales to the Reserve Bank of India (RBI), saying that it was done in SDR's... I think the confusion exits in the fact that the Gold sale kept getting reported as $6.7 Billion worth of Gold... But to put these questions to rest... Here is a report from the Economic Times of India (leading financial newspaper)
http://economictimes.indiatimes.com/markets/bullion/RBI-buys-200-mt-gold-from-IMF-to-pump-up-reserves-value/articleshow/5194492.cms
The purchase was in SDR 4.8 Billion worth.

Today in the U.S. we'll see the Weekly Initial Jobless Claims data, which will remain above 500,000 per week... And the ICSC Chain Store sales figures, which if consumer spending has gone back to pre Cash for Clunkers levels, would mean these figures would be soft... But I don't think this data gets much playing time with traders, so we'll just carry on...

And then there was this... OK... So... Some people chastised me yesterday for saying that the Gov't can't prove the 650,000 jobs they claim they "saved"... Well... Here's a ditty for you! Did you know that the Gov't is claiming that by giving a person that already has a job, a raise, it constitutes as "saving" that job? Want more funny accounting? Stay tuned, same bat time, same bat channel!

To recap... The FOMC left rates unchanged and said they would remain there for an "extended period of time" this sent the dollar to the woodshed, but reversed on a dime... PPT at work? The BOE and ECB meet this morning to discuss monetary policy. Expect the BOE to announce more bond purchases, and expect the ECB to announce a move to withdraw stimulus.. We learned that New Zealand is not Australia, but lucky to be Australia's neighbor! And try as they might to keep the real from gaining VS the dollar, the Brazilian Gov't's moves have not worked...

Currencies today 11/5/09: American Style: A$ .9085, kiwi .7190, C$ .94, euro 1.4850, Sterling 1.6530, Swiss .9825, European Style: rand 7.6360, krone 5.6975, SEK 7.0540, forint 186.37, zloty 2.8745, koruna 17.55, RUB 29.15, yen 90.32, sing 1.3955, HKD 7.75, INR 47.02, China 6.8276, pesos 13.28, BRL 1.7255, dollar index 75.81, Oil $79.91, 10-year 3.62%, Silver $17.40, and Gold... $1,088.80

That's it for today... Writing from home again, as I have yet, another appointment with a doctor this morning. When you have a blood clot, they monitor the thinness of your blood, and it has to be checked every 3 days... So, I have that going for me! I'm taking tomorrow off, so Chris will have the conn on the Pfennig tomorrow... So, as our little Christine would say... This is my Friday! YAY FOR ME! So with that on my mind... Good luck to my beloved Missouri Tigers as they take on Baylor this weekend, and my little Buddy Alex has his last game on Saturday. Congratulations to the Yankees on their World Series Championship... So... I'm off to see the Wizard... Talk to you again next Monday, and try to have a Tub Thumpin Thursday!

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

Another New Record Level For Gold!

Chuck Butler — Wed, 04 Nov 2009 15:19:53 GMT

..But First, A Word From Our Sponsor..
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* 4 BRIC currencies: Brazilian real, Russian ruble, Indian rupee, Chinese renminbi
* High upside potential
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Don't miss this unique opportunity. Deadline to buy the BRIC MarketSafe CD is Dec. 3rd, 2009. Apply today or learn more at http://www.everbank.com/001CertificatesMSBRIC.aspx?referId=11808
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In This Issue..

* Risk players come back out to play...
* Waiting on the Fed's statement...
* Yield differentials come into focus...
* Lisbon Treaty gets signed / ratified...

And Now... Today's Pfennig!

Another New Record Level For Gold!

Good day... And a Wonderful Wednesday to you! Well... Did you see the strong performance that Gold put in yesterday? And it didn't stop yesterday, overnight Gold is up another $7 on top of the +$20 gain it had yesterday... I've got some info on that, we can talk about later...

Oh Shoot Rudy! Let's talk about it right here, right now! It's not every day that Gold not only goes past its previous all-time record high, but obliterates the previous figure! I know you're wanting to take a peek at the price of Gold in the currency round-up portion of the Big Finish, so go ahead, and then come on back... How'd that $1,090 and change price look to you? Pretty sweet, eh? That is as long as you are a Gold holder!

So... What put the tiger in Gold's tank yesterday and overnight? Well, the weaker dollar helped... The thought became clearer that the cartel, I mean the Fed will keep rates on hold this week helped... But the real beef came from the announcement that the Reserve Bank of India was buying the 200 tons of Gold from the IMF... I know, I know, I told you yesterday that I thought it would be a "wash" for the dollar and the Gold price... But that was before I learned that the Reserve Bank of India paid for their $6.7 Billion dollars worth of Gold with... SDR's!

So... Either, the Reserve Bank of India (RBI) didn't want to get rid of their dollar reserves... (yeah, right!) or... The IMF didn't want anything to do with dollars, and preferred receiving SDR's! (for those of new to class, a SDR is a basket of currencies to make one unit called a Special Drawing Right, of which the IMF uses, and has been rumored to be the replacement for the dollar as the reserve currency of the world... The one government, one currency thing)

I'll pin my colors to the mast of the IMF not wanting anything to do with dollars at this point! Been there, done that, bought the T-shirt!

So... The price of Gold is nearing $1,100... I reminded my beautiful bride last night that just 2 months ago I told a group of close friends that they should seriously be considering buying Gold as it had slipped to $940 an ounce... I wonder what they think when they see Gold at nearly $1,100... I'm sure the V-8 head slap is going on all over my neighborhood!

OK... So what's going on with the currencies, as the dollar has had the hammer for 3 consecutive days now... Well... The dollar is back on the slippery slope this morning, as those same thoughts about the cartel, I mean (crying out loud Chuck, why can't you get that thought about the Fed really being a cartel out of your mind!) the Fed, will keep rates unchanged this week, really emphasizing the fact that Australia has raised rates 50 BPS so far, and Norway has raised them 25 BPS... There are places to go where you can get higher yields...

I get a kick out of some people that call the desk here, and say... "I'm looking for a high yield of around 8-10%, with no risk... Do you have that?" Sure, right here in my back pocket! NOT!

The FOMC meeting will be a 2-day meeting, so get the board games out, find the deck of cards, and make sure you have good batteries for the Battleship Game! When the Fed Heads get tired of the board games, and all, they'll announce tomorrow afternoon that they are going to leave rates unchanged, and that while they see improvement in the economy, sans the 3.5% 3rd QTR GDP, it's too soon to remove the accommodating rates... How do I know that? I don't... But, I'll bet a Krispy Kreme to a dollar that what they say is pretty darn close to that!

The key will be to see if the Fed Heads, led by Big Ben Bernanke, leave the words regarding the how long the low rates will remain, "extended period" for if they do... The dollar will immediately be sent to the woodshed once more, without passing Go, and without collecting $200! So... The statement following the rate announcement is the key tomorrow...

So... The euro is 1-cent higher this morning, the Aussie dollar is about 1-cent higher, and so on... Those that bought at yesterday's blue light special prices will be smiling like a Cheshire Cat this morning!

OK... I have to talk about this... For I've received a ton of emails about it...

Quite a few readers have sent me Nouriel Roubini's interview knowing that Mr. Roubini has long been a fave of mine.
Well... Mr. Roubini talked about the "mother of all Carry Trades" being the dollar, of which I told you had become the new funding currency for the Carry Trade a few months ago...

Mr. Roubini also talked about how this was fueling a huge run-up in the prices of risk assets... I've also told you about that, and how... Should the U.S. do the double dip that a huge sell off of stocks would probably occur, and cause an adverse affect on the risk assets of currencies and commodities....

So... All in all... Nothing new... So I was surprised that readers wanted me to comment on this... Well, the caveat here is that Mr. Roubini is calling for a massive sell off of the risk assets when the correction comes... He doesn't specify when this will happen...

I've also said that the risk assets have gone too far too fast, and that a correction is due... So, let's move on from there...

I see where Marc Faber is saying that the correction will net the dollar 10% VS the euro... Again, he doesn't say when this will happen, but that it will...

But again, as diversification people, with our eyes fixed on the horizon that shows that the only way the U.S. Gov't can repay their debts is with cheaper dollars... We just batten down the hatches for this correction, for we know that on the other side of the correction is another massive move upward...

There was something else that I wanted to talk about... And it's something that I'm sure I'll get a few emails about... Good and bad... But here goes... Did you see that Ford announced a nice profit for the last quarter... CAPITALISM ISN'T DEAD! Three cheers for Capitalism! Maybe that's all I'll say about it, for if I went into how I feel that Capitalism is getting beaten like a rented mule, I might start talking about stuff that doesn't need to be discussed here!

So way to go Ford! Didn't take bailout money... And 1 year later books a profit! Whereas GMAC is in need of additional bailout money, and Chrysler is Fiat now... Great use of taxpayer money wasn't it?

Here I go again... Sorry, didn't mean to go on this tangent about this stuff... It's just that I have no idea why this doesn't just tick off any American that reads about this stuff! But not to worry, the Gov't has more plans to spend money they don't have!

Hey! Earlier I talked about Australia's rate increases... Well, the Reserve Bank of Australia (RBA) is running scared these days... Scared that their rhetoric about rate increases is going to push the A$ to parity with the green/peachback... So guess what the RBA members have decided to do? You've got it! They're going to "tone down" their interest rate hike rhetoric... RBA Gov. Stevens said that the 28% gain in the A$ this year VS the U.S. dollar would be a good inflation fighter, and allow him to slow down the rate increases...

Well... Don't get off the A$ love train just because the RBA Gov. Stevens suggests that he could slow down rate increases... The A$ already enjoys more than 300 BPS of yield differential to the U.S. dollar, Japanese yen, Canadian dollar, and Swiss franc!

And the Lisbon Treaty that was hung up in the Czech Republic, has finally been signed by the Czech Republic's President, thus completing the rounds, and putting the Treaty in place. Now, I'm not a big fan of the Treaty, but... It's what the Eurozone needed to remain viable, and so it it's done... This removes the albatross from around the euro's neck, and will shut those people up that keep talking about a collapse of the European Union, and the euro...

Chris Wood is filling in for good friend David Galland this week on David's daily letter called "Casey's Daily Dispatch"... Anyway, Chris Wood had this to say yesterday, which I believe just about sums it all up regarding the Fed and Treasury here in the U.S....

"A group of federal agencies including the FDIC, Federal Reserve, and Office of Thrift Supervision just released new guidelines for how banks deal with troubled commercial real estate loans. And get this:

Under the guidelines, loans to creditworthy borrowers that have been restructured and are current won't be classified as high risk by regulators solely because the collateral backing them has declined to an amount less than the loan balance.

Yes, you read that correctly. Banks won't have to show losses "solely" because the collateral has fallen in value below the loan. Perhaps most incredible is that this move is being applauded by the business community. The next step will be a federal move to facilitate refinancing that same collateral."

Chuck here again... That's pretty amazing, don't you think? First the financial institutions were allowed to drop the "mark-to-market" on their collateral... And now this... And people still question why foreigners are growing very weary of these things, and becoming quite scared regarding their dollar backed holdings? They shouldn't question any longer, eh?

And then there was this...

Remember how excited I was that Ron Paul's bill to audit the Fed was going to discussion? I thought, surely (hey! Who's Shirley?) this would be it... The Fed would finally get audited, and treated like the Corporation they are! But, then Ty Keough sent me this, and my hopes were dashed...

Representative Ron Paul, the Texas Republican who has called for an end to the Federal Reserve, said legislation he introduced to audit monetary policy has been "gutted" while moving toward a possible vote in the Democratic-controlled House.

The bill, with 308 co-sponsors, has been stripped of provisions that would remove Fed exemptions from audits of transactions with foreign central banks, monetary policy deliberations, transactions made under the direction of the Federal Open Market Committee and communications between the Board, the reserve banks and staff, Paul said today.

"There's nothing left, it's been gutted," he said...

OK... To recap... Gold is soaring! Gold has reached a new record all-time high! The dollar has given back some of its gains the past 4 days as traders begin to realize that the Fed is going to keep rates unchanged tomorrow. The Gov't is up to its usual tricks regarding collateral and the bill to audit the Fed.

Currencies today 11/4/09: American Style: A$ .9080, kiwi .7245, C$ .9425, euro 1.4770, sterling 1.6525, Swiss .9770, European Style: rand 7.7365, krone 5.7150, SEK 7.0580, forint 187.60, zloty 2.89, koruna 17.6650, RUB 29.27, yen 90.80, sing 1.3970, HKD 7.75, INR 47.06, China 6.8270, pesos 13.22, BRL 1.7280, dollar index 76.14, Oil $80.02, 10-year 3.48%, Silver $17.43, and Gold... $1,091.70

That's it for today... I hear that my colleague on the Currency Capitalist newsletter that I do for the Sovereign Society, Ashish, is going to fill in for me at the Conference that I'm missing, and give my presentation on the Treasury Bubble... He'll do a great job! We've had 4 consecutive days of sunshine, and you should see the people, they are smiling again! I began making my plans for Spring Training with the family last night... Whenever I do that, I get all geeked up and ready to leave now! But I have 4 months to go! UGH! First we have our move to the new building next door, then Christmas, then New Year's, Orlando Money Show, and then finally March! Oh, and there's a conversion to a new system thrown in there somewhere! It's a moving target so we don't know for sure, but it will be HUGE! OK... Well, as with every day, it's time to go, so I hope you have a Wonderful Wednesday!

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

RBA Raises Rates Again!

Chuck Butler — Tue, 03 Nov 2009 15:44:43 GMT

..But First, A Word From Our Sponsor..
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* 4 BRIC currencies: Brazilian real, Russian ruble, Indian rupee, Chinese renminbi
* High upside potential
* No market risk to deposited principal
* Low $1,500 minimum deposit

Don't miss this unique opportunity. Deadline to buy the BRIC MarketSafe CD is Dec. 3rd, 2009. Apply today or learn more at http://www.everbank.com/001CertificatesMSBRIC.aspx?referId=11808
.

In This Issue..

* Risk Aversion boosts dollar...
* U.S. manufacturing is strong...
* More stimulus? Please say it ain't so Joe!
* Thoughts from the Big Boss!

And Now... Today's Pfennig!

RBA Raises Rates Again!

Good day... And a Terrific Tuesday to you! Well, I'm here! Just when you thought I would be gone for the week, and you would get away from my rants, and get the calm Chris Gaffney, the rug gets pulled out from you! I am so bummed! I was told that I could not travel to Cabo for the Sovereign Society's Offshore Advantage Conference, and I was to remain at home, with my leg up, blah, blah, blah... What a crock!

OK, now that we've got that out of the way... Front and Center this morning, we have a very strong dollar rally going on... It began yesterday mid-morning, when things turned on one thin dime. First, we had the U.S. Manufacturing Index rise in September and the Trading Theme kicked in with the dollar getting sold on the good news for the economy... But then a strange thing happened on the way to the forum. Everyone began to fear what's been going on in Banking... Friday, the 115th bank failed this year, and suddenly, traders, investors, hedge fund dudes, and everyone else, got a case of the flu... Not the "pandemic" H1N1 flu... This is the "chicken flu"... Chicken to continue to takes risks in the face of a banking problems... Well, to think of it, maybe, just maybe, it's not the "chicken flu" but the "prudent flu"!

So... The dollar's losses were reversed by mid-day, and the non-dollar currencies were taken to the woodshed... Shoot Rudy, even a rate hike by the Reserve Bank of Australia (RBA) couldn't reverse the Risk Aversion trading... I'll get back to the rate hike by the RBA in just a minute... But first I need to talk about this shift to Risk Aversion once again... We saw this briefly last week, and it faded into the wind... I hope this shift to Risk Aversion is soon a small item in our rear view mirrors!

Now... The ISM Manufacturing Index rose to 55.7 from the prior month's 52.6 reading. This marks the strongest reading for the index since the April 2006 reading of 56.0. Let me explain something to you, that I've explained before, but this really illustrates what I'm talking about... And that is... This Manufacturing renaissance here in the U.S. comes as a benefit of the weak dollar that's been in place for over 6 months now. It's that simple folks... You want Manufacturing in the U.S. to be robust? Then you need a discounted clearing mechanism... And that is the dollar...

For, the Asians are learning to trade among themselves without the U.S., and the Eurozone already has 80% of their trade among themselves, with out the U.S. that doesn't bode well for U.S. exports unless... Unless there is a discount... And that discount comes in the price they have to pay / convert their currency for the dollars that are needed to buy the export... So... Why shoot the goose that lays the golden eggs?

OK... As I mentioned above... The RBA raised rates 25 BPS (1/4%) last night, as I expected them to, and had told you they would! The A$ got sold though after rallying briefly... Traders go spooked when the RBA Gov said that "it was prudent to lessen gradually" the stimulus to the economy provided by lower borrowing costs... OK... Folks, that's Central Bank parlance for: The interest rate hikes are going to slow down from here on out... So don't expect a rate hike at every subsequent meeting!

Oh come on A$ Traders! The A$ yield differential to the U.S. is now staggering! As it is to Japan, Europe, and Canada! Only New Zealand and Brazil can play on the same team as Australia when it comes to significant yield differentials! But NOOOOOOOOO OOOO! You get spooked! Have you no intestinal fortitude? HEY! The good news is that it gives late comers a chance to buy at cheaper levels, or... Those that already own, a chance to pick up more at a cheaper level! Courtesy of the Chicken Little A$ traders!

Well... I guess I can't blame them too much, with the Risk Aversion campers taking over the campground... Here's another thing that I saw last night that has the Risk Aversion campers spreading like wildfire... A long time reader of the Pfennig and Bloomberg TV personality, Pimm Fox reported last night that: President Barack Obama's advisers are "seriously" considering proposing a second stimulus measure to boost the economy, Commerce Secretary Gary Locke said in an interview. Locke said another stimulus would be "very targeted and specific and we need to be mindful of the deficit as well."

Hmmm... OK... How many times have I said in the past 8 months that the Gov't was going to see the need for more stimulus? The answer? MANY! I've got a question... If the GDP was "so robust" as the Gov't officials claimed it to be, then why are they discussing more stimulus? BECAUSE THE GDP WAS A FRAUD! We all know that... I explained it all to you yesterday! But the announcement that more stimulus is being "seriously considered" is what we used to call as kids as "cheaters proof"!

What does "very targeted and specific" mean? It means the Gov't is going to get deeper and deeper into the private sector... That's what it means!

I have a question for the Gov't... You told us the $787 Billion stimulus package last February was going to keep unemployment from reaching 10%... Guess what? That didn't work! So, what makes you think whatever taxpayer money you spend now is going to work? Oh, and don't give me that barrel of baloney that you've "saved" 650,000 jobs... Saved Jobs CAN NOT BE PROVED! So why not say you saved 1 Million or 2 Million jobs? I mean, what difference does it make... It's not true, and can't be proved!

Whoa, there big boy... You had better stop before the Pfennig gets sent to the White House to shut me down! Yeah, like it hasn't been sent there before now!

OK... Did you hear about the IMF Gold Sale? The IMF sold 200 tons of Gold... Not to worry though, the Reserve Bank of India stepped to the plate and bought the Gold... Gold revisited $1,060 after this announcement, but in reality it should have been a wash, and the price of Gold has backed off a few dollars overnight... But still pretty well bid, given the Risk Aversion going on in the currencies.

And why not? Gold is a store of value... Of wealth... Whey wouldn't it buck the trend?

Speaking of which... The Big Boss, Frank Trotter, and I were talking last week about Gold, and we kicked around this thought of sharing a lesson of money with kids... And he sent me this...

The weather turned around here in about three weeks. Great fall, then 10 days of deluge, now the chill of late fall. And instead of Thanksgiving displays, the march of catalogues imploring us to turn away from savings and save the world through spending have begun to hit the door. In the past few years as our children have become young adults we have started to turn away from the quest for unneeded presents and zombie-like consumption and have started to implement a contribution concept: research and choose a cause that will appeal to the recipient, ensure that the cause is not acting like your average NGO running around in white land cruisers or and staying at five star hotels in the third world, and make a modest contribution. It isn't working perfectly and we certainly backslide enough but it's underway. We may turn it into a gift of a few shares of a good company but enough of this.

Something else that meets the need of a physical gift, but one with a message has been on my mind lately. It isn't easy to start a conversation with a young person, especially quite young about global economics and the transient value of money. In fact it's hard to start a conversation with almost anyone on the topic. So what's a better way to provide a gift box and a message? Readers of "A Pfennig for your Thoughts" will certainly be ahead of me ( the gift of real money of course ) gold coins.

With the gift of a coin, or a set of coins you can tell so many stories or impart values in a variety of ways. Coins are struck around the world providing a geography lesson and of course an insightful and cogent discussion of central bank attention to their country's money supply (well okay, you might want to skip that one). You can tell the story of gold in the history of the world, and if you are brave and the audience attentive, how gold has held its value over the centuries and will probably do so for centuries to come. Bringing things up to date you can cover the astounding fiscal and monetary policy that has become our new national pastime over the current and past administrations (but be sure to take your blood pressure medicine). Tell 'em "you are worth an ounce a year" (or more).

If you are buying for one or two friends or children or grandchildren head down to the local coin store and grab a couple bullion coins. If you have a good size list or have the capacity to do something substantial then give the team here at EverBank a call. In any event lets all be sure to teach our kids, grand-kids and generally people around us about the monetary value of gold.

WOW! That was great Frank! I love it when the Big Boss puts down his thoughts in writing and shares them with the rest of us!

OK... To recap... The dollar is enjoying a strong rally thanks to the Risk Aversion crowd, that is getting spooked about the banks, after the 115th U.S. Bank this year failed... The Reserve Bank of Australia raised rates again by 25 BPS, and the Reserve Bank of India bought 200 tons of Gold that the IMF felt it needed to sell, so a wash if you will. And then Chuck went on a rant about stimulus...

Currencies today 11/3/09: American style: A$ .8935, kiwi .7115, C$ .9235, euro 1.46540, sterling 1.6285, Swiss .9685, European style: rand 7.9210, krone 5.8325, SEK 7.1625, forint 191, zloty 2.94, koruna 18.03, RUB 29.42, yen 90.10, sing 1.4030, HKD 7.75, INR 47.41, China 6.8279, pesos 13.35, BRL 1.7725, Dollar Index 76.73, Oil $77.19, 10-year 3.38% (see the Risk Aversion with the drop in the 10-year yield fall from 3.62% yesterday!) Silver $16.36, and Gold... $1,057.70

That's it for today... A little long today with the Big Boss's thoughts, but well worth them I must say! For all of you that are heading out to Cabo to the Sovereign Society's Conference, specifically to see me, I apologize for not being there! HA! Yeah, like someone was going just to see me! HAHAHAHAHAHA! Seriously though... I feel real bad that I had to remain at home... UGH! OH well, this way I won't miss my little buddy Alex's last game this Saturday, or son Andrew's girlfriend Rachel's birthday on Sunday! Gotta go... I hope your Tuesday is Terrific!

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

Consumer Spending Drives GDP?

Chuck Butler — Mon, 02 Nov 2009 15:44:08 GMT

..But First, A Word From Our Sponsor..
Gain exposure to currencies of emerging BRIC countries-and don't lose a dime on market risk

* 4 BRIC currencies: Brazilian real, Russian ruble, Indian rupee, Chinese renminbi
* High upside potential
* No market risk to deposited principal
* Low $1,500 minimum deposit

Don't miss this unique opportunity. Deadline to buy the BRIC MarketSafe CD is Dec. 3rd, 2009. Apply today or learn more at http://www.everbank.com/001CertificatesMSBRIC.aspx?referId=11808
.

In This Issue..

* Dollar rebounds after spending fades...
* Chinese Manufacturing rises...
* Eurozone Manufacturing rises...
* Australia as the proxy for global growth...

And Now... Today's Pfennig!

Consumer Spending Drives GDP?

Good day... And a Marvelous Monday to you! And Welcome to November! My least liked month! But that's a story for another time! I hope your Halloween was fun! The rain stopped here, there was a near full moon shining in the sky, and the little kids had a blast! And Hey! The Rams won a football game! WOW!

OK... Well... Friday was a blur to me, as I went to the doctor's office for a test, and then on my way to work, they called my cell and asked me to turn around and go to a lab for more tests... UGH! So, by the time I got to work, Jennifer had set everything up and begun trading for me... Then it was time to go home! So, I'm sitting here this morning, scratching my bald head trying to recall the currency prices on Friday... And Oh yeah! Now I remember! Do you recall the Thursday action after the GDP report showed such strength (whether you believe it or not) and the dollar got sold like pet rocks?

Well the Gov't had made such a big deal out of the fact that a good portion of the GDP report was consumer spending during the quarter... In fact 1.6% of the 3.5% increase was the Cash for Clunkers program! Well... That was a bad thing to do, for on Friday, Personal Spending and Income printed, and the Spending piece had fallen in September... So much for the euphoria of Consumer Spending bringing the economy out of the recession! Oh, and like I said last week, this plays right into my thoughts from long ago, that we would see some growth near the end of this year, but would slip right back into recession, thus a double-dip... So, the first two parts are in the books...

So... The currencies slid VS the dollar on Friday, and haven't really rebounded overnight from what I can see here at home, as I write the Pfennig at my kitchen table! The Aussie dollar (A$) seems to be champing at the bit to move higher VS the U.S. dollar, but just can't get the Big Dog, euro, to get off the porch this morning!

The reason the A$ is champing at the bit to move higher, is the news from China this past weekend that their Manufacturing data from October showed the fastest gain in 18 months! So, in keeping the Manufacturing Index here in the U.S. in mind, the Chinese Manufacturing Index moved to 55.4 in October, from the 55 in September, and the Chinese say that exports were strong... Ok... We have to apply the "believe 1/2 of what the Chinese tell us about their economy... If that's so, then the Manufacturing Index still is above the expansion line of 50... And that's a good thing for the global economies!

I would think that news like this from China would be a springboard for Commodities, and the Commodity Currencies of Australia, Brazil, Norway, New Zealand, and Canada...

Speaking of strong manufacturing... The Eurozone printed a strong Manufacturing Index report this morning too! Manufacturing in Europe expanded for the first time in 17 months, in October, increasing to 50.7 VS 49.3 in September!

The dollar index is beginning to show some weakness as I write this morning... And one would certainly think that news like this from China and the Eurozone, would push the dollar down... But, there's that stinkin' Trading Theme hanging over us like the Sword of Damocles! And with the news this past weekend that CIT Group was going to have to file bankruptcy, if things hold true, it would be good for the dollar... The flight to safety, and all that!

Hey! Doesn't this news about CIT Group tick you off a bit? It does me... And I'll tell you why! CIT Group had received $2.33 Billion of taxpayer money in an attempt to bail them out last year, but they failed any way! Again! Wouldn't it have been far better to just let them fail when they first showed signs of not being able to compete, and survive? I know that in the whole scheme of things $2.33 Billion doesn't sound like that much... Considering the Trillions that have been spend, allocated or guaranteed! But... $2.33 Billion here, and $2.33 Billion there, and pretty soon you're talking about a nice sized pile of cash, that would not have been wasted!

The Business Section of our local paper had an article this past weekend on what I was referring to last week regarding GMAC and Ally Bank... Here's David Nicklaus saying what I wanted to last week... "That clever Ally Bank ad, the one where a boy is denied a toy truck because of a "limited-time offer," omits a fact that would interest most viewers.

You, the taxpayer, are propping up Ally, the bank that's so good at making fun of other banks. And it looks like Ally's parent, GMAC Financial Services, will ask for more money soon."

So... The Gov't is in competition with private sector banks... And they can pay interest rates that are higher than other banks, because... If they lose money, they can just go back to the well and get more bailout money!

This is all just becoming one Big Mess folks... You've got to see what's going on here! It's called Big Gov't... And when you have Big Gov't, you have Big Deficits! The Gov't does not have any money to spend unless they steal it, I mean take it from taxpayers first! And they're spending what they don't have! Tax receipts are falling, and the Gov't's expenditures are rising! That's a bad formula folks...

And one that makes you so aware of the need to be diversified with a portion of your investments out of the dollar!

OK... I've got to stop there, I have to go to the doctor's office this morning, and I don't need my blood pressure boiling!

Hey! I was reading an article on Friday about Australia in which the Australian Treasurer, Wayne Swan, told reporters that he truly believes that the Australian economy is going to outpace most of the world in 2010... This plays well with my thought that I've held for so long, and have told you dear readers about for some time now, and that is... That Australia is the proxy for global growth... And if the "insiders" in Australia think their economy will outpace most of the world, that's a good sign for the global growth! And one that I think traders should be taking notice of!

I think that Brazil has a long way to go to catch up with Australia but, Brazil has made great leaps in the past 5 years, and has really taken the steps to be in the same conversation when talking about Australia... The country is still an Emerging Market though, and with that, you get wild swings in the currency... Just so you know!

I want to get back to the GDP report in the U.S. from last week... Recall that above, I told you that the Gov't made a Big Deal out of the fact that a large portion of the rise in GDP was consumer spending... But you have to ask yourself this question... "how are consumers propping up GDP with spending in the face of over 16% unemployment? Personal Consumption climbed while Personal Income fell in the quarter, as documented in the Pfennig each time they printed... So, the only way that works is if, you don't think, nah, we've had to have learned our lesson, right? Oh well, I'll throw it out there... The only way that works is if the money is borrowed... Credit cards, etc. OH NO! Tell me we're not going down this road again! Ahhh grasshopper, but Christmas is just around the corner... With 16% unemployment going on, this should be a very "plastic" Christmas shopping season!

Ok... The week ahead is chock-full-o-data and events... Like... The FOMC meeting tomorrow, that carries over to Wednesday... You know what I say about those two-day FOMC meetings! Got any Aces? Go Fish!

We'll see our own version of Manufacturing Index the ISM as it prints this morning... We'll also see Pending Home Sales. Tomorrow is the Auto Sales, and Factory Orders. Wednesday we'll get the Treasury Refunding Announcement, and Thursday is weekly initial Jobless Claims, and the stupid Productivity reports, and then Friday is the Jobs Jamboree!

So... We've got a lot to talk about his week... I'm supposed to be leaving for Cabo tomorrow, but I doubt the doctor is going to let me travel, so I'll probably be here all week. So, Chris gets off the hook this week most likely...

To recap... The euphoria that was all over the markets after the GDP report was wiped out by a very weak Consumer Spending report for September. The dollar rebounded on the "bad news for the economy" thus confirming that the "trading theme" is still in place. CIT Group filed for bankruptcy this weekend, thus wasting the $2.33 Billion, that was given to them by the Gov't from taxpayers! And both China and the Eurozone's manufacturing indexes were strong last month, which should be a good thing for the global economies, commodities, and so on...

I'm going to try something different this morning... I still get emails from people that question why I quote currencies in two different ways... Well, there are two pricing conventions in currencies, and so I try to keep currencies in the form they are quoted... But to make things easier... We'll break out the American Style, and the European Style...

Currencies today 11/2/09: American Style: A$ .9045, kiwi .72, C$ .9255, euro 1.4780, sterling 1.6360, Swiss .9790, European Style: rand 7.9175, krone 5.70, SEK 7.0315, forint 186.05, zloty 2.8740, koruna 17.88, RUB 29.20, yen 89.90, sing 1.3990, HKD 7.75, INR 46.97, China 6.8279, pesos 13.22, BRL 1.7635, dollar index 76.15, Oil $78.17, 10-year 3.62%, Silver $16.62, and Gold... $1,054.30

That's it for today... Well.. For once, it was a good football weekend here in St. Louis, as our Rams stopped a 17-game losing streak, and my beloved Missouri Tigers posted a Big 12 win. Little Buddy Alex's team remained undefeated, but tied. Two absolutely glorious sunny, blue sky days here after the what seemed to be 40 days of rain finally ended! November is off to a good start weather wise, but I know all too well what it has in store for us! Well, I'm off to see the Wizard! Speaking of which, my little granddaughter, Delaney Grace was the cutest Dorothy you've ever seen! She came by the office on Friday to show every here just how darn cute she is! OK... Time to go, this time for real... I hope you have a Marvelous Monday, and a good start to the week and month!

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

3rd QTR GDP Is Strong!

Chuck Butler — Fri, 30 Oct 2009 14:40:04 GMT

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In This Issue..

* Dollar gets sold after GDP report
* High yielders get bought!
* German Retail Sales decline...
* Real has wild swings!

And Now... Today's Pfennig!

3rd QTR GDP Is Strong!

Good day... And a Happy Friday to one and all! I can't believe how hard it rained here yesterday... Unbelievable! And me, with my cane, and not able to run, was stuck in it going from the car... Absolutely soaked! If I were a kid, I would have thought that to be fun! But, I'm not... It's still raining this morning too! UGH! Let's hope it stops in time for the Trick-or-Treaters!

OK... Well the rain fell on the dollar's parade yesterday too! And, just like I thought it would do... The dollar got sold like funnel cakes at a state fair, once the U.S. 3rd QTR GDP report printed... The dollar rally was stopped in its tracks, which meant that the "trading theme" that rewards the dollar when things look bad in the U.S. and punishes it when things look good, which is completely opposite of what it should do fundamental wise, was still in place!

3rd QTR GDP was 3.5%!!! Let's Party! Get on your red dress sweetheart we're going out dancing, we're going to party like it's 1999! Seriously, the Gov't officials, including Summers and Geithner think it's all seashells and balloons from here on out! So, why shouldn't we think the same? I mean they've never led us to the wrong side of the tracks have they? HAHAHA HAHAHAHAHAHA... And HAHAHAHAHAHAHA HAHAHAHAHA!

OK, don't get me wrong here, I'm glad the U.S. economy seems to be out of the recession/ depression... But, didn't we expect a bump in the economy? Didn't we think we would see growth by the end of the year, based on the stimulus and money supply extravaganza that went on the first part of this year? And... Based on the reports I saw, a large portion of the growth was actually a return of Consumer Spending in the quarter... Cash for Clunkers really helped the Consumer Spending along too!

But isn't it just like the people that win the lottery... Suddenly, they have all this cash... And they spend it until they have no cash and voila! They are back to having nothing to spend! That's how I think the U.S. economy will react once the stimulus and other monetary candy is withdrawn from the economy... I'm still pinning my colors to the mast of a double dip for the economy... We've got the first two parts... The negative growth, and now the positive growth... Where are we headed next? Only the Shadow knows!

We'll begin to see a glimpse of what's going to go on in the next couple of weeks, as the Fed's Quantitative Easing program has hit their ceiling of $300 Billion, and ended yesterday... The Fed's 7-month buying spree, remember they announced this plan while I was in Florida at spring training, seems to have put the lid on yields of Treasuries to allow the housing market some time to heal... But, as I told my publisher for the Currency Capitalist, Erika Nolan, when I met with her after the announcement... "the U.S. has just opened Pandora's Box of baaaaaaaaaddddddd things for the economy, for Japan has implemented this same program, but over 10 years ago, look how well that's turned out for them!"

Today's data brings us two of my faves... Personal Spending and Income... We'll see if the Consumer Spending continued in September or not...

There's a great headline to a story on the Bloomie this morning... The title reads: "Obama Bridge To Lasting Economic Expansion Risks Going Nowhere" A Bridge to nowhere... That sounds about right to me! It could be the Bridge Over Troubled Waters, or it could be the Bridge of Sighs... I still believe that the U.S. Gov't has spend Trillions taking us deeper into the abyss of a national debt, with little to show for it, except... The U.S. has ventured into the private sector deeper than any Gov't has before during this financial meltdown... Think they'll get out once it's over? HAHAHAHA HAHAHAHAHA! Not going to happen my friend!

OK, enough of that! It's a Friday for crying out loud, Chuck, can't you think of more pleasant things to talk about? Yes... Let's see... Oh yeah! I started telling you above about the non-dollar currency rally VS the dollar yesterday, so let's go back to that!

Well, there wasn't much to say other than the dollar got sold after the GDP report printed... It wasn't so much that the currencies rallied VS the dollar, as it was a sell off of the dollar, which led to a currency rally! The high yielding currencies of Australia, Brazil, New Zealand, and even Norway now that rate on the rise there, posted the best gains VS the dollar on the day. And that makes sense, right? I mean, haven't I been harping on the yield / interest rate differentials lately? And here's where they came out to play!

The data in the U.S. was good, which brought the risk takers out of the walls once again, and knowing that the U.S. interest rates are going to remain near zero for some time to come, they sold the dollar and those paltry yields that go with the dollar, and bought currencies that had a nice positive yield differential to the those paltry yields!

The Big dog, euro, as the offset currency to the dollar, obviously participated in this dollar sell off... The euro's gains were stopped this morning though, when German Retail Sales printed and unexpectedly declined in September. Remember, Germany's economy exited their recession in the 2nd QTR, albeit a nascent recovery at best... So, we'll have to keep an eye on Germany's nascent recovery to see if it "double dips" too!

Speaking of Brazil... Recently, the real has really shown its tendency to take a walk on the wild side when trading gets going... I'm talking about 3-5% swings good and bad! Whew! That's something to watch! The good news is... That even though the swings in the price of the real are wild, the overall trend continues to be good for real holders... I expect the real to react to rumors this morning that the Gov't will not throw out road blocks to impede the real's performance... That would be HUGE! And very welcomed by currency traders that trade the real always looking over their shoulders to see if the Gov't will throw out the road blocks... So, like I said, there are rumors this morning, that the Gov't will announce that they are not going to impede the real's rise at this time...

And then there was this... U.S. Treasury Sec. Tim Geithner, announced yesterday that he wants the power to not only tell a corporation that they are closed for business, but to also have the power to shrink Corporations that are not having problems! He will be the "death panel" that Barney Frank talked about a couple of months ago for non-financial institutions... Shake me, Wake me, when's it's over... Maybe I'm having a bad dream, folks...

To recap... The dollar's rally was stopped in its tracks by the U.S. 3rd QTR GDP which printed a 3.5% increase, and caused investors to seek higher yielding assets, thus selling dollars. German Retail Sales unexpectedly declined in September, thus stopping the euro from rallying further this morning. And the High Yielders get all the glory when investors realize that U.S. rates are going to remain near zero for some time to come... Aussie, Brazil, New Zealand lead the pack!

Currencies today 10/30/09: A$ .9155, kiwi .7310, C$ .9360, euro 1.4845, sterling 1.6540, Swiss .9840, rand 7.6750, krone 5.63, SEK 6.9875, forint 183.61, zloty 2.8525, koruna 17.83, RUB 29.02, yen 90.90, sing 1.3970, HKD 7.75, INR 47.03, China 6.8275, pesos 13.01, BRL 1.7325, dollar index 75.87, Oil $79.58, 10-year 3.62%, Silver $16.60, and Gold... $1,044.90

That's it for today... I'm writing from home this morning, as I have a doctor's appt. first thing before I go to work... The network was a little touchy this morning, and I wasn't sure I would get this out, but it has settled down now. Whew! Big Weekend for my beloved Missouri Tigers as they travel to Colorado. And my little buddy Alex, as his team travels to Webster Groves! HA! Good news in the local paper this morning, as the best player in baseball today, Albert Pujols announced that he wants to be a Cardinal for life! Our Blues just can't get on a roll, win one, lose one... UGH! So... Tomorrow is Halloween! I can't wait to see the little ones in their costumes! Our little Delaney Grace is Dorothy from the Wizard of Oz, with ruby red shoes, a basket and Toto too! She is so darn cute! I'll leave you with the thought of a little Dorothy coming to your door! I hope it dries out here soon... And I hope you have a Fantastico Friday and Ghoulish Weekend! BOO!

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

3rd QTR GDP To Lift Our Spirits?

Chuck Butler — Thu, 29 Oct 2009 14:08:00 GMT

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In This Issue..

* Currencies rebound a bit VS the dollar..
* Bill Gross on the dollar...
* Norway raises rates!
* RBNZ lifts easing bias!

And Now... Today's Pfennig!

3rd QTR GDP To Lift Our Spirits?

Good day... And a Thunderin' Thursday to you once again! It's not raining at the moment, but rain is forecast for today, thus the Thunderin' Thursday name! Rain today, tomorrow and who knows when it will stop... I'm thinking of buying the blueprints to build an Ark!

Front and Center this morning, we have the non-dollar currencies showing some healing as stock futures are positive. What's driving this new found positive feeling in the risk assets? Well, it's all about the first reading of 3rd QTR GDP today, which... Is expected to show that the U.S. economy came out of the recession in the quarter. Of course, I'll be looking for the Gov't spending portion of the GDP, but other media outlets won't, and the markets will get back to looking for higher yields, which you can not get in the U.S.!

Speaking of higher yields... Norway's Norges Bank did indeedly do raise rates yesterday, making them the first European Central Bank to do so. The Norges Bank members chickened out and only opted for 25 Basis Points (BPS), when I thought they should go the full 50 BPS... But, hey! The Norges Bank is raising rates, right? Let's not get picky here! Is the European Central Bank raising rates? Is Sweden's Riksbank, or Switzerland's Central Bank raising rates? How about Canada? Or Japan? NO, NO, NO, NO, NO, NO and NO! Let's get to giving some love to the Norwegian krone!

So... Looking at the rate hike score card of major countries, we have Australia, and Norway... The exact two I told you months ago would be the first to raise rates this year, when most observers thought it would be in the first quarter of 2010... So, if the U.S. GDP is as strong as forecast (+3.2%) then investors and risk takers will be coming out of the walls again, and buying higher yielding assets... There's only a few places in the world they can go folks... Australia, New Zealand, Brazil, South Africa, the Eurozone, and Norway... The Euro wannabes of the Czech Republic, Poland and Hungary probably fall in there somewhere, but those countries are not at the top of the Hit Parade when people start looking for yield!

OK... So, the non-dollar currencies are seeing some healing this morning... The Big Dog, euro, had fallen to 1.4706 before the healing began, and is now 1.4750... The Aussie dollar (A$) had fallen to 89-cents and change, but has rebounded to .9055, as I write. And... If the trading theme remains in place, the dollar will get hammered on the positive GDP report this morning...

Well, yesterday it was PIMCO's Bill Gross's turn to give his thoughts about the dollar... Let's listen in... The dollar is an over-owned currency and likely to fall to an all-time low against major counterparts, Pacific Investment Management Co.'s Bill Gross said in an interview on CNBC.

"The Chinese, the Asians, have owned too many dollars for too long." The dollar becomes more and more owned and less and less desirable, so ultimately the direction is down. I don't sense stability in the dollar."

OK... Thanks Bill! Hey! Recall the other day when I gave you the list of "rumors" in the markets that deep-sixed the non-dollar currencies? One of the items on that list was the rumor that the tax credit for first time home buyers wouldn't be extended... Well, now there's a rumor going 'round that someone's underground, and she will rock, no wait! The rumor going around is that the tax credit will indeed by extended to April 2010... You heard it here first folks, remember that! HA!

And the folks over at the Royal Bank of Scotland (RBS) sent out a note to customers that "the euro remains in an uptrend, and investors should buy the currency when it weakens. It has dropped back to the middle of its last consolidation zone in late September and early August. In a bigger correction scenario it may make it down to 1.45-ish, but it is no longer a compelling sell, and medium term considerations favor buying dips."

Hmmm... Couldn't have said that better myself!

So... Let's get back to this thing with the risk assets... There must be quite a few of you missing class each day, for recently, there have been a ton of people telling me that I never talked about a risk asset sell off... WHAT? ARE YOU KIDDING ME? I've been talking about how stocks have been linked to currencies and commodities (the risk assets) for months now! And several months ago, I began to see the price to earnings ratios getting way out of whack (tech bubble like!) and began to talk about a stock market sell off that could adversely affect the price gains that the currencies and commodities had made since March...

I know that some of you believe that I only want to "talk up" the currencies to benefit me somehow... And would never write about a potential currency sell-off... Well I have written about it... And this isn't the first time either! I'm really pounding the keys right now, because the more I think about this, the more it ticks me off! I mean... Do these folks not recall my going through how to handle a currency sell-off? It went something like this...

If you bought currencies and precious metals to simply go with the flow and get out when the prices begin to decline to book your profits, then you simply want to watch the stocks to see if they put in a 4-day consecutive sell-off... That might be your indication... However, if you bought your currencies and precious metals to diversify your investment portfolio to: 1. not have just dollar denominated investments, 2. to provide a hedge against the potential of a further weakening in the dollar... Then you will simply want to batten down the hatches and ride this dollar strength out... And if you do anything, you might want to take this dollar strength as an opportunity to buy at cheaper levels!

Calm down, Chuck... Ok, I was gone for awhile but I'm back now... The real question is just why are stocks and currencies and commodities all being thrown into the same barrel marked Risk Assets? When fundamentals are in place, this isn't the case, for currencies and commodities have a low correlation with stocks, and they have different pricing mechanisms...

So, a return to fundamentals would be like manna from heaven for yours truly!

OK... Earlier this week I talked about the Bank of Canada officials jawboning the Canadian dollar / loonie lower... Well, they've done their job... The loonie is 2 full cents lower... I expect the markets to test the Bank of Canada (BOC) here, to see if they really want to keep the loonie from getting stronger...

The Reserve Bank of New Zealand (RBNZ) met last night, and while they officially removed their easing bias from their monetary statement, they did not come out and outright mention rate hikes.... In fact, the RBNZ said that there was "no urgency to begin withdrawing monetary policy stimulus" (low rates)... So, it was a two-handed monetary statement by the RBNZ... They removed the "easing bias" but didn't feel the urgency to move rates higher... But shoot Rudy! That's way better than the stuff they gave us at the last meeting, which was "we expect to keep the OCR (their Official Cash Rate / interest rate) at the current level until the second half of 2010"... Yes, Virginia, the RBNZ did improve their statement!

Yesterday, I talked about GMAC coming back to the well, and asking for more bailout money, to the tune of $12-15 Billion... This has some conspiracy undertones to it folks... You just have to think about GMAC and the bank they own, which in reality the taxpayers own! Well, the thoughts going around now is that GMAC, which has already gone to the well 2 times for bailout money, will get what they need, because the Gov't is "in too deep"... Oh great! Now we not only have the "too big to fail" thing, but the "in too deep" thing going for us taxpayers! Where do I sign up for more of this? I just can't get enough of Gov't owned former private sector businesses! NOT!

OK... So, like I said at the top, 3rd QTR GDP will print a preliminary figure this morning... And is expected to have gone from negative to +3.2%... That's quite a rise, don't you think? Personally, I think that it will be less than 3%, probably around 2.5%, and will have been made up of Government Sending... But don't let that get in the way of a feel good media blitz that will happen after the number is printed this morning!

U.S. New Home Sales declined in September for the first time since March... Does any one else feel that the best of the U.S economy during this recession / depression has passed us by, and that we'll be double dipping soon?

Well... With it being a Thursday, we will get the usual Weekly Initial Jobless Claims this morning... You know, this is some very disheartening data... The Weekly Initial Jobless Claims continue to remain above 500,000 each and every week! And the Continuing Claims continue near 6 million at 5.920 million! Who among us believes that the U.S. economy can REALLY recover as long as we have 16% unemployment rates?

To recap... The dollar rally continued throughout the day yesterday, but has stalled in the overnight markets, as the focus shifts to the U.S. 3rd QTR GDP, which is expected to be positive, thus technically taking the U.S. economy out of recession. This would bring the risk takers back into the markets, and thus the dollar would get hammered... The Reserve Bank of New Zealand lifted their "easing bias" but left rates unchanged, and U.S. New Homes Sales declined in September...

Gold is up $7 this morning, so it too is receiving some love, and healing!

Currencies today 10/29/09: A$ .9050, kiwi .7265, C$ .9280, euro 1.4750, sterling 1.6465, Swiss .9765, rand 7.8150, krone 5.7050, SEK 7.0170, forint 186, zloty 2.8880, koruna 17.92, RUB 29.27, yen 90.70, sing 1.3985, HKD 7.75, INR 47.21, China 6.8280, pesos 13.23, BRL 1.76, dollar index 76.26, Oil $77.83, 10-year 3.43%, Silver $16.33, and Gold... $1,035.50

That's it for today... Had a visitor yesterday... A very delightful person! It sure was nice to meet you Rebel! This past week has been the 80th anniversary of the 1929 stock market crash! I really am grateful for all of you readers that haven sent me notes this week with kind words... They are truly appreciated! A reader sent me a note yesterday giving me 3 cheers for not calling the Pay Guy a Czar... Yes, the Czars thing makes me ill! My trip to Cabo San Lucas might be nixed because of the blood clot they found in my leg... I hope not, I was really looking forward to going there! It's Thursday, so our little Christine will stop and bring us in breakfast sandwiches... Yeah for us! And on that note, I'll hit send... I hope it's dry where you are, but that your Thursday is still Thunderin'!

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

Consumer Confidence Drops!

Chuck Butler — Wed, 28 Oct 2009 14:22:19 GMT

..But First, A Word From Our Sponsor..
Gain exposure to currencies of emerging BRIC countries-and don't lose a dime on market risk

* 4 BRIC currencies: Brazilian real, Russian ruble, Indian rupee, Chinese renminbi
* High upside potential
* No market risk to deposited principal
* Low $1,500 minimum deposit

Don't miss this unique opportunity. Deadline to buy the BRIC MarketSafe CD is Dec. 3rd, 2009. Apply today or learn more at http://www.everbank.com/001CertificatesMSBRIC.aspx?referId=11808
.

In This Issue..

* The dollar continues to hammer!
* Jim Rogers on the dollar rally...
* C. Fred Bergsten talks of a dollar alternative...
* Lord Monckton's thoughts...

And Now... Today's Pfennig!

Consumer Confidence Drops!

Good day... And a Wonderful Wednesday to you! It's still raining here... Quite frankly, I don't know how people that live in rainy areas do it! I don't mind rainy days, as long as they are sprinkled in with the days of sunshine!

Well... The dollar rally that began for a number of rumored reasons continued on yesterday... Remember when I said on Monday that the data this week should show us that the economy is healing somewhat, which would be bad for the dollar? Well, that thought got cold water thrown on it yesterday when Consumer Confidence surprisingly declined last month...

You know how I like to question just what people that were surveyed for this Consumer Confidence report are so confident about? Well, apparently, the Conference Board surveyed the wrong people this month! Consumer confidence in the U.S. declined in October to 47.7 versus expectations of a 53.5 reading. Both consumers' perceptions of current conditions and their expectations for the future declined. Hmmm...

So, Consumer Confidence is fading this month? That sure wasn't the outcome I was expecting... Sure, I would have questioned the dolts that were confident as people that obviously had no idea what was going on, but still, these people that get surveyed had not allowed negativity to enter their minds before, why was this month different? Maybe... Just maybe, people are waking up to smell the coffee that's brewing... And with that I mean, the deficit situation here in the U.S. and all the games the Gov't, the Fed, and Treasury are playing to pull the wool over our eyes... You think? Do you really think that's the case? Because if it is, then the next step is to stand up and shout out loud that you want Government to stop spending! Shout it, Shout it, Shout it out loud! And if they won't listen to you, fire them the next chance you get!

So... The dollar continues with this rally that began Monday mid-morning... One of our fave old friends, Jim Rogers was in the news last night... Let's listen in to what Jim had to say! "Everybody is pessimistic on the dollar, whenever you have everybody on the same side of the boat, you know what you have to do. We may have a rally in the dollar, a decline in Commodity prices or stock prices for a while." He went on to say that while there may be a rally in the dollar, it won't be "sustainable"

He also said something that goes right along with my "Treasury Bubble Story"... Rogers said, that he "certainly wouldn't be buying U.S. Treasuries, and couldn't imagine lending money to the U.S. government for long periods of time."

You know what? I don't think I could imagine that either! So... One has to wonder, just when the Chinese and Japanese begin to feel this way? It's not like we've spent the money and won't have a need to borrow again... The Gov't is finding new ways to spend money! The Budget Deficit is forecast to be $9 Trillion for the next 9 years! And that was before the Gov't got their hands on these "new ways to spend money"!

And getting back to what Jim Rogers said in about the dollar... Isn't this the same thing I've been warning about for a couple of months now? So, this shouldn't sound like anything new to Pfennig Readers... I've warned that the stock market was overbought, and that the U.S. economy was going to do a double dip, which would cause stocks to sell off, and that stocks would probably drag the other risk assets of non-dollar currencies and commodities along with them...

But again, this kind of move, just like the one in 2005, and the one from July 2008 to Feb 2009, will not be sustainable! There's trading themes, and there's trends that are moved by fundamentals... The fundamentals will win out eventually... And when the markets get all the excesses out of their system, the fundamentals will be there like that navy suit... Always in style, always dependable, always there for you!

This next story is very interesting indeed... Here's the skinny... C. Fred Bergsten, the former Treasury executive, is warning that dollar deficits might no longer be funded by foreign nations, including China! He also wrote in the current issue of the Council on Foreign Relations' Foreign Affairs magazine that he would recommend that the White House join with the international community in creating an alternative to the dollar for international trade... What? Are you kidding me?

This is not a joke folks... This is a real person, that is well respected... And he's telling the White House to help create an alternative to the dollar for international trade? That's like telling the fox he can guard the hen house!

That story leads me to this one... Quite a few readers have asked me to talk about this and while I wasn't sure I would, because it's so political, it now plays well with story I just told you about!

Have you heard of Lord Monckton? Well... He gave a speech in Minnesota last week, that you can find on U-Tube. In the speech he says that he has read the global climate change bill, and that if our President signs it, he will be signing away our sovereignty, our prosperity, our freedoms, for global rule...

So... We have the global rule rumors and the global currency rumors back to back! I'm not here to debate what Lord Monckton said, for all I know he's bang on with this thoughts... My thing is to point out that there's smoke... And you know me... Where there's smoke, there's fire...

Is this the method the U.S. will use to get us from beneath this deficit rock? I certainly hope not! And that's all I'll say about that! Now at least!

Remember my rant about allowing bad corporations to fail and not bailing them out? Well, I took a lot of heat on that one from some readers that didn't agree, and that's OK... But to my point... GMAC Financial Services and the Treasury Department are in advanced talks to prop up the lender with its third helping of taxpayer money.

The U.S. government is likely to inject $2.8 billion to $5.6 billion of capital into the Detroit company, on top of the $12.5 billion that GMAC has received since December 2008.

Another example of throwing good tax payer money at bad money...

Remember last week when I told you about the Pay guy (I refuse to call him a Czar!) was getting the Gov't involved in pay cuts for the bailed out firms? Hmmm... It was reported yesterday by the Wall Street Journal that while he cut total compensation by half, he substantially increased one important element -- regular salaries, according to a Wall Street Journal analysis. The move reflects the complexity of regulating something that mixes politics and economics. Yes, indeed it does!

So... I've gone on and on this morning about what we have to look forward to in our future (near?)... What about what's going on today? Well... As I said yesterday, Norway's Norges Bank will announce a rate hike this afternoon... They will be the first European Central Bank of raise rates, and the third overall Central Bank to raise them. We all know that the Reserve Bank of Australia (RBA) raised rates first... But who was second? Ahhh... In a not so publicized move, the Bank of Israel raised rates second!

Norway is experiencing accelerating home prices and the Norges Bank has to step in before another housing bubble gets started. No, the Norwegian economy isn't going great guns, but the recovery is going on, and a rate hike here would probably nip the housing price acceleration in the bud... The question remains of will the Norges Bank be aggressive with the rate hike and go for 50 Basis points (1/2%) or just 25 Basis Points (1/4%)? If they have any intestinal fortitude they'll go for the 50! But the markets expect them to be gradual about their approach to raising rates... And so, 25 BPS will probably be the announcement this afternoon.

Gold has really gotten the snot knocked out of it recently... Gold is trading more than $30 per ounce less than it was 10 days ago! And this plays well with the comment above about risk assets being dragged down by stocks... You know my thoughts on price drops in Gold... Need I say more?

And then there was this... Just when you thought the yield on the 10-year Treasury was going to keep moving higher... An invisible hand sweeps down and knocks the yield back 10 Basis points! Well... In this case, it's probably more "safe haven buying" driving the price up and the yield down, than it is hanky panky from the Fed... You would think that anyone that played this "safe haven" game before and got burned badly would not go down that road again... But... Maybe they didn't even realize that they took losses on their "safe haven" purchase! HA!

To recap... The dollar is on the warpath, as a drop in Consumer Confidence in the U.S. has investors dumping risk assets again. C. Fred Bergsten, former Treasury official, recommends the White House to participate in forming a new alternative currency for international trade and dump the dollar, and we talk about Lord Monckton's speech about the climate change bill... Norway will raise rates today, and safe haven buying seems to be on the docket once more.

Currencies today 10/27/09: A$ .9035, kiwi .7335, C$ .9315, euro 1.4780, sterling 1.6325, Swiss .9785, rand 7.7610, krone 5.7190, SEK 7.0425, forint 184.75, zloty 2.8830, koruna 17.8380, RUB 29.29, yen 91, sing 1.4015, HKD 7.7507, INR 47.35, China 6.8281, pesos 13.26, BRL 1.75, dollar index 76.24, Oil $78.86, 10-year 3.43%, Silver $16.46, and Gold... $1,033.05

That's it for today... Well... Thanks for all the kind notes regarding my cancer update... The did find the problem in my left leg... I have a blood clot! UGH! I'm not taking this one as well as I did the one in my right leg after my surgeries! But, we'll get it dealt with, and move on... I know that some of you don't like these health updates, but many do... I forgot a trip when I was talking about my upcoming travel yesterday... At the end of January I'll be heading to San Antonio... Time to batten down the hatches once again... And the World Series starts tonight... Good thing Colorado didn't make it to the World Series, they would be "snowed out"! OK... Time is here today... Time! I hope your Wednesday is Wonderful!

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

The Dollar Bounces Back!

Chuck Butler — Tue, 27 Oct 2009 14:22:19 GMT

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In This Issue..

* Rumors kill the currency rally...
* Risk Aversion campers return...
* Dr. Faber with some thoughts...
* Big Mac and the real...

And Now... Today's Pfennig!

The Dollar Bounces Back!

Good day... And a Terrific Tuesday to you! The rain is back... First we had the coldest / rainiest spring I can ever recall, and then a very mild summer, now this... Cold and rain in the fall... I'd say that's climate change for you!

Good news from the scans! By the grace of God, I sailed through the scans and tests, cancer wise... I would like to thank everyone that had me in their thoughts, and prayers... Those are powerful things, don't forget that one minute!

OK... Well, the non-dollar currencies didn't enjoy such good news yesterday, as they got whacked a good one! After signing off yesterday, the non-dollar currencies continued to rally VS the dollar, and then the rug got pulled out from underneath them in a NY Minute! What happened? The risk assets were dropping like the Cardinals' batting averages at the end of the season... Well... Remember yesterday when I said that the data for the week looked like it might show some healing in the economy which would be bad for the dollar?

Well, it wasn't data that caused this move... It was a few things that I'll list for you that ganged up on the currencies and gave the markets the thought that the U.S. economy just might not be free and clear, which brought about a return of the "Risk Aversion" trades... Here's the list that ganged up on the non-dollar currencies...

Things making the U.S. economy look like its on shaky ground again include:
1. rumors that the first-time home buyer's credit will not be extended past Nov 30
2. rumors that the ING rights issue is not being well received
3. talk of bank downgrades
4. mention of a new bill addressing 'too big to fail' giving the Gov't broad power to dismantle financial companies that get into trouble

I was asked by our Public Relations people to put together some thoughts for CNBC... So, the above stuff was what I put together... CNBC then asked for an interview... Well, this is where I get off the bus... Long time readers know that I've been ambushed twice at CNBC, and decided to not go back for a 3rd... So, even though this interview has little chance of an ambushing, since they asked for the info... The Big Boss Frank Trotter will be doing the honors at 8:40 CT / 9:40 ET, today... So, don't forget to tune in!

Another thing that may be giving the dollar some love is the yield on the 10-year Treasury... This yield, as reported in yesterday's Pfennig, had bumped up to 3.50%, which had been the proverbial line in the sand in the past... 3.50% had been the level that had seen strong Treasury buying (probably by the Fed!) to bring the yield back down... But yesterday, we saw this yield inch higher to 3.54%... We should keep an eye out of this, to see if we see slippage in the yield, for it would only mean one thing... That the Fed was buying again! And that's the reason the dollar got some love yesterday from this yield... Because so far... The Fed hasn't gotten their hands dirty here... But should they, once again, it won't support the dollar...

So... There you have it! Just when we thought the data this week would send the dollar to the woodshed, these things popped up to underpin the dollar! Hopefully, it's just a case of sell the rumor and buy the fact for the non-dollar currencies, as most of this stuff was just rumors in the markets...

But it did get people / investors / traders thinking about just how oversold, in the short-term, the dollar was... It normally takes something like this to get those thoughts to come to the front of the class, as the negativity had such a stronghold.

We've seen these "Risk Aversion" moves in the past 7 months, and each time they've been short in terms of time that they lasted. But that doesn't mean we'll see the risk aversion campers leave shortly this time... They might... And they might not... Don't you just love it? I know one thing for sure! The sell off yesterday was swift and strong. For instance, the euro was 1.5050 before the sell off, and is 1.4890 this morning! What does that look like to you? Buzz! If you said, "Chuck, it looks like a cheaper level to buy" then you may have won a free subscription to the Pfennig newsletter! If you did not have that answer, then there's a free parting gift for you at the door! HA!

Yes, it certainly does look like a cheaper level to buy... Of course it doesn't mean that tomorrow's price won't be cheaper, but given the history of the risk aversion reversals in the past, it doesn't mean that it will be cheaper either!

And... According to Commerzbank... "it would probably be premature to call this the end of the dollar's weakness. It remains under pressure due to the low interest rates and the resulting attractiveness as a financing currency for Carry Trades."

I saw a story last night about the Brazilian real, and how the real's +35% gain VS the dollar this year, as a Big Mac in Brazil costing more than in New York and London... Uh-Oh! That Big Mac Index again! But that doesn't scare the research team over at Goldman Sachs, for they still believe the real has room to gain VS the dollar... And you know me and the Big Mac Index... While it's a "nice" measure, it's not the holy grail of currency outlooks... I can point back to 2000 and 2001, when the Big Mac Index said the dollar was overvalued, but it took nearly 2 years before we saw dollar weakness... So, I don't put much faith in the Big Mac Index, for short term forecasting... Not that I forecast, at least not in this letter I don't, for I would be hung out to dry by readers if I got something wrong... I mean look at when I said I thought the Aussie dollar COULD go to parity, and it only got to 98.5-cents!

OK... Dr. Marc Faber was in the news last night, as he was giving an interview on Bloomberg TV... This is Dr. Faber's words folks...

"The dollar will become worthless when people eventually realize the fiscal situation in the U.S. is a disaster. It will go to a value of zero eventually, but not right now. Looking at Mr. Obama's administration, it should already be there." He went on to say...

"In my opinion, about 50% of tax revenues will be used just to cover interest payments on the government debt. That's unsustainable. Then you'll really be forced to print money. The best investments right now are foreign currencies, commodities, and equities." And then when asked about Fed Chairman, Big Ben Bernanke, Dr. Faber said, "He's a money printer. He's nothing else."

Whew! That's taking the whole shootin' match of the Gov't and the cartel, I mean the Fed, to the woodshed, eh?

For those of you at home keeping score, make sure you've jotted down the right figure of dollars that the U.S. Gov't and the Fed have spent, lent or guaranteed... $11.6 Trillion!

OK... It looks like the last country that's needed to sign the Lisbon Treaty, the Czech Republic is going to sign it... Now, let me be perfectly clear about this... I don't agree with the Lisbon Treaty, but the European Union has gone so far down this road now, that there's no turning back, so you might as well go along and sign the thing, I guess... The one thing it does do, is underpin the euro... For if this Treaty did not get signed, the pressure on the euro would have been great, because you would have had all the naysayers coming out of the walls again talking about a collapse of the European Union and a return to the legacy currencies... You know: Deutsche marks, French francs, Spanish pesetas, and so on...

Speaking of Europe... I know it's not really November... But it's close enough! The Norges Bank of Norway will meet tomorrow, and are expected now to raise rates, which would make them the first European Central Bank to raise rates... Notice I said "now"? Well, the rest of the crowd are jumping on my bandwagon that began a couple of months ago when I said that it was a race between Australia and Norway to be the first to raise rates... There weren't many pundits out there calling for rate hikes... But as time has gone on, and they read the Pfennig, they've come along nicely! HAHAHAHAHAHA!

In the last couple of weeks, the Pfennig and me, have been mentioned a couple of times by the best writer on the planet, Richard Russell... And now, I have learned that Harry Schultz has mentioned the Pfennig and me in his most recent letter... The Pfennig is really beginning to get noticed, eh? That just puts more pressure on me to come up with fresh, informative information!

Hmmm... And then there was this... PIMCO's Bill Gross, who is known as the "bond king" admitted that he "has some concern on owning Treasuries"... If Bill Gross has some concern folks, shouldn't we? I recently did about a 20 minute video for our friends over at the Sovereign Society on the Treasury Bubble... Sure wish Bill Gross would have said something like this when I was putting that video together! Imagine what I could do with a statement like that when I'm doing a video on the Treasury Bubble!

OK, to recap... The dollar came back with vengeance yesterday, after some rumors on the street led people to believe that things in the U.S. won't be free and clear after all, which led to risk aversion... We've seen this risk aversion before, and each time it hasn't lasted too long... Dr. Marc Faber checks in with some comments on the dollar, and Bill Gross has some concern about owning Treasuries!

Currencies today 10/27/09: A$ .9185, kiwi .7485, C$ .9370, euro 1.4890, sterling 1.6440, Swiss .9825, rand 7.5680, krone 5.6350, SEK 6.8930, forint 180.25, zloty 2.8170, koruna 17.52, RUB 29.11, yen 91.90, sing 1.3965, HKD 7.75, INR 46.95, China 6.8294, pesos 13.24, BRL 1.7325, dollar index 75.85, Oil $79.09, 10-year 3.54%, Silver $17.14, and Gold... $1,040.10

That's it for today... Well... From one thing to another... No sign of cancer is a great thing for me! But now the left knee and lower leg... I go for another test today, to see if they can figure out what's causing the swelling. So, I'm not out of the woods completely, just yet... Originally, I had thoughts about attending the Grand Opening of La Estancia de Cafayate in Argentina that's going on this week... But then Ty Keough told me how long it would take me to get there, and I decided that my trip to Cabo San Lucas next week was enough! Then I think that's it for me this year, as far as travel goes... I normally speak to the Wealth Masters Group in December on Marco Island, but they moved that meeting to next spring... So, I think I'll be home until we go to Orlando for the Money Show in Feb. 2010! You'll be so tired of hearing from me, you all will probably take up a collection and buy me a plane ticket somewhere! HA! OK... Time to go... I hope your Tuesday is Terrific!

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

Jobless recovery?? Not going to happen....

Chuck Butler — Fri, 23 Oct 2009 14:56:00 GMT

..But First, A Word From Our Sponsor..
Gain exposure to currencies of emerging BRIC countries-and don't lose a dime on market risk

* 4 BRIC currencies: Brazilian real, Russian ruble, Indian rupee, Chinese renminbi
* High upside potential
* No market risk to deposited principal
* Low $1,500 minimum deposit

* Leading indicators up, but employment down...
* 11 million new jobs in China...
* Pound sterling gets pounded...
* A Great Day for EverBank...

And Now... Today's Pfennig!

Jobless recovery?? Not going to happen....

Good day...and happy Friday! It has been a fairly busy week here at EverBank, with the issuance of another big BRIC MarketSafe CD, the maturity of another MarketSafe, and a big acquisition (more on that later). While things were a bit crazy at EverBank, the currency markets were fairly uneventful. The dollar started the day off with a move up after a positive report on US leading indicators, but it gave back most of the gains as the trading day wore on. At the end of the day, only one currency moved more than 1% vs. the greenback, with the pound sterling dropping almost 1.5%.

As just mentioned, the leading indicators for the US rose in September for a sixth straight month, giving confidence to those calling for continued expansion in 2010. The gauge which attempts to predict the economic outlook for the next 3 to 6 months climbed 1%, beating most economists forecasts. But much of the good news on the US economy is due to the government stimulus programs, and two other reports indicated future growth for the US is still a question mark.

Offsetting this positive report was the weekly jobless claims which rose, and a report which showed home prices fell. So apparently the leading indicators are predicting a recovery without jobs, and without a strong housing market. You can see why Chuck and I question reports of a 2010 recovery. The US economy will not be able to post strong growth with near double digit unemployment and with both residential and commercial real estate in the dumps.

One of the Fed heads agrees. Federal Reserve Bank of Boston President Eric Rosengren said the US economy is at risk of relapsing into recession after expanding in the second half of 2009. "It's certainly a risk," Rosengren said in an interview with CNBC. "That is why we don't want to take away the stimulus too quickly." I don't look for the Fed to move interest rates higher anytime soon; the leaders of our Fed realize a full US recovery is still a ways off.

Here is a question which needs to be asked: Can the world grow without a robust US consumer? I believe the answer is yes! Growth in Asia and Europe can propel the world out of the global recession without the help of the US consumer; and I think that there is a very good chance that is what is going to happen. Chuck has compared the current state of the US to what happened in Japan after its stock and real estate markets crashed in 1990. Japan plunged into a 10 year period of stagnant growth while the rest of the global economy prospered. Many will question how the global economy can grow without the help of its largest contributor, but Japan was the second largest economy during the 90's, and the rest of the world barely skipped a beat during their malaise.

With the emergence of the consumer in both China and India, the global economy can and will continue to grow even if the US is stagnant. I read a report this morning which stated China will create over 11 million jobs this year, 2 million more than the government had earlier predicted. These new jobs will continue to increase the standard of living in China, and create 11 million 'new' consumers.

While the current administration may talk about reversing the stimulus and government spending as the rest of the world starts to recover, their actions won't match their talk. I believe we will see interest rates stay low in the US for an extended period of time. We will also probably see additional stimulus proposals as US unemployment continues to rise and US consumers continue to tighten their purse strings.

As the rest of the world continues to recover, and central banks begin to increase rates in order to fight rising inflation; the US dollar will continue its slide. A strong dollar just isn't in the interest of the US if we have any plan to try and pay down the tremendous debts and stimulate growth through increased exports. The dollar will fall victim to policies which will be designed to try and push the US economy up to keep pace with the global recovery occurring in Asia and Europe. Despite all of the rhetoric about a 'strong dollar policy', the administration is willing to sacrifice the dollar in order to keep the US from slipping further into recession.

I don't think this is the right course to take for the US, but I firmly believe this is what is going to happen. The future is too far off for politicians to worry about; they focus on the short two year election cycle. They will continue to leverage the future of America with borrow and spend policies designed to keep the US economy on life support until it magically recovers. Their policies will cause a dramatic fall in the value of the US$ which will eventually make our exports competitive and finally spur growth in the manufacturing sector. This drop in the value of the US$ will also enable us to pay down our debts to foreign holders with cheaper US dollars.

I am not suggesting that the US will slip into a 'great depression', but I believe we will see an extended period of stagnant growth. Certain well run companies (like EverBank) will still be able to make a good profit, and the falling dollar will create opportunities for companies with a strong international presence. As an investor, you should look to hedge your portfolio against the inevitable fall in the value of the US$ by investing in non-dollar assets such as our WorldCurrency and MetalSelect accounts.

One major problem the sliding dollar causes for the rest of the world is that the price of oil is inversely related to the value of the dollar. As the dollar has steadily declined this year, the price of oil which is price in $, has risen. In fact, a study released yesterday showed oil is relatively cheap at $80 per barrel. The study showed the price of oil should be $88 per barrel with the euro trading at $1.50. As the dollar continues to slide, there will be further calls for oil to be priced and traded in some other currency besides the dollar, as countries try to de-link it to the falling greenback. If this would occur, it would be a major blow to the reserve status of the US$.

And the folks at PIMCO, the global bond giant based in California seem to agree. Richard Clarida, a strategic adviser at Pimco wrote a note to clients yesterday pointing to "an orderly dollar decline" as the "most likely scenario". He added "a disorderly decline, while unlikely, cannot be ruled out." In the note, he states that a collapse in the value of the dollar would jeopardize its status as the world's reserve currency. Not a rosy picture for the greenback.

Both the central bank of Sweden and South Africa announced they would be keeping rates unchanged yesterday, but the announcements have very different effects on the values of their currencies. The Riksbank of Sweden stated that they would keep their benchmark interest rates at .25% and said that level would be maintained until 'autumn' of next year. The Swedish krona slid against the dollar after the announcement. But later the

South Africa also left their rate unchanged at 7%, but the rand rallied as some had expected a 50 basis point cut. South Africa's central bank leaders said rising energy costs had added to inflationary pressures, and therefore rates would have to be maintained at their relatively high levels. The rand rallied after the announcement.

As mentioned earlier, the big loser overnight was the pound sterling, which fell over 1.5% vs. the dollar. A report this morning showed UK gross domestic product unexpectedly dropped in the third quarter, falling .4% from the previous three months. The British economy has now shrunk over six consecutive quarters, the most since records began in 1955. The report confirms the BOE will continue to keep the 'quantitative easing' policies of low interest rates and government purchases of debt in place. Both Chuck and I have railed against these policies, as they largely untested, and will likely lead to a spike in inflation down the road. Unfortunately the US has been following the UK in their attempts to borrow and spend their way out of recession. I don't think the future is too bright for either the pound sterling or the dollar.

Before leaving work yesterday, Chuck wrote me the following to add to today's Pfennig:

OK... I sure stirred up a bee's nest with my rant yesterday... It's always interesting when I do that, for the people that agree with me will far outweigh those that don't. But that's not the point... The point is that I got people to think about what's going on in the U.S. whether they agree or not!

So, with that, I'm going to talk about... GOTCHA! No opinions just facts...

Canada posted a stronger than expected Retail Sales in August printing at +.8% (forecast at +.4%)... Then that report was followed by the Bank of Canada's (BOC) Monetary Policy Report for this month, in which the BOC admitted that "Canada's economy is recovery due to monetary and fiscal stimulus, increased household wealth, improving financial conditions, higher commodity prices, and stronger business and consumer confidence."

Hmmm... Seems to be the same exact things I've been saying about Canada!

There is an important point in on the items the BOC talked about... And that is the stimulus... Once in a while I get notes from people telling my I bang on the U.S. for stimulus when every other country in the world did the same thing... Well, not quite... While every other country might have implemented stimulus... They were in a fiscal position of strength to do so, while we merely raised the national debt to levels that now place more than $38,000 of debt on each civilian in this country! So... There was a difference, folks... And that leads me to the point I've tried to make for years now, and that is why it is so important for a country to be a Surplus Country!

Colleague Aaron Stevenson brought this to my attention yesterday regarding the price of Gold... The charts show that the price of Gold basically traded back and forth for a flat result for 6 months prior to August 25, 2009...

From August 25th of 2009, Gold has gained 12%! So... Guess what was announced on August 25th that probably has a ton to do with this gain in Gold? Give up? August 25th was the day that the President announced that Ben Bernanke would be reappointed Fed Chairman...

Coinquidink? I don't think so!

I really appreciate it when Chuck gives me these notes to get me going when I am pfilling in for him. It gets the juices flowing instead of staring at a blank sheet of paper!

Both the high flying Australian and New Zealand dollars fell a bit vs. the US$ yesterday as investors worried about China pulling back there stimulus. The currencies, which were trading near their 14 month highs, were ripe for profit takers after China announced accelerated growth in the third quarter. With China clearly back on the growth path, some investors feared they would reverse some of the stimulus programs put into place over the past year. China will certainly start to pull back some of their expansionary policies, but I think this was just a good opportunity for 'traders' to book some nice profits. The Chinese economy will continue to grow, and their demand for raw materials will keep the exporters of Australia and New Zealand busy. As Chuck stated the other day, this isn't a crying opportunity but is rather a buying opportunity! We still feel the Aussie dollar is a solid currency to own.

Before moving on to the currency wrap-up, we had some great news from headquarters yesterday. It was announced that we reached an agreement to purchase Tygris Commercial Finance Group, Inc. Tygris is a private company that specializes in providing lease financing to small and mid-sized companies in specific industries such as healthcare and technology. In addition to diversifying our assets and earnings stream, the acquisition will provide more than $500 million of growth capital. You can read all of the details in the press release at http://www.tygriscf.com/press-releases.aspx#ctrlDeailsDiv It truly is another Great Day at EverBank!!

Currencies today 10/23/09: A$ .9252, kiwi .7555, C$ .9509, euro 1.5022, sterling 1.6386, Swiss .9929, rand 7.4514, krone 5.5395, SEK 6.81, forint 177.05, zloty 2.7790, koruna 17.2425, RUB 28.9797, yen 91.94, sing 1.3928, INR 46.52, China 6.8285, pesos 12.8944, BRL 1.7156, dollar index 75.323, Oil $81.12, 10-year 3.47%, Silver $17.70, and Gold... $1,060.95

That's it for today, by now Chuck is at the doctors for a full day of poking and prodding. I'm not sure how he keeps so calm going to the doctor for his checkups after all he has been through; and then to have to wait a few days before finding out the results! I'm sure he would appreciate all of your prayers for another round of good results! I spent the evening last night celebrating my father's 72nd birthday. He is in the advanced stages of Parkinson's, so we brought cake and ice cream to the nursing home and enjoyed a night with all of his 'housemates'. While he has probably already forgotten the celebration, he flashed us all a huge smile when we showed up with his presents. Hope everyone has a fantastic Friday and a wonderful weekend!!

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

China Grows at +8.9%!

Chuck Butler — Thu, 22 Oct 2009 18:08:51 GMT

..But First, A Word From Our Sponsor..
Gain exposure to currencies of emerging BRIC countries-and don't lose a dime on market risk

* 4 BRIC currencies: Brazilian real, Russian ruble, Indian rupee, Chinese renminbi
* High upside potential
* No market risk to deposited principal
* Low $1,500 minimum deposit

Don't miss this unique opportunity. Deadline to buy the BRIC MarketSafe CD is Dec. 3rd, 2009. Apply today or learn more at http://www.everbank.com/001CertificatesMSBRIC.aspx?referId=11808
.

In This Issue..

* Currency rally is reversed overnight!
* Pay Czar dreams...
* Brazil may reverse capital inflow tax...
* An Asian Union?

And Now... Today's Pfennig!

China Grows at +8.9%!

Good day... And a Thunderin' Thursday to you! It's raining outside, so... It must be a Thursday! Amazing how many Thursdays have seen rain this fall! The ground isn't the only thing that's getting watered down this morning...

Front and Center this morning, the euro traded well past 1.50 yesterday afternoon, and drug all the other non-dollar currencies higher as the day went on. But overnight, all that giddiness with seeing the euro over 1.50 for the first time since August of 2008 (and then it was on the way down, instead of this time on the way up!), has been watered down...

Here's the skinny... China printed a very strong 3rd QTR GDP number overnight of +8.9%, and instead of basking in the glow of that report, currency traders took a different route, and decided that if: China is growing that strongly, then stimulus in China will be removed soon, and other countries will follow suit... No one in the markets believes that the U.S. economy can withstand a removal of stimulus... Big Ben Bernanke might believe so, but the markets say "ain't no way!"

So, here we are once again with this stupid trading theme of "what's bad for the U.S. is bad for the world, and thus a flight to the dollar and Treasuries is required"... I just love how these guys "decide this is what's going to happen and the rest of the trading world follows them"... The non-dollar currencies got all caught up in this, and thus were sold off almost throughout the Asian and European sessions... I have seen the euro pop back up since I came in though, so maybe this will be short-lived...

There was news out of Brazil yesterday that was interesting... Yesterday I told you about the "tax" on capital inflows to slow down the stock market, and the real... Well, there were rumors yesterday that the Brazilian Gov't would change this from "Capital inflows" to "Capital outflows"... This would apply to balances that were in the country for less than 2 months... So... This removes the albatross from the real's neck, in my opinion that is...

I came across some news yesterday that just kind of hit me right between the eyes, and the light bulb went on, and so on... The news about the "Pay Czar", just got me thinking. ( I know that's a dangerous thing!)

Well... Too bad the new "Pay Czar" (man I hate that term "Czar"! I mean really, when did we become the Soviet Union?) any way... Too bad the new "pay czar" doesn't work for us in Congress! The new "pay czar" slashed compensation at 25 of the financial institutions that took Gov't. funds, lowering compensation by 50%!

But, he doesn't, and nor would his colleagues on "the Hill" like it very much if he started slashing their compensation! But wait! That's a great idea! When he's finished with the financial institutions, he can go to "the Hill" and start slashing compensation there Freddie Krueger style!

Because... Today, every dollar of growth comes with about 4 dollars of debt.

Again, the same dude sent me another email yesterday, telling me that I need to stop banging on the current administration, for deficit spending, it wasn't their fault the annual deficit went from $450 Billion in 2008, to $1.42 Trillion in 2009! AGAIN! I DON'T CARE WHO SPENT IT, WE DIDN'T HAVE IT TO SPEND! And once again, let me be perfectly clear about this... When the first $150 Billion of checks were sent to kick start the economy, I ranted and kicked and screamed... When the first TARP was introduced, I screamed to the heavens! I stated then, that I would NOT have bailed out anyone! I would not have spent the money we didn't have! I would have let those that could not stand on their own, fail... Think about that... The Big Ben's and Summers' of the world are telling you that "they saved the world"... Saved us from what? Financial ruin? We're freakin' broke now, what difference would it have made on that front? Job losses? Oh! And 10% (really 16%) unemployment is "saving us"? Or how about collapsing the markets? Well, I personally doubt that would have happened, folks... That's just a scare tactic they use...

Think about this for a minute... If we had done nothing... Like Ronald Reagan did after the stock market collapse of 1987, we would have suffered some great losses... But we would be past it by now... Instead, the same firms that took Billions from the Gov't, are still hurting... Did you see that Bank of America (BOA) booked a $2.2 Billion loss for the 3rd QTR! Even the Fed's Beige Book revealed that the Fed's regular report found that the overall economy is still plagued by weakness in banking and increasing unemployment.

Ok, I'm sorry... But once I get on a roll about this stuff, I can't stop! Just ask my kids... Their eyes begin to glaze over, they stare at the ceiling, and you can almost hear them thinking..."here he goes again with that deficit speech, when will he ever figure out that we heard it and understood it the first 50 times he's gone through this with us"! HA!

OK, back to the currencies... One currency you would have thought would have gone through the roof on the news that China's 3rd QTR economic growth was +8.9%, is the Aussie dollar (A$)... But NOOOOOOOOO! That didn't happen... Once again the thought here is that economies around the world can not withstand the removal of stimulus.... Starting right here in the U.S., but traveling around the world to China too... The thought process (strange as it might seem, and I do believe it's strange) is that if China grew this fast with stimulus the Chinese Gov't might see this as an opportunity to remove the stimulus, and when they do... All hell breaks loose!

While I don't disagree that stimulus removal in the U.S. would send our economy spiraling down the slippery slope of a double dip, I don't agree that it would be the same in China...

So... The A$ is about 1-cent cheaper than it was yesterday afternoon... Looks like, smells like, walks like, and talks like a cheaper buying level opportunity!

Remember when I thought that Sweden's Central Bank, the Riksbank, was prudent? Well, that all changed a few months ago, when the Riksbank joined the Bank of Canada in saying that they would not raise rates until the 2nd half of 2010... Well, the Riksbank repeated that line this morning after they left rates unchanged... I just don't get it... What the heck are these Central Banks thinking? I guess they just don't have a brain... The need to go visit the Wizard of Oz, I heard he's giving out brains! In fact, they're probably singing this right now!
I could wile away the hours
Conferrin' with the flowers
Consultin' with the rain
And my head I'd be scratchin'
While my thoughts were busy hatchin'
If I only had a brain

Oil is back to $80 this morning... Gold is $1,055... And that means the Canadian dollar / loonie is back on the rally tracks heading toward parity against the dollar once more!

And for those of you that like to take a walk on the wild side... The South African rand has really taken a blow to the mid-section in the past couple of days... You see, there was a rumor floating around that the South African Reserve Bank (SARB) was going "freeze" the rand, to keep it from getting too strong VS the dollar. It was rumored that the Economic Development minister, Patel, was going to propose that the rand be "frozen"... Both the ministry and the Central Bank have denied ever discussing this proposal...

Let's hope that they haven't! That would be awful! Just look at the damage the rand has suffered on the rumor! So... If the leaders in South Africa can calm down the markets, we'll see a rebound in the rand, and it will have been a case of "sell the rumor, buy the fact"...

Our office coordinator extraordinaire, Danielle Goodman, gave me one of those fake $1,000,000 bills yesterday and wanted to know if that was enough to buy a BRIC MarketSafe CD! She just wanted to hear me do Dr. Evil from Austin Power, and say with my little finger aside the corner of my mouth... One Mill-ion dollars... HA!

But that got me thinking about the hyper-inflation story I told you about the other day... Let's hope that we never have inflation that bad that $1,000,000 bills are floating around like $100 bills, c-notes, Benjamins...

The new Japanese PM is beginning to take some direction for his new Japan... For instance, this caught my eye... Prime Minister Yukio Hatoyama has advocated creation of an East Asian Community, modeled after the European Union, with China at its heart and the U.S. left outside. Hmmmm... The Big Boss, Frank Trotter and I did a report about 6 years ago for the Daily Reckoning, where we outlined this Asian Union, and called the new currency there the "Pan"... That would be truly amazing if that Asian Union came to reality!

But like we said then... The wounds run pretty deep between China and Japan, and it will take quite a lot of love and tenderness to get past that! Which country has the love and which one has the tenderness? HA!

Well... The euro has continued to push back against the dollar since I came in this morning... So, maybe it can get back to 1.50, which sure looks like a nice crooked number to me!

As I said above, Gold is $1,055 this morning having lost $5 this morning. Don't you just "love" all those commercials on TV these days with guys telling you to buy Gold? Where were they when Gold was $250, or $500, or $750? They were afraid that Gold's rise was not on terra firma, and they rolled up in a ball in the basement of their buildings, shaking with fear! HAHAHAHAHAHAHAHA! Nah... Just kidding... But I do find it weird that these guys are coming out of the woodwork like bugs now... Guys like Casey, Bonner, me, and the Mogambo Guru, have been here all along with the same message about buying Gold...

Speaking of the Mogambo Guru... I had the honor of exchanging emails with him the other day... He absolutely cracks me up!

The Data Cupboard finally yields some data worth looking at this morning, as the Weekly Initial Jobless Claims prints along with Leading Indicators... We're still seeing +500K new jobless claims every week folks... When will this stop? I contend that the U.S. economy can not sufficiently recover until the unemployment situation is addressed... Why is our Gov't trying to shove this, that and the other thing down our throats these days, and not addressing the unemployment situation? I mean, a tax cut for businesses would be a great move there don't you think? The other thing the Gov't is ignoring is the deficit... Instead they're thinking of new expenditures! I've written my congress people until my fingers won't write any longer about this... What have you done? Come on people! This is immoral what they're doing to our grandkids, and we just let them?

OK, I've got to get off that subject!

Let's go the recap and Big Finish now, as I feel myself getting all lathered up to scream at the walls about this stuff!

To recap... The euro traded past 1.50 yesterday for the first time since August 2008, then, however, it was going down, this time it was going up! The non-dollar currencies have given back yesterday's gains after China announced a +8.9% GDP for the 3rd QTR, thus making the traders think that stimulus worldwide will be removed and that would be bad for the U.S. and thus, we return to the stupid trading theme of rewarding the dollar when things are bad! UGH!

Currencies today 10/22/09: A$ .9235, kiwi .7545, C$ .9525, euro 1.4975, sterling 1.6550, Swiss .9915, rand 7.47, krone 5.5650, SEK 6.90, forint 177.30, zloty 2.2770, koruna 17.3250, RUB 29.0845, yen 91.30, sing 1.3970, INR 7.7497, China 6.8290, pesos 12.96, BRL 1.7320, dollar index 75.34, Oil $80.17, 10-year 3.39%, Silver $17.55, and Gold... $1,056.20

That's it for today, and this week for yours truly. I will be at the hospital most of tomorrow, for annual tests, scans, needles, etc. Let's keep our fingers crossed that all's well, eh? I don't get the results until Monday afternoon, so I'll have to find something to keep my mind off what's in the results this weekend! It's Homecoming at the University of Missouri this weekend. When our older kids were there, we used to go down to look at the house decorations on Friday night, and then stay for the football game on Saturday. I won't make it there this weekend, but I hear that the game has been picked as the location for the Tailgate Tour 2009! So, if you're going, stop by and check that out! My poor beloved Missouri Tigers are having a rough go of it this year... And they picked #3 Texas as their homecoming opponent! UGH! My little buddy, Alex has a football game Saturday too! OK... Let's say our goodbyes for the week... Goodbye... And get this out the door! I hope your Thursday is Thunderin' (good that is!) Thanks for reading the Pfennig...

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

Brazil Throws The Cat Among The Pigeons!

Chuck Butler — Wed, 21 Oct 2009 14:26:05 GMT

..But First, A Word From Our Sponsor..
Gain exposure to currencies of emerging BRIC countries-and don't lose a dime on market risk

* 4 BRIC currencies: Brazilian real, Russian ruble, Indian rupee, Chinese renminbi
* High upside potential
* No market risk to deposited principal
* Low $1,500 minimum deposit

Don't miss this unique opportunity. Deadline to buy the BRIC MarketSafe CD is Dec. 3rd, 2009. Apply today or learn more at http://www.everbank.com/001CertificatesMSBRIC.aspx?referId=11808
.

In This Issue..

* Real leads Commodity Currencies to the woodshed!
* Niall Ferguson speaks his mind...
* BOC leaves rates and statement unchanged...
* Bollard gives the green light!

And Now... Today's Pfennig!

Brazil Throws The Cat Among The Pigeons!

Good day... And a Wonderful Wednesday to you! How many people out there know about "network neutrality"? Well, if you don't know, you're about to find out tomorrow, when it will be decided upon... I'm not going to get into it, because after you find out what it is you'll know why I didn't explain... All I'll say is that this is just another thing that's flying below the radar that's about to be thrown in our laps...

OK... Well... Yesterday, after signing off and hitting the "send button" for the Pfennig, I saw a story that shot across the desk, and then a follow up was sent to me by Don Ries later in the morning. The story was about the Brazilian Gov't imposing a 2% tax on capital inflows... This was done in an attempt to slow down the Brazilian economy by slowing down the "hot money" that's going into the Brazilian stock market by foreigners... Talk about throwing a cat among the pigeons!

This news was like a shot to the heart and you're to blame, for the Brazilian real... Talk about pulling the rug from underneath the real! The loss for the real was 3.5% for the day! WOW! We had a reader call and accuse me of not writing about this story in yesterday's Pfennig, because I didn't want to water down the BRIC MarketSafe CD sales... WHAT? First of all, I didn't know about it until after I sent the Pfennig out... And second of all, What's a tax today that may not even be in place 6 months from now, have to do with the real's value in 3 years from now? Besides, this is good news for those that are buying the real now, for they get to buy it 3.5% cheaper! I shake my head and repeat... HOGWASH! Accusing me of hiding something!

Any way... My colleague on the Currency Capitalist newsletter, Ashish Advani, had this to say about the tax announcement in Brazil...

"Frankly, I think this move to restrict capital flows is a pointless exercise at best. It's simply a waste of time to think that they can control the strengthening Brazilian real."

OK, back to me... In addition, to Ashish's thoughts... I tend to think there's something up Bullwinkle's sleeve here... Recall that about a week ago or so, I told you that Brazil's Central Banker had mentioned the need to raise interest rates 200 Basis Points (or 2%)... So... The Gov't sees the real responding to that comment, and thinks, "Oh my God, we've got a big problem when rates really do go up 2%, for this real will skyrocket! What's a Gov't to do? Ahhh, we'll impose a tax to offset the rate hikes, thus currency neutrality"...

So... I still like the real, but this really points out what I've been trying to say for some time now... These Emerging Markets currencies are Big Swingers, when they're going good, they're really good, but when things go awry, they really go bad, fast! But, that's their game, as long as you know it, no biggie!

But like Ashish said, I see this as a short-term adjustment for the real...

OK... So, that news yesterday sent not only the real to the woodshed, but sent the Aussie, kiwi, Norwegian krone, and Canadian dollar to join the real in the woodshed! The Big Dog, euro lost about 1/2-cent, but was able to avoid the trip to the woodshed.

I also received an email yesterday from a reader that really ticked me off... And I get ticked off every time someone accuses me of this! The reader said that I was accusing the current administration with the "total deficit"... I AM NOT! I HAVE NOT! I USED TO SHOOT ARROWS AT THE PREVIOUS ADMINISTRATION FOR THEIR DEFICIT SPENDING! I CAN NOT BELIEVE I HAVE TO KEEP EXPLAINING THESE THINGS! Look... Do the research and then point a finger at me! The research in this case would show that for over 9 years, I've harped and harped about deficit spending! Remember when the U.S. Current Account Deficit reached 4.5% of GDP in 2001, and I blasted the Gov't for doing that? Of forget about it Chuck, this is akin to talking to one of your kids... One of these days when they're adults they will talk about how smart you became in your late years!

Whew! I was really pounding on the keys there... My fingers need a rest! But as long as we're on the subject of Deficit Spending, (that's been going on for more than 8 years!!!!) Ty Keough sent me this:

The U.S. is an empire in decline, according to Niall Ferguson, Harvard professor and author of The Ascent of Money.

"People have predicted the end of America in the past and been wrong," Ferguson concedes. "But let's face it: If you're trying to borrow $9 trillion to save your financial system...and already half your public debt held by foreigners, it's not really the conduct of rising empires, is it?"

Given its massive deficits and overseas military adventures, America today is similar to the Spanish Empire in the 17th century and Britain's in the 20th, he says. "Excessive debt is usually a predictor of subsequent trouble."

OK... Here's some more Niall Ferguson... Ferguson dismisses the dollar loyalists, citing the British pound -the last international reserve currency - as his example. "These things don't last forever" but don't expect it to happen overnight. "It's a long multi-decade process," he states. Even with the dollar near a 14-month low against the Euro, he claims it's not without historical precedence for the greenback to lose "another 20%" this year.

For international investors the loss is enough to offset this year's stock market gains. Not exactly great motivation for foreigners to keep buying the almighty dollar."

Sounds like Mr. Ferguson has been a loyal reader of the Pfennig for the past 17 years!

Fed Head, Janet Yellen gave a speech yesterday, which her comments are usually good for a few quotes... And this was no exception... Fed Head Yellen said, "IT IS TO BE EXPECTED THAT INTEREST RATE DIFFERENTIALS WILL DRIVE CAPITAL FLOWS and that: U.S. STRUCTURAL BUDGET DEFICITS A SERIOUS PROBLEM, WILL REQUIRE PAINFUL DECISIONS"

Well now, that's two subject that I've talked quite a bit about lately now isn't it? Interest rate differentials, and the Budget Deficit problem... And some people wonder why I say that currency and precious metals diversification is a must? Really? When your own Fed Head thinks that these things will be problems, doesn't that spell it out for you? I thought so...

Not that I'm waving the flag for the Russian ruble here folks, but I think it's important to note that I've said all along that Russia is an "oil play" and nothing more... And that the currency has rallied in step with the rise in oil prices recently... And the ruble's biggest move VS the dollar came overnight after Oil briefly touched $80 yesterday!

A few people asked me yesterday why I didn't include the Swiss franc when I was talking about Aussie and loonies going to parity against the dollar... Well, for one, I wasn't talking about that, I simply gave you a quote from Citigroup's research team. But since you asked... The franc is only 1-cent away from parity, so in my mind it's already there! I just keep thinking about the Swiss National Bank's (SNB) warning to the markets about franc strength...

But hey! What could the little old SNB do to stop the franc from going to parity against the dollar?

Well... I was wrong... There I said it! (My beautiful bride says that I never admit when I'm wrong, and I say I do, it just doesn't happen very often! HA!) I said that I thought the Bank of Canada (BOC) would lift their previous statement that their near zero interest rates would remain in place until the 2nd half of 2010... The BOC did NOT lift that statement... In fact, the BOC hung the loonie out on a line to be beaten until dry! The BOC whined about the strong loonie as working against economic growth...

So... I think the BOC did what they set out to do, and that was to: 1. stop the talk about a rate hike before their stated timeline, and 2. stem the loonie's rise... The loonie dropped about 2% on the day...

But, like most things... The pain of the BOC statement will be forgotten about in a few weeks, and I suspect the loonie to be back on the road to parity against the dollar...

And then there was this... Long time readers know my dislike of the Reserve Bank of New Zealand's (RBNZ) Gov. Bollard, due to his penchant for dissing the currency, kiwi... Well, in a turn of direction... Gov. Bollard said in a speech last night that "there is little the Bank can do to bring down the value of NZD, and that the high value of NZD is not necessarily an impediment to raising the official cash rate in order to quell rising house prices."

That's Central Bank parlance for: "I'm giving you the green light to push kiwi higher"...

U.S. Housing Starts were disappointing in yesterday's print from September, where a .5% gain was very much less than expected...

PPI (wholesale inflation) declined 0.6% in September... Which is a very strange number don't you think?

To recap... Do you know what Network Neutrality is? You had better find out! Brazil imposed a 2% tax on capital inflows to an attempt to slow the economy and the real's rise. The real reacted with a 3.5% drop VS the dollar. The other Commodity Currencies followed the real down VS the dollar. The Bank of Canada also tried to stop the loonie's rise, and the RBNZ's Gov. Bollard give the green light to kiwi appreciation!

Currencies today 10/21/09: A$ .9220, kiwi .7530, C$ .9475, euro 1.4930, sterling 1.6570, Swiss .9890, rand 7.3930, krone 5.5750, SEK 6.8990, forint 177.50, zloty 2.7960, koruna 17.33, RUB 29.17, yen 90.80, sing 1.3950, HKD 7.75, INR 46.48, China 6.8275, pesos 13.02, BRL 1.76, dollar index 75.46, Oil $78.30, 10-year 3.36%, Silver $17.40, and Gold... $1,052.70

That's it for today... I hope everyone is staying healthy, and away from the flu these days... Good luck to the best baseball player today, and best Cardinal since Stan Musial, Albert Pujols will undergo surgery on his right elbow today. Had a visit from one of my all-time fave people yesterday... Ellie Williams came by! Ellie has authored a few books over the years, and in one, that she wrote about 8 years ago, she even mentions me and the Pfennig! Ellie is a fellow cancer survivor, so we always have plenty to talk about! The Big Boss, Frank Trotter, was limping around the office yesterday, having suffered an ankle injury playing soccer (why, I have no idea!) I told him we could go to the orthopedist together, as my knee has never responded to the steroids that were injected into it. Looks like a scope is in my future! And with that... I'll get this out the door! I have an eye appt. this morning, so I need to get working! I sure hope your Wednesday is Wonderful!

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

Will History Repeat Itself?

Chuck Butler — Tue, 20 Oct 2009 15:07:39 GMT

..But First, A Word From Our Sponsor..
Gain exposure to currencies of emerging BRIC countries-and don't lose a dime on market risk

* 4 BRIC currencies: Brazilian real, Russian ruble, Indian rupee, Chinese renminbi
* High upside potential
* No market risk to deposited principal
* Low $1,500 minimum deposit

Don't miss this unique opportunity. Deadline to buy the BRIC MarketSafe CD is Dec. 3rd, 2009. Apply today or learn more at http://www.everbank.com/001CertificatesMSBRIC.aspx?referId=11808
.

In This Issue..

* Non-dollar currencies rally...
* A$'s and C$'s to parity?
* Reaching 40% of expenditures...
* Gold & Oil on the rise once again...

And Now... Today's Pfennig!

Will History Repeat Itself?

Good day... And a Terrific Tuesday to you! A long day on the desk for me yesterday, left me draggin' the line... But I'm rested and refreshed again this morning, so let's get to the Pfennig for today! The Finance Ministers of the Eurozone met yesterday, as I told you, and they've tried to stem the euro's rise... But, they'll need more than words to get the job done! And so, we begin a new day...

Front and Center this morning, the currencies, which had given back ground overnight to the dollar, are back in rally mode, and are taking liberties with the dollar once more. For most of the night that was not the case, though. The dollar had rallied back and sent the euro, for instance, to the 1.48 handle, after the single unit spent yesterday at 1.49 and change... There seemed to be a move to the dollar, but that didn't last long, and the currencies are once again rallying VS the dollar this morning, and the euro has pushed to 1.4970 as I write...

Daily noise, eh? Yes, you have to wade through this daily noise most days, and keep your eyes fixed on the horizon...

OK, I mentioned above that the Finance Ministers of the Eurozone met yesterday, and tried to stem the dollar's decline by backing the U.S. administration's stated preference for a strong dollar... Of course we all know that the U.S. administration's stated preference for a strong dollar is a bunch of horse dookie! So... What was it that the Eurozone F.M.'s were backing? A false statement by the U.S.? Now, that's something to hang your hat on, eh? The dolts just continue to mount daily don't they?

But, you can't be too hard on the beaver (Eurozone F.M.'s) for they have to sound like they don't want their euro to get too strong, for if they really said what they wanted to say, the euro would be back to 1.60 with a bullet in a heartbeat! So... In the end, I don't think currency traders were swayed by the Eurozone F.M.'s, at least not for too long!

Yesterday, I talked about Canada and the Bank of Canada (BOC) and how I thought that the BOC would remove their statement about interest rates remaining on hold until the 2nd half of 2010... I had a few readers question me on this, saying that Canada's economy is in no shape to withstand a rate hike... OK... Hear me out on this... I'm not saying that the BOC will hike rates now, or even in 2009... But, if Canadian energy prices of Oil, natural gas, and coal continue to get stronger, I'm afraid the BOC will have to entertain thoughts of raising rates to fight inflation... But not now... So... I hope you get what I'm saying here...

So... The U.S. fiscal deficit for 2009 was $1.42 Trillion... Remember how I used to take the previous administration to the woodshed for posting $450 Billion fiscal deficits? How did we go from $450 Billion to $1.42 Trillion, that is if that's really the number??? Well... That's not a question to really answer, folks, we all know how we got here... But now that we're here, what happens next?

I came across this when putting the two monthly newsletter together on Sunday, I think it would be appropriate to share it with you here...

Peter Bernholz (Professor Economics in Basel) studied the world's 12 most important periods of hyperinflation and discovered that the tipping point occurs when deficits amounted to 40% of the expenditures.

For the United States we have arrived at exactly that point. The deficit of $1.5 trillion amounts to 41.7% of the $3.6 trillion in expenses.

You see, that Peter Bernholz, rounds some numbers, but for those of you keeping score at home, the real point is that the U.S. deficits are greater than 40% of expenditures... And you know me, I truly believe in this history repeating itself, or as Mark Twain put it, it may not repeat itself but it rhymes... Mark Twain also wrote: "It's not worthwhile to try to keep history from repeating itself"...

So, the point I'm trying to make here is that according to Mr. Bernholz, we can soon expect a bout of hyperinflation! OH BOY! Where do I sign up for that? Not only do we have a falling dollar causing us to lose purchasing power, but what purchasing power we have left is going to be eaten away with inflation! Like I said, OH BOY! Gee Willikers, that sounds like the cat's meow! NOT!

So... Here we go again, with me getting on the soapbox and telling you the only way to protect yourself from a falling dollar and hyperinflation is to diversify with non-dollar currencies and precious metals...

OK... I get emails all the time from readers that say, "OK Chuck, you tell us to diversify, but you don't tell us what to buy"... Well... To the untrained eye, that would be true... But to long time readers they know better... So, keep reading, and it will hit you right between the eyes one day, and you'll slap your forehead and say, "I could have had a V-8"!

The boys and girls over at Citigroup have written a letter to their clients telling them that "the dollar is weakening because foreign central banks are diversifying their reserves and U.S. investors are buying high-yielding emerging market assets." The went on to say that, "The Australian and Canadian dollars are likely to rise to parity against the U.S. currency."

So, there's one more on the roster that believe Aussie dollars (A$) and loonies will go to parity against the dollar... The loonie isn't exactly the same stretch of a forecast as the A$, as loonies are almost 97-cents right now, with A$'s trading near 93-cents...

Doesn't that make sense given the talk we just had about hyperinflation? What currencies are going to help protect you against hyperinflation? The Commodity Currencies! Aussie, kiwi, Canada, Norway, Brazil and you can even throw in the S. African rand, for those that like rides on Mr. Toad's wild ride!

The folks at Citigroup also had this to say about the euro, which I found to be quite interesting... "The euro will extend gains against the U.S. dollar and the British pound, and may reach parity against the U.K. currency in 6 to 12 months."

I would think that for the euro to reach parity with the pound, it would involve the pound falling quite a bit from current levels... And that makes sense to me... Did you see the report the other day from the U.K. where they reported bank bad debt to be twice the forecast amount? YIKES!

You know... The Asian currencies which never really participated in the first bout of dollar weakness, are still stuck in the mud... Well, they are being manipulated to be stuck in the mud, for the most part... But, something's got to give here sooner or later. Why do I say that? Well, as I've told you for months now, the Chinese economy was the first to exit their slowdown / recession... Shoot Rudy, even Japan is showing signs of economic growth! And then we have India going strong too... And of course you have the "kind of Asian countries" of Australia and New Zealand... Where we already know that Australia has raise rates and New Zealand would love to raise rates... So, this region is leading the world out of the recession... Hmmm... I thought only the U.S. economy was allowed to do that! Uh-Oh, looks like we have a shift in how the world works!

Hey! Even Big Ben Bernanke sees the Asian countries as leading the world out of the global recession! Big Ben said... "Asia appears to be leading the global economic recovery." Hmmm... See, even a blind squirrel can find an acorn! HA!

I had to laugh when I read this headline this morning... "yen rises as Fujii repeats reluctance to stem currency's rise"... I laugh because the last time Japan's new Finance Minister talked about not intervening to stop the yen's rise, he back-pedaled and said that traders mis-took him to say that he was not going to intervene... So, this on again, off again love affair with Fujii and intervention, just makes me laugh! I would think that after getting burned on Fujii comments a couple of weeks ago, that Traders would not get too lathered up when he talks about not intervening...

Ok... Here in the U.S. while we are still a sovereign nation, the cartel, I mean the Fed Reserve, is doing some testing of reverse repos as a means of drawing the excess liquidity / stimulus out of the markets... I don't think we have to put too much into these tests right now... But it will be a method that the cartel uses at some point in the future... The IMF is against removing any stimulus now... So, that may carry some weight with the cartel, I don't know...

Gold prices rose yesterday for the first time in a couple of days, pushing back above $1,060... I would think that until we know for sure that the cartel is removing stimulus, that Gold would remain well bid... When we do know that stimulus is being removed... Gold might take a step or two back... But then we'll have to wait-n-see what happens with inflation...

I read where ETF holdings of Gold are sluggish... Well, that certainly makes sense to me! With what we're seeing these days from our Gov't pushing us toward who knows what (I know, but I get blasted by people whenever I say it out loud), physical Gold is the thing people want right now... And you can't get physical Gold out of an ETF! So... All those people that have long said that the ETF was just as good as holding Gold either in your buried coffee cans in the back yard, or in pooled accounts, are wrong, when it comes to physical Gold demands...

And, don't know about you, but I filled my gas tank the other day, and the price of gas has really shot up recently, eh? And a quick look at Oil prices and that tells it all... Oil prices have risen to $79, while trading at $69 just a month ago! Is Oil the proxy for rising inflation?

OK... To recap... The dollar rebounded a bit overnight, but has given back to a currency rally this morning. Citigroup believes Aussie and Canadian dollars will reach parity to the U.S. dollar. The Bank of Canada meets today. Our fiscal deficit reached 40% of our expenditures, which historically is a harbinger to hyperinflation, and Gold is back above $1,060 this morning...

Currencies today 10/20/09: A$ .9280, kiwi .7545, C$ .9690, euro 1.4975, sterling 1.6435, Swiss .99, rand 7.32, krone 5.56, SEK 6.9350, forint 176.50, zloty 2.7735, koruna 17.1470, RUB 29.15, yen 90.40, sing 1.3890, HKD 7.75, INR 46.11, China 6.8266, pesos 12.85, BRL 1.7360, dollar index 75.27, Oil $79.31, 10-year 3.37%, Silver $17.80, and Gold... $1,065.50

That's it for today... My good, dear friend, Mary Anne Aden, sent me a note last night, that really lit up my day... Mary Anne told me that Richard Russell recently mentioned me and the Pfennig... WOW! When a man as well respected as Richard Russell mentions me and my humble little Pfennig newsletter, then that's a great day! Mike Meyer just came in, returning from a trip to Jacksonville to watch the Rams / Jaguars game on Sunday... He travels once a year to watch the Rams... It actually was a nice day here yesterday with the sun out, and a hint of warmth in the air! The weather forecasters say El Nino is going to keep our winter warmer than usual and dryer than usual... That's fine with me! Well, I've got to go... I hope your Tuesday is Terrific!

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