Daily Pfennig

Risk Returns... Slowly...

Chuck Butler — Thu, 09 Jul 2009 14:24:08 GMT

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In This Issue..

* Currencies rebound...
* G-8 has no fireworks...
* Aussie / China and coal...
* Entitlements...

And Now... Today's Pfennig!

Risk Returns... Slowly...

Good day... And a Tub Thumpin' Thursday to you! I'm late, I'm late! I don't believe I ever heard the alarm go off this morning! I overslept by more than an hour, and will still be here more than an hour before any sign of someone else! But! That puts me behind by more than an hour today... I've got to play catch-up! So, let's get this Tub Thumpin' Thursday going!

Well... Let's see... G-8 never had the opportunity to shoot fireworks because China's leader had to return home to deal with the street riots going on in his country. So... The call for a replacement for the dollar as the reserve currency will have to wait for another day! And, with that news, the dollar got to remain in the sunlight, and bask in the glory of being the reserve currency and so-called "safe haven" another day...

There was added Risk Aversion yesterday when it was reported that an Australian shipment of coal to China was cancelled... This sent bad vibes through the markets for the currencies and commodities with the thought that China was putting the brakes on their buying of raw materials, and that their recovery had not taken hold like many had believed...

But... Overnight, calmer heads have prevailed. You see, it was my opinion when I heard that news yesterday, that it was simply one bad shipment to a customer that was having difficulties... Not ALL OF CHINA! And then overnight the data came out... This was one shipment, maybe 150,000 tons of coal... Australian coal shipments to China on a monthly basis run about 3 million tons! I truly believe that Australia's trade with China is on terra firma, and this was a one-off deal that went bad... I also believe that the sell-off of the Aussie dollar (A$) was completely overdone... Completely!

I don't know this to be a fact... But, given the relationship of the Asian investors and the A$, I would think the Asian investors to be licking their chops to have the opportunity to buy the A$ at these lower levels! Buy on the dips, right? Don't I always say that to be a prudent investment strategy?

Of course it didn't hurt that U.S. stocks rebounded yesterday a bit on the news that Alcoa's losses weren't "as bad as expected"... Talk about setting the bar low! It's not like ALCOA didn't still have a LOSS! But, don't get me started on this mental giant thought process that has a grip on stocks these days... "oh, don't worry, you only burned down 1/2 of the house, I would have expected it to all burn down!"

I've got to leave that alone before I really burst! Let's see, what can get my mind off of that subject... OH! The Bank of England (BOE) just announced that they would keep rates unchanged. Well, my goodness, what else would we expect them to do? Their base rate is .50!

Here in the U.S... The Obama administration is trying desperately to nip in the bud, the whispering campaign for another stimulus package... "No one in the administration is talking about a second stimulus at this point," said Robert Nabors, deputy director of the Office of Management and Budget. However he also mumbled something about how the President is not "ruling anything out"...

I don't care what they say... I'll believe it when I see it... And I still believe that the Gov't will believe that another stimulus is needed...

One of the discussions that I had with my fave economist the other day was about "delaying the inevitable"... I've talked about this before, but for new readers, I thought I would give them a dose of "Chuck's Thoughts" this morning... (HA! As if they don't get that every day!)

This "delaying the inevitable" is all about the TARP (troubled asset relief program) and how it all did was allow bad banks to continue to be bad banks longer, with toxic waste in their portfolio... This, even in the face of a suspension of the mark to market rules! Bad Banks should have been sent packing, then... And now, all we've done is let them hang on to cause even more collateral damage!

OK... I'll get back to the daily discussion now...

It looks as though the auction of $35 Billion in 3-year Treasuries went smoothly, which is another reason the dollar was strong yesterday... Every time one of these auctions go smoothly, the "deficits don't matter" crowd all point and say... "see, we told you, that foreigners will always come to the auction to buy Treasuries, so it doesn't matter what we run the deficit up to"...

Right! You just keep thinking that, and see where it eventually gets you! Ty sent me a note yesterday from an article he was reading, that plays nicely with this discussion... So... Let's play Marvin Gaye, and see what's going on!

"For now, the Treasury continues to find takers for government savings bonds at low interest rates. But somewhere between here and infinity lies a point at which American debt reaches unsustainable proportions, at which investors will balk at continuing to finance the American expenditures absent a higher return on their investments. Then, everything could change quickly, with interest rates soaring and the value of the dollar plummeting, as foreign investors lose faith in its fundamental value.

"We're running this $10 trillion gamble that interest rates aren't going to rise," said Kenneth S. Rogoff, a former chief economist at the International Monetary Fund and now a professor at Harvard. "If they do, we could end up in a very difficult situation."

Hey, you think so, Kenneth? My goodness, we have a new "Mr. Obvious!" I would think that we are already in a very difficult situation, given the fact that when the you know what hit the fan the U.S. had no war chest to use, like China did... Why? Because we didn't think "deficits mattered"... Dealing with problems from a position of strength, it would have made a HUGE difference from the get-go!

However, having said that... I believe that a larger problem is still on the horizon for the U.S. and the "deficits don't matter" flag wavers... And Hey! It's not going to happen overnight... It's going to be a slow, dragged out, problem that goes on for years, and then finally snaps! I'm talking about the entitlements and the retiring baby boomers... And more specifically when I'm talking about entitlements, I'm talking about Medicare!

The Big Boss, Frank Trotter, showed me a graph that he came across from the Concord Coalition the other day that illustrated this... While I wasn't shocked, having seen this all in the movie I.O.U.S.A. and in the book of the same name, there it was again staring me in the face...

The reason I tell you all this, is that the Current Administration has no other choice but to allow the dollar to weaken considerably over the years so that these deficits that "didn't matter" can be paid off with cheaper dollars... And it won't be this administration that has to deal with it... That's why this one and the previous one aren't concerned about the size of the National Debt...

Ok, enough of all that... I didn't mean for this to be gloom and doom! Let's move on...

The data cupboard has the Initial Weekly Jobless Claims for us to view today... I expect for the weekly number to remain above 600,000, and the Continuing Claims to have risen... Though this all sounds bad, the markets have become comfortably numb with this unemployment data... It will take something really BIG to slap the markets in the face and say WAKE UP!

And then, finally... The Japanese yen has really been on a tear this week as the Risk Aversion crowd dominated the markets... I find it very strange that Japan is considered a "safe haven" currency, given their national debt problems... And their once "Ace in the hole" the Trade Surplus, is taking on water... But... This is what the markets do, and they are never wrong! However, there's a road block ahead for the yen, as it trades with a 92 handle this morning... And the road block is in the form of the Bank of Japan. (BOJ).. It was reported that last night the Bank of Japan issued a statement to the markets that "they were checking FX levels"

That's Central Bank parlance especially coming from the BOJ, for... We don't want the currency to get any stronger, and we're just letting you know that we're ready to intervene if you don't settle down. Sort of like when grandma would tell you that if you didn't settle down she would send you to the woods to find your switch... Believe me you only didn't settle down once!

And when the Risk Traders come back and push the Risk Aversion crowd to the back of the room... Again, we'll see yen sell off again... So be careful here!

Currencies today 7/9/09: A$ .7845, kiwi .6305, C$ .8650, euro 1.3980, sterling 1.6260, Swiss .9250, rand 8.11, krone 6.4925, SEK 7.8590, forint 196.70, zloty 3.1150, koruna 18.55, yen 92.90, sing 1.4580, HKD 7.75, INR 48.71, China 6.8317, pesos 13.47, BRL 2.00, dollar index 80.21, Oil $61.29, 10-year 3.39%, Silver $12.95, and Gold... $915

That's it for today... Well... I got the news from the eye specialist yesterday regarding my left eye... The tumor and the fluid on the eye is gone, they successfully shrunk it and removed it... Unfortunately it left a ring of "stuff" on my eye, and my eyesight from that eye will never get any better. Of course, I still have my right eye, so I'm not completely bummed... My cutie little granddaughter, Delaney Grace came by to see me yesterday, she wanted me to come "sit by her" She's almost 2 now, and saying her ABC's, and singing songs, and she showed me how she knew her right from left now... Such a little joy to be around... I'll get to spend a whole week with her in about 10 days when we all go on vacation together... Can't wait! Well, my lateness has put me way behind this morning, I had better get going... Don't forget... Today is going to be a Tub Thumpin' Thursday no matter what!

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

China Is Back On The G-9 Docket...

Chuck Butler — Mon, 06 Jul 2009 15:10:19 GMT

.........But First, A Word From Our Sponsor..........
Now in Print: What You Need to Know About America's Economic Crisis

Based on the eye-opening film, IOUSA is your guide to America's enormous economic crisis. You won't find a more concise and complete evaluation of the global financial situation anywhere else.

Get your copy today
.................

In This Issue..

* Risk Aversion is strong once again...
* Currencies get sold...
* What's China really up to?
* RBA to leave rates unchanged?

And Now... Today's Pfennig!

China Is Back On The G-9 Docket...

Good day... And a Marvelous Monday to you! Some people have the day off today, so we'll probably not be back in full force until tomorrow... Not that we've been in full force, as a workforce in the U.S. for some time... But that's another story for another day! Today is a new day, and new week!

Friday's thinned out markets were not what the currencies wanted to see, as the bias to Risk Aversion was magnified in the thinned out markets, only making the selling of the currencies even worse... Some "levels" were hit in the thinned out markets, and that caused even more selling in the overnight markets as Japan and Asia came on board.

I'm really kind of shocked at the Asian selling... You may recall that last week we had the wild swing Thursday, after there were reports that China had obtained approval to attend the G-8 meeting this week in Italy, and discuss replacing the dollar as the world's reserve currency. The dollar was sold like funnel cakes at a state fair, after that report hit the news wires... But it was quickly turned around when the Chinese denied they knew anything about the contents of the report...

But... This weekend, while the charcoal was burning everywhere, the splashing in the swimming pools, and the display of fireworks had everyone's attention, the Chinese admitted that they were going to G-8! Where's the selling now? Isn't this confirmed now? Has something changed?

The answer to the Has Something Changed question, is yes... Currency strategists have come to the conclusion that China won't get anywhere with their desires to replace the dollar with SDR's (special drawing rights). Even with France throwing their two-cents into the discussion, and having their Finance Minister (Lagarde), and Bank of France Gov. (Noyer) calling for an increased discussion of currency coordination, the Currency strategists just aren't budging... They believe there's no way China, even with the backing of Brazil, Russia, and India, will get any traction...

Hmmm... So... It's over? Not hardly folks! I think that the comments coming from the French officials says..."We need to give the emerging markets more say in how the world's economy is run"... A foot in the door, if you will... And... When you have the war chests like Brazil, Russia, India and China have, a foot in the door, is like having a wide enough space that you could drive a Mack Truck through!

Of course that's just my opinion... I could be wrong... But then, somewhere in the back of your mind, you're thinking... Hey, this Chuck guy may just be, because you never know... He might be right!

OK... Playing games with your mind isn't what I was trying to do there... I was simply crossing the T's for the legal beagles...

So... We begin the week with the currencies weaker than they were last week, and the euro about ready to lose the 1.39 handle. The High Yielders are taking it on the chin too, with the exception of Brazil, but once that market opens we could very well see the real play catch-up.

The data cupboard is relatively empty this week, with the Initial Jobless Claims on Thursday, and the Trade Deficit data on Friday, the only "real" data this week... So, the G-8 meeting on Wednesday will have center stage, and any comments from the "outsiders" (China, etc.) creating pressure points for the dollar this week.

One of the worst performing currencies in the past couple of weeks is the Canadian dollar / loonie. No wonder, with the price of Oil dropping and Gold stuck in a rut... Nothing to give the loonie a boost... And overnight, the price of Oil has "gapped" down to $64, putting even more pressure on the loonie.

Let me explain what I think we're seeing in the price of Oil... I think a large part of the run-up in the price of Oil was caused by investors taking positions to hedge VS inflation... And in recent days, those fears of inflation have been put on hold... And these investors have no patience... So, those positions are getting sold, and... That's what's pushed Oil down so much in the past week.

Tonight, the Reserve Bank of Australia (RBA) meets to discuss rates... I fully expect the RBA to keep rates unchanged at an internal level of 3%. But, I also expect them to muddy the euphoria of unchanged rates, by leaving their easing bias intact. Put yourself in the shoes of the RBA... You may want to say the end of rate cuts has been seen and the next move, whenever that is, will be higher... But! You don't want to open Pandora's Box of currency rallies... The RBA would be the only Central Bank in the world that had removed their easing bias, with an eye on higher rates... The flood gates of investors seeking a currency that will be raising interest rates, would be thrown open, and an unwanted at this time, run-up in the A$ would take place.

So... The RBA will be cautious with their words, and keep their rate hike cards in their back pockets for now... Waiting for the right time to pull them out and throw them on the table!

Did you hear about China and Hong Kong agreeing to settle cross-border trades in renminbi? I know, you're scratching your head and saying, but Chuck, isn't Hong Kong a part of China? I could swear I saw the U.K. hand it over to China years ago! Ahhh grasshopper, you are correct... But, Hong Kong retains their own currency, the Hong Kong dollar, or "honkers" as currency traders call them. And... Renminbi has never been allowed outside of the mainland China... But now Hong Kong Banks will be able to borrow or buy renminbi!

I know this sounds like small potatoes... But, these are baby steps for China and what I believe their goal is... And that is, to gain wider acceptance for their currency... It's how they will be able to spring the coup someday to replace the dollar as the reserve currency... I truly believe their call to use SDR's is just a smokescreen... These currency agreements that China has signed with Argentina, and the Southeast Asia countries, and have on the table with Brazil, is the real thing to watch... I see the SDR's as a sort of stalking horse for China's wish for wider acceptance for the renminbi...

And to round out our discussion today... Our old friend, Jim Rogers, was back in the news last night. Let's listen in to Jim Rogers, author of a few best selling books, and long considered an excellent investment mind...

"The government is printing lots of money and borrowing even more; that's not the basis for a sound currency. The idea that anybody would lend money to the U.S. government for 30 years at 3 or 4 or 5 or 6 percent interest is mind-boggling to me." Jim also said that he olds fewer dollar than a year ago, and plans to short U.S. government bonds someday."

Of course this is a reoccurring theme with yours truly... I have harped and harped about this since the beginning of this year. In fact, in February, the title of my Currency Capitalist letter was: U.S. Treasuries the next great bubble...

The number of bonds being issued... And the question of who's buying them? For instance, the U.S. had more than doubled bond issuance to $963 Billion in the first half of this year, with another $1.1 Trillion scheduled to be sold by then end of the year. U.S. debt issues have lost 4.46% in the first 6 months of this year, and I just don't see how that trend can be turned around, when $1.1 Trillion in new issuance will be forced down the throats of investors before we sing Auld Lang Syne for 2009!

The Bank of Japan believes that they are seeing signs of an end to their recession, saying that they are more optimistic about the economy since 2006... I wonder how many times since 1990 that Bank of Japan officials have said those words? Probably enough times to make you wealthy if you had a Gold coin for every time they said it!

Speaking of Gold... Another $10 off the price this morning, down to $922... Silver is in danger of losing the $13 handle! Did I hear someone say... Bargains? Well, only if they go up from here, eh?

Currencies today 7/6/09: A$ .79, kiwi .6265, C$ .8585, euro 1.39, sterling 1.6125, Swiss .9145, rand 8.0230, krone 6.5215, SEK 7.8560, forint 197.25, zloty 3.16, koruna 18.6750, yen 95.20, sing 1.4575, HKD 7.75, INR 48.47, China 6.8340, pesos 13.36, BRL 1.9530, dollar index 80.86, Oil $63.76, 10-year 3.51%, Silver $13.09, and Gold... $922.70

That's it for today... I hope you all had a grand 4th of July holiday! It was pretty low key at the Butler House, as my little buddy, Alex, was suffering from a case of swimmer's ear, and the weather did not cooperate, as it rained, and rained hard, all weekend. I did get to spend some time with good friends on Friday night before the rain came. The rain didn't stop me from putting my Weber grill to use all weekend! The Agora Financial Investment Symposium in Vancouver is only two weeks away. Last year, I go food poisoning while in Vancouver, and believe me... being on the road, is no place, to get sick like that! I have better memories of Vancouver though... I've actually written my presentation for the general session in Vancouver... WOW! That's a first for me! Now, that workshop thing... You should check out Vancouver, and the Agora Financial Investment Symposium at: http://www.agorafinancial.com/AFsymposium/ OK! Time to go, Mike's here! I hope your Monday is Marvelous! Tell yourself that today will be a Marvelous Monday!

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

A Lost Decade?

Chuck Butler — Thu, 02 Jul 2009 15:08:57 GMT

.........But First, A Word From Our Sponsor..........
Now in Print: What You Need to Know About America's Economic Crisis

Based on the eye-opening film, IOUSA is your guide to America's enormous economic crisis. You won't find a more concise and complete evaluation of the global financial situation anywhere else.

Get your copy today

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

In This Issue..

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

And Now... Today's Pfennig!

A Lost Decade?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The U.S. Treasury Moves The Goal Posts...

Chuck Butler — Wed, 01 Jul 2009 14:33:01 GMT

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In This Issue..

* A 4-day rally gets stopped at the border...
* Home Prices fall at a -18.12% pace...
* Alice Rivlin gives her 2-cents...
* Kiwi bond maturities galore next month...

And Now... Today's Pfennig!

The U.S. Treasury Moves The Goal Posts...

Good day... And a Wonderful Wednesday to you! As tradition with the Pfennig would have it, here's my introduction to July... There I was... On a July morning... Looking for love... With the strength of a new day dawning, and... The beautiful sun...

Yes, for those "old rockers" from the 70's like me... That's Uriah Heep, at their best!

OK... So, welcome to July! The last day of June was quite the volatile one to say the least! There we were waiting for the S&P/CaseShiller Home Price Index to print, and show that home prices were still down by quite a bit, when it did, it did, it printed at -18.12%... But! The media was all over that like a cheap suit, clamoring that the spiral down in Home Prices had come to and end! Which, may be true... But wouldn't you want to wait to see if next month's report confirms it? And... By the way... Since when does -18.12% fall in home prices beckon a rally? Yesterday, would be that answer!

So... The currency rally that was going on for a 4th day, was quickly wiped out, Ventures style... What? Don't know who the Ventures are? Boy, you really missed a lot of great instrumentals! Any way, the euro sunk like the Titanic from a level of 1.4130 to 1.40... The iceberg that caused this mess was simply the fact that traders, etc. believe the U.S. is on its way out of this mess... Of course, they must not be Pfennig readers, because... They would have read yesterday how I detailed the monthly numbers and showed how even with the spiral down in Home Prices ending, it would take until 2011 before the Home Prices got back to zero!

But NOOOOOOO!!!! They couldn't read it until late yesterday afternoon, because... Houston, we had a problem, with the Pfennig's delivery yesterday... See, how I've mellowed? I'm not even going to rant about this... Instead, I'll just remind everyone that whenever the Pfennig doesn't show up in your email box, you can most likely find it to read on the Pfennig's website, where you can view that "glamour shot" of me, and archives of the Pfennig! You can find it here: www.dailypfennig.com ---- Hope that helps!

OK... Well... After the thrill is gone, and the dust settled on all that yesterday, the euro is leading the other currencies higher once again... Here are a few things that have caused a sell-off of the dollar overnight once again...

Not that I'm a fan of his... In fact, I don't really care at all... But George Soros, normally has some interesting things to say, that end up being bang on... So here are a few one liners from a speech by George Soros yesterday... I believe this sounds very much like the things I tell you, have told you, and will continue to tell you...

SOROS SAYS SEES A "STOP-GO" ECONOMY GOING FORWARD
SOROS SAYS SELF-CORRECTING MARKETS IS A MISCONCEPTION
SOROS SAYS INFLATION FEARS WILL DRIVE UP RATES AS MARKETS REVIVE, CHOKING OFF GROWTH
SOROS SAYS CURRENT SUPER BUBBLE MADE POSSIBLE BY PAST INTERVENTION, EFFORT TO RESOLVE PREVIOUS BUBBLES
SOROS SAYS FORMER FED CHAIRMAN GREENSPAN REFUSED TO ACCEPT RESPONSIBILITY FOR STOPPING BUBBLES

And then there was Alice Rivlin, she of former Budget Director, and former Fed Reserve member, fame, had a few things to say to the House Budget Committee... Good stuff, but you have to wonder if anyone was paying attention! Here's Alice!

"The long term budget outlook: impending catastrophe"

"No one needs to remind this Committee that the outlook for the federal budget is worrisome indeed, scary. Long before the financial crisis and the current deep recession, this Committee was anxiously pointing out that current federal spending and revenue policies are on a risky, unsustainable course. Promises made under the major entitlement programs (especially Medicare and Medicaid) will increase federal spending rapidly over the next couple of decades, as the population ages and medical spending continues to rise faster than other spending. Federal expenditures are projected to grow substantially faster than revenues, opening widening deficit gaps that cannot not be financed."

Hmmm... Sounds like me too! Is this "sound like Chuck day?" HA!

OK... Enough of all that, I don't want anyone to get hurt, and I should have told everyone to put away the sharp objects before reading!

In other data yesterday, Consumer Confidence took a step backward, and fell in June to 49.3 from May's figure of 54.8... Maybe those that were surveyed has just read Alive Rivlin's talk to the House Budget Committee! Seriously though, this was a surprise, given the fat that the DOW gained 838 points in the 2nd QTR! At least, that's what the Wall Street Journal said!

Today, we get a truckload of data starting with Challenger Job Cuts, and the ADP Employment Change. Those are followed by the ISM Manufacturing Index, Construction Spending, Pending Home Sales and Vehicle Sales... Not a lot of "major" data prints, but still stuff to check the pulse of the economy.

I was talking to my good friend, and an economics professor at a prestigious University, yesterday, and she mentioned that "this piece of data is questionable as to the inputs"... I said to her... "What piece of data isn't questionable these days?"

OK... The "demand for high yield" was put on hold yesterday... But it will return, or at least I should say I think it will return... I don't know for sure to say "it will", so had better make the legal beagles happy... That's funny! To say that they would be "happy" with me... They cringe, and get very uncomfortable every day when they read the Pfennig! HA!

But you know me... I'm just trying to provide Market Commentary, and other things that I think are important, well, important to me that is!

Like... A long time reader sent me a note yesterday, and said, "hey Chuck, did you see the story in the Wall Street Journal (WSJ) on Foreign Demand for Treasuries?" Well, I hadn't and went immediately to the WSJ, and there it was... Tucked away in a corner so that no one would see it, if they weren't looking for it... A story, by Min Zeng, titled, "Is Foreign Demand As Solid As It Looks?

These are the things that really TICK ME OFF folks, so stay with me on this... Basically, as we all know the U.S. Treasury Auctions have been getting "covered" easily recently... And foreign demand was listed as the reason... Which would have been the exact opposite of what I was saying about foreigners shying away from Treasuries...

Here's the skinny... But I'll let Min Zeng tell it, since he did the research and brought this to the public, even though it was tucked away so no one would notice!

"But in a little-noticed switch on June 1, the Treasury changed the way it accounts for indirect bids, putting more buyers under that umbrella and boosting the portion of recent Treasury sales that the market perceived were being bought by foreigners.

The new definitions are deep in the arcane world of Treasury auctions. The change involves buyers who place orders through primary dealers. Those had been counted as direct buyers, but as of June 1 they were classified as indirect buyers, making that group larger than before. Because investors view that group as being dominated by foreign buyers, they assumed foreign demand was higher."

>>>> OK, back to me... Ahhh, so that's what's going on... The Treasury "moved the goal posts on us"... As Sylvester would say... That's despicable! Why isn't someone in Washington D.C. shouting from the roof tops about this? Oh, that's right, they're all in cahoots!

This is HUGE folks... So... When the markets were thinking that foreign demand was increasing, it was actually, as I had said, shying away from Treasuries! Which, if the market participants are thinking that as long as foreigners are "buying into our deficit spending" then the dollar will be on terra firma, but instead are getting "duped" by the U.S. Treasury, you would think that someone would have some xplainin to do... Right Lucy?

And here's another thing that just ticked me off when I read it this morning... Recall, last week I told you about how someone in China was dissing the talk that China's stimulus was working, and that China would not be recovering, which sent the Aussie dollar to the woodshed until this news had passed? Well... Talk about egg on their face! Here's the skinny...

China's manufacturing expanded for a fourth month in June... The official Purchasing Managers' Index rose to a seasonally adjusted 53.2 in June from 53.1 in May... And just like here in the U.S. any reading above 50 is thought to show manufacturing is expanding... The manufacturing index in the U.S. is around 44, so... We DO have the tale of two economies...

In one corner, we have the Chinese who have spent about $585 Billion worth of renminbi in stimulus, and are seeing the results... Whereas in the other corner we have the U.S. who have spent... More money than you can shake a stick at, and are not seeing green shoots like they "think they are", instead they see dandelions, and weeds!

And the currencies of Australia and New Zealand have responded positively to this news from China...

And since I'm talking about China, might as well check on the other members of the BRIC's (Brazil, Russia, India and China) Brazil's real just posted its best quarterly performance on record, and India was Asia's 3rd best performing currency, and if you throw out the two currencies above India that are illiquid, South Korea, and Indonesia, India was the best performing currency in Asia in the second QTR...

And the people over at the Royal Bank of Scotland (RBS) believe that the rupee won't stop here... RBS issued a research report calling for a record 11% gain by the rupee in the 3rd QTR... I bet this news is music to the ears of my colleague on the "other" newsletter that I write... The Currency Capitalist... (to find out more: https://www.web-purchases.com/CUC/WCUCJ900/landing) My colleague, Ashish Advani, at the Sovereign Society, has been saying the rupee would be a strong performer for months now!

Here's something you might want to be aware of, regarding the New Zealand dollar / kiwi... About $4.5 Billion in kiwi Uridashi and euro kiwi bonds denominated in kiwi will expire next month... I'm told that this is more than 4 times the size of a usual monthly expiration of bonds. This could very well be the hoola hoop the Reserve Bank of New Zealand (RBNZ) is looking for, given their wish that kiwi would weaken...

Royal Bank of Canada's Currency guru, Sue Trinh, says that kiwi weakness could be beneficial to Aussie dollars, as the Japanese are leaning toward Aussie over kiwi these days...

Sounds about right to me!

And then there was this... OK, you all saw that Bernie Madoff was given 150 years in prison... Did you see that his wife, Ruth, reached an agreement with the authorities to return all of her wealth except $2.5 million that she got to keep? The thing that I still don't get is how there aren't more people going down with the ship on this one... I've been in the back office of brokerage firms, ran a margin dept, etc. and know this wasn't just Bernie and his accountant... There was a lot of wool pulled over many eyes... And this will be the next step in the investigation by the U.S. officials... To see, who else knew what... If a whole stable full of people aren't found to have known, then I'll be surprised...

Currencies today 7/1/09: A$ .8045, kiwi .6410, C$ .8640, euro 1.4050, sterling 1.6430, Swiss .9220, rand 7.7675, krone 6.39, SEK 7.6337, forint 192.50, zloty 3.1390, koruna 18.3315, yen 96.90, sing 1.4475, HKD 7.75, INR 47.90, China 6.8330, pesos 13.18, BRL 1.9515, dollar index 80.11, Oil $71.27, 10-year 3.54%, Silver $13.67, and Gold... $931.20

That's it for today... So sorry about the tardiness of the Pfennig yesterday, but I can't do anything about it when we have technical difficulties... You know that I get up before the milkman, and the paper man, to get here to write it... It wasn't like I was dilly-dallying around and didn't get it done until 5 in the evening! HA! I see that my little buddy, Alex, got a 2nd and 3rd in backstroke and freestyle respectively at his latest swim meet. Really long time readers might recall when Alex's older brother, Andrew was a highly decorated swimmer, and I would write about his swimming records... And their sister Dawn, also was a medal winner as a young girl! So... It's now up to granddaughter, Delaney Grace to carry on the swimming tradition! HA! Cards lose again... UGH! OK... Time to try to get this out the door, hopefully it will go without a hitch... But whether it does or doesn't it won't stop me from having a Wonderful Wednesday... How about you?

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

A Week Dominated By Data...

Chuck Butler — Mon, 29 Jun 2009 14:32:45 GMT

.........But First, A Word From Our Sponsor..........
The Ultra Resource Index CD: 6 foreign currencies, 1 unique opportunity

The Ultra Resource currencies (each is equally represented in the CD):

*Australian dollar
*Canadian dollar
*Hong Kong dollar
*New Zealand dollar
*Norwegian krone
*Singapore dollar

EverBank is a Member FDIC and Equal Housing Lender.
......................................................

In This Issue..

* Both sides of the ship...
* Currencies remain well bid...
* ECB and Riksbank meet this week...
* Baiting the hook for more stimulus?

And Now... Today's Pfennig!

A Week Dominated By Data...

Good day... And a Marvelous Monday to you! The Heat Wave finally broke Saturday night, and we had just one of the most beautiful days yesterday that I have ever seen! Which was good, because we had a backyard full of first kids, and then family to celebrate Alex's 14th birthday!

Well... We have a week ahead of us that will be dominated by the U.S. data cupboard. And this week, we'll get the June Jobs Jamboree (JJJ) on Thursday instead of Friday. Saturday is the 4th of July, and I guess the Bureau of Labor Statistics (BLS) isn't working on Friday! HA! No, they do this every now and then when the markets will be quite thin on a Friday before a Holiday weekend. And this week qualifies BIG TIME! It will be the 4th of July! And maybe, just maybe because you never know, someone in Washington D.C. will realize that the it's supposed to be about WE THE PEOPLE, not we the politicians...

Friday, I left you with the currencies moving higher on yield demand, I held by breath this morning when I turned on the currency screens, as I was concerned that another "demand" was going to be the headline. Because that's how it's been lately, eh? One day this "demand" the next day some other "demand"... But, no such new trade direction today. WHEW! I totally dislike getting whipsawed around like that, when we all know, and the traders all know, and the Hedge Fund managers all know, that in our collective heart of hearts, that in the end, the dollar will be much weaker... It's just all this stuff that goes on between now and when the end of the trend takes place.

For instance, one of the headline stories on the Bloomie this morning is that the "Best Currency Forecaster says the Dollar to Rise Most Since 1981 by year end"... WOW! Now that's an interesting forecast... But, it's just that... The "forecaster", believes that the U.S. recession will have come to an end in the U.S. this year, and U.S. growth will outpace everyone else, making the dollar the King once again... Now... I talk about going out on limbs all the time with my opinion / look ahead on things, and this is "forecast" qualifies as going out on a limb!

It's important that I tell you about these things, because... This is market commentary, and I wouldn't be doing it right, if I only told you stories on one side the ship... Right? Of course that's right! Of course, you know me, I just don't see it happening that way, and the one thing I think of when I read something like that is: rose colored glasses...

And... Speaking of the sides of the ship... Union Bank of Switzerland (UBS), the world's 2nd biggest currency trader, has just revised THEIR CURRENCY FORECAST for year end, believing the dollar will be lower... So there you go... Two stories from both sides of the ship!

Playing well with the "forecast for a strong dollar" is a story overnight that China has once again backed off their statements calling for a replacement to the dollar as the world's reserve currency. Of course, that's what the "markets read"... I don't read it that way... Let's see what you think... "China ruled out "sudden changes" to its foreign-reserves policy"... I think it's strictly China being China, aloof, cunning, and other things... Of COURSE they don't want any "SUDDEN CHANGES", they haven't had enough time to rid themselves of hundreds of billion of dollar reserves!

Even with those two stories this morning, the dollar remains on the down side against the currencies, with the euro remaining above 1.40 through Friday, overnight Sunday, and so far this morning... The euro did get a boost this morning from a report on economic confidence, as the data moved upward to an index number of 73.3, VS the 71 that was forecast...

The European Central Bank (ECB) will meet this Thursday, and I do NOT expect them to make any moves with rates, leaving their internal rate at 1%. The most important thing will be if ECB President Trichet, has something to say that could me the markets after the rate announcement.

Sweden's Central Bank, the Riksbank, also meets on Thursday this week. (there's a ton of stuff going on Thursday, eh?) With internal rates at just .50%, I guess they could cut, but what would be the point?

The Swiss franc is getting caught in the middle of a war between the Swiss National Bank (SNB) and traders... The SNB has been in the markets quite a few times recently intervening (selling francs) to keep the currency from getting too strong. And traders see that as a great opportunity to test the SNB's intestinal fortitude... I've always loved watching these things develop... If the traders "really" want to test the SNB, they'll win, as the SNB doesn't have the war chest that, say a Japan has... Unless they want to get into the "printing" business....

Besides data, and Central Bank meetings this week, it's also the end of the quarter tomorrow... Which means the books get closed as some businesses have their year end, on June 30th. This also means that 2nd QTR earnings isn't that far off, and I think these reports will be quite interesting, maybe taking some of the shine off the thoughts that the recession ended already!

The High Yielders have remained strong since Friday of last week, with Aussie, kiwi, Brazil, all leading the way. And there was no "new News" from the BRIC's over the weekend... For those of you new to class, the BRIC's are Brazil, Russia, India and China, all emerging markets that are clamoring for change and a great influence in the world's financial matters... And why not? They have more money in reserves than you can shake a stick at, and... The have the a very large portion of the world's population!

So, let's go to the data cupboard and see what else will be on the docket this week data wise...

Today we have a couple of 3rd tier reports, so nothing to write home about, but tomorrow... We'll see the April S&P Case/Shiller Home Price Index... I truly expect this data to show that Home Prices continue their downward spiral... We'll also see The Chicago Purchasing Manager report (manufacturing), and Consumer Confidence...

When we turn the calendar page to July on Wednesday, we'll be met by the ADP Employment report, and the ISM Manufacturing Index. There's also Construction Spending, Pending Home Sales, and Total Vehicle Sales. Then on Thursday, which will be the "Mother of all Economic Data and Central Bank meeting days"... The June Jobs Jamboree, along with the Weekly Initial Jobless Claims... Which is going to look really stupid for the Jobs Jamboree... You see, the monthly report from the BLS is expected to print at -350K... Whereas the "WEEKLY" Initial Jobless Claims will print at over 600K for the week! I know, I know, it doesn't add up, folks... Which is one of the things I complain about, and point out, and make fun of all the time... The BLS... Need I say more?

And then there was this... Did you know... That U.S. Treasuries posted their largest 1st half losses in 30 years? Well, that's the facts Jack! Now... Quite a few "bond dealers" believe that the worst is over... OVER? Nothing's over until we decide it is! Was it over when the Germans bombed Pearl Harbor? HAHAHAHAHAHAHA! (ok that's a line from Animal House, please I know it's incorrect, just funny!)

Seriously though... I don't see how these "bond dealers" can say something like that, as they know all too well that the supply of Treasuries that will be issued this year will be enough to send yields higher... How can they get away with saying something like that? Oh! I know! They won't be technically wrong, if Treasuries continue to lose value, as long as they don't lose as much as they did in the 1st half of this year! Shame, shame, shame...

OH, and remember last week, when I told you about the President saying "not yet" instead of a resounding "no" when asked about another Stimulus? Well... The White House Senior Advisor, David Axelrod, said this weekend that the President is ready to discuss additional measures... And the President also casually mentioned that "we have not broken the back of the recession"... Is that like baiting the hook? I think so folks...

Now... On to the Big Finish for this Marvelous Monday!

Currencies today 6/29/09: A$ .8065, kiwi .6490, C$ .8685, euro 1.4065, sterling 1.6570, Swiss .9215, rand 7.8405, krone 6.4470, SEK 7.7390, forint 196.30, zloty 3.1920, koruna 18.4855, yen 95.30, sing 1.4540, HKD 7.75, INR 48.10, China 6.8335, pesos 13.1920, BRL 1.9355, dollar index 79.94, Oil $69.69, 10-year 3.50%, Silver $14.12, and Gold... $941.95

That's it for today... As I said above, yesterday was my little buddy Alex's birthday. We went to breakfast, as we always do... Yesterday was also my darling daughter Dawn and husband Jerry's 6th wedding anniversary. I felt bad after sending out Friday's Pfennig that I had not paid respect to Farrah Fawcett, who had passed away after losing her battle with cancer on Thursday. I wonder how many T-shirts were bought and worn back in the 70's with Farrah on the T-shirt... They were everywhere! And this weekend, the info-commercial guy, Billy Mays, passed away... OK... Our little Christine returns to work today, after a brief vacation... Yay for us! And a good show for the U.S. National Soccer Team yesterday, losing the Championship game 3-2, after leading 2-0 at halftime! Gotta go... It's a Monday, so we might as well make it Marvelous, eh?

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

Desperately Seeking Yield...

Chuck Butler — Fri, 26 Jun 2009 15:27:32 GMT

.........But First, A Word From Our Sponsor..........
The Ultra Resource Index CD: 6 foreign currencies, 1 unique opportunity

The Ultra Resource currencies (each is equally represented in the CD):

*Australian dollar
*Canadian dollar
*Hong Kong dollar
*New Zealand dollar
*Norwegian krone
*Singapore dollar

EverBank is a Member FDIC and Equal Housing Lender.
......................................................

In This Issue..

* Currencies rally...
* More on the BRIC's...
* New Zealand's GDP contracts..
* Bernanke gets grilled!

And Now... Today's Pfennig!

Desperately Seeking Yield...

Good day... And a Happy Friday to one and all! The end of what seemed to be a very long week... The last weekend in June, can you believe that? Next week, we'll be getting ready for the 4th of July celebrations! WOW!

Well... What a volatile week it has been in the currencies! Up, down, all around, and settling back to levels that we saw before the Fed's FOMC meeting earlier this week. Suddenly, investors are looking for yield again... Looks like they are "Desperately Seeking (not Susan) Yield! And why not? The Fed, and the Bank of Canada (BOC) have come out and said that there will be no interest rate hikes until we've turned quite a few pages on the 2010 calendar.

So, with investors clamoring for yield, the dollar gets taken to the woodshed... As I said earlier this week, one of these probes above 1.40, need to take hold of the figure and build on it, otherwise we're doomed to remain in the 1.35-1.40 range, and range trading is for the birds! Talk about counting flowers on the wall, and watching paint dry! UGH!

I was shocked yesterday to see but a few emails asking me more about the SDR's story that I talked about... Men, women, boys and girls, all... This is important stuff! Don't take it lightly! There's a movement underway that could end up costing you dearly, if you do not take the diversification steps...

I think it is important to know that the BRIC countries (Brazil, Russia, India, and China) are serious about replacing the dollar with a "global currency" i.e. the IMF's SDR's... And... That the BRIC's want more power on the World's stage... And why not? These countries currently have almost 3 Trillion in foreign reserves... And... A very large piece of the world's population... (Thanks for that fodder, Kevin!)

OH! And guess who was banging the drum for a "super-sovereign" currency overnight? China, that's who! So... They're Baaaaaaaaccccckkkkk! OK... This was the People's Bank of China (the Central Bank), that made this statement, along with a call for the IMF to manage part of member's foreign exchange reserves... Hmmm... OK, I just said that China wants more power on the world stage, and here they are saying that their puppet will be the IMF! OK, I took some liberty with that, but it's the way I see it!

OK... Back to what's going on in the currencies today... Hmmm... The dollar is getting taken to the woodshed to end the week, that's what's happening! And the currency leading the pack with regards to performance VS the dollar, drum roll please.... The Brazilian real... A 3 day "winning streak" has the real back to levels it saw before the Brazilian Central Bank (BCB) cut rates about 10 days ago...

The way I see it, and long time readers know this will be interesting in the least, is that investors want to invest in the BRIC countries, but there's very little liquidity there in each of those currencies, along with very little yield, except... In Brazil... Liquidity isn't what the majors enjoy, in fact it's still traded on what's called a "non-deliverable forward", which means it can only settle in dollars, with no deliverability, but... It's traded easier and less costly than the other BRIC's and... It has the highest interest rate available... So... You can see why investors are buying reals...

Having said that though... You must know about the volatility... Look at what happened this week... On Monday, we started the week with the real at 1.9750, only to see it rocket to 2.0326 in one day's trading, a near 3% move / loss in one day! Then we saw it rally back to 1.9795 the next day, and after 3 days of gains the real sits at 1.9420 this morning, thus generating a "gain" for the week! And... The other thing, is that Brazil is considered an Emerging Market... And long time readers have learned over the years that when one Emerging Market gets slammed, they all get taken to the woodshed... So... Be careful out there!

A high yield currency that far removed from the early days of trading like Brazil, but offers yield, is the New Zealand dollar / kiwi... And kiwi has been held back, although still posting a gain VS the dollar, overnight as 1st QTR GDP printed at a negative -1%, thus marking the 5th consecutive quarter of negative growth in New Zealand...

I'm probably out there on the big fat limb (to hold me up, of course!) by myself on this one, but... I personally believe that both the Reserve Bank of New Zealand (RBNZ) and the Reserve Bank of Australia (RBA) have seen the lows in their interest rates, and no further rate cuts will come from these respective Central Banks. I know, that last week, we were all hyped up about future rate hikes from the RBA in 2010, and we probably got a little ahead of ourselves with that thought... I'm probably ahead of the curve on the "end of rate cuts" talk... But that's where I like to be!

So... When the world's investors are looking for yield, they don't have to go to Brazil, or India... They can go to the old reliables... Australia and New Zealand, with a reduced fear of further rate cuts... At least that's they way I see it! And yes, I could be wrong...

And how about Gold and Silver this week? What a week on Mr. Toad's Wild Ride for precious metals... The main thing though is that they are finishing the week with a rally, and Gold which was trading at $922 on Monday, is $944.85!

And how about that grilling that Big Ben Bernanke received yesterday by legislators over the Fed's conduct in the Bank of America (BOA) takeover of Merrill Lynch... You may recall that BOA's CEO, Ken Lewis said he was "bullied" into taking over Merrill and not disclosing to his shareholder all of Merrill's losses that were on the books... Big Ben denies that he participated in any bullying... (doesn't that lead to Paulson then? Did Big Ben just throw Paulson under the bus?)... Any way... Big Ben did little to convince the legislators that the Fed didn't keep their hands out of the cookie jar... And that, my friends, may be the foot in the door that we've been looking for... Maybe, just maybe, because you never know, but with the legislators having questions about the Fed and Big Ben, they probably aren't in any mood to hand over the regulatory powers that the President wants to give them...

And... My old fave Central Banker, NOT! Big Al Greenspan was back in the news last night... I'm trying to figure out how he and I got on the same side of the ship... But, here was Big Al, my nemesis for years, talking about inflation being a concern... Let's listen in to Big Al... Alan Greenspan, former chairman of the Federal Reserve, said the threat of inflation needs to be confronted because it poses a threat to economic recovery. "Excess capacity is temporarily suppressing global prices. But I see inflation as the greater future challenge," Greenspan said. "If political pressures prevent central banks from reining in their inflated balance sheets in a timely manner, statistical analysis suggests the emergence of inflation by 2012."

Of course, I think inflation will be showing its ugly face next year, not 3 years from now!

And on the data front... The Weekly Initial Jobless Claims "surprised" economists by moving back up, after falling last week... 627,000 unemployed Americans filed for unemployment claims last week... No "green shoots" here! In fact... We need to see if we can use these so-called Green Shoots that the President and Big Ben keep talking about, for ethanol... They've got to be good for something! HAHAHAHAHAHAHAHA! I must say that a reader gave me that line!

And here's Warren Buffett on Green Shoots... "I had a cataract operation on my left eye about a month ago and I thought maybe now I'll be able to see green shoots. We're not seeing them. Whether it's retailing, manufacturing, wherever. We have a big utility operation. Industrial demand is down like we've never seen it for a simple thing like electricity. So it hasn't happened yet. It will happen. I want to emphasize that. But it hasn't happened yet."

And... Then... There was this... A good story to end the week and head to the Big Finish with...

Barclays Capital Inc. (Barclays) the world's third largest currency trader, have lowered their one-year forecast for the dollar, saying foreign investors will reduce their purchases of U.S. assets... Barclays referred to the dollar's status as "safe-haven paradise lost", due to the ballooning fiscal deficit and the printing of money by the Central Bank... Barclays believes that the euro will be trading at 1.50 in a year...

Hmmm... Nothing new there for Pfennig readers, but, I always find it to be good to see others with their BIG research departments, no divisions, yeah, divisions, that's bigger than a department! Wait, get back on track, here Chuck! Yes, the Big research divisions, that finally come around to what little old me has been saying for months now... Oh! And that "little old me" has just got to crack up any one that knows me, and have seen me lately!

And one more thing... Oil is back to $71 this morning, as there has been more problems in Nigeria... Let's hope these problems go away!

Currencies today 6/26/09: A$ .8055, kiwi .6450, C$ .8710, euro 1.4085, sterling 1.6490, Swiss .9210, rand 7.9680, krone 6.4250, SEK 7.8125, forint 196.20, zloty 3.1975, koruna 18.50, yen 95.40, sing 1.4540, HKD 7.75, INR 48.21, China 6.8338, pesos 13.18, BRL 1.9420, dollar index 79.86, Oil $71.07, 10-year 3.55%, Silver $14.25, and Gold... $945.65

That's it for today... Well... Today marks the 2-year anniversary of the surgery that removed my cancer ridden femur, and replaced it with a prosthetic. Quite an ordeal, but... Here I am! Rock you like a hurricane! Oops, sorry, got carried away there! I'm so happy that's behind me now! Well... Michael Jackson has died at 50 years old... When I think of Michael Jackson, I just remember my two oldest kids, playing that Thriller album over and over again. The heat wave over us continues, but is expected to back off next week... My little buddy, Alex, turns 14 on Sunday. WOW! We began a tradition when he was quite young, of the two of us going to breakfast on his birthday. Two years ago, when I was in the hospital, my darling daughter, Dawn, brought Alex to the hospital with breakfast, so we could continue the tradition. I hope I can continue celebrating with him for many years to come. So... Happy Birthday Alex! Real long time readers might recall when Alex was 3, and would sit on my lap as I wrote the Pfennig from home, and every once in awhile the text would look like this... 9087lkndy7, and I would say, "sorry, Alex is helping me again"... Alex has already made me aware that he can get his drivers permit next year... YIKES! OK, time to head off into the sunrise... (not sunset, as I'm writing at daybreak, HAHAHAHA) The currencies are having a Fantastico Friday, so why don't we joining them?

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

Increasing SDR Issuance...

Chuck Butler — Thu, 25 Jun 2009 15:17:40 GMT

.........But First, A Word From Our Sponsor..........
The Ultra Resource Index CD: 6 foreign currencies, 1 unique opportunity

The Ultra Resource currencies (each is equally represented in the CD):

*Australian dollar
*Canadian dollar
*Hong Kong dollar
*New Zealand dollar
*Norwegian krone
*Singapore dollar

EverBank is a Member FDIC and Equal Housing Lender.
......................................................

In This Issue..

* Fed confuses markets, risk assets get sold...
* SNB intervenes to stop franc's rise
* ECB issues 12-month liquidity...
* Bernanke to get grilled?

And Now... Today's Pfennig!

Increasing SDR Issuance...

Good day... And a Tub Thumpin' Thursday to you! Yes, I know the currencies and commodities got whipsawed yesterday, and my Cardinals got spanked, but that's no reason for us to not enjoy a Tub Thumpin' Thursday! Every day is a gift, and it has nothing to do with stocks, bonds, currencies, and commodities!

OK... Not that I try to be philosophical, sometimes it just comes out that way! Besides, you don't want to think that I'm just a smart *** all the time! HAHAHAHAHAHA!

Well, as I said in the open, the currencies and commodities got whipsawed yesterday, and the culprit was the FOMC minutes... You see, the Fed Reserve met to discuss rates, and other items. And what they said just blew away the bond vigilantes, and really ticked off the Hawks, but in the end, what they said, was really that things will remain status quo...

Their announcement of bond buying didn't measure up to what the bond folks wanted to see, and their announcement that interest rates won't be going up for some time, didn't measure up to the inflation Hawks, who wanted a comment about fighting inflation. Instead, what they received was more Alfred E. Newman on inflation... "What, me worry?" That's how ridiculous their statement was folks... The Fed still looks for inflation to "remain subdued for some time"... Although... Their outlook for the economy was slightly upbeat...

So... If your confused about what the Fed is thinking... Then join the rest of us! The markets spent the day trying to sort it out, and when it was all said and done, they couldn't, so they sold risk assets... So... The 1.41 level the euro enjoyed yesterday morning when I signed off, is now 1.3945...

On top of all this, the Swiss National Bank (SNB) has issued a communiqué' that talks about their "new aggressiveness" toward Swiss franc strength. Now, isn't that just one of the most ridiculous things for a Central Bank to say about it's currency! Would someone over there at the SNB, please think about what you're saying!

Oh well... This is all I'll say about the SNB... It's hard to soar with the eagles when you have to work with a bunch of turkeys! OH! And it's also reported that this "aggressiveness" showed up as intervention by the SNB yesterday... They sold francs in the markets... UGH!

OK, let's get back to the Fed, and their bond purchase program / Quantitative Easing / monetizing the debt / money printing... It's all the same... Oh, one more thing, it's the road to ruins, but don't let that get in the way of the Fed Party! You see, the Fed didn't announce anything this time, because all the world was watching and waiting for them to announce a "mega-buying program"... I told you earlier in the week to NOT expect the Fed to announce any changes to their road to ruins at this meeting, but instead the August meeting, when during the dog days of summer, when almost every #1 trader on earth is on vacation...

So... The bond vigilantes who want bond yields low realize, with the amount of supply that the Treasury is issuing these days, that the only way to get those lower yields is to have the Gov't buying bonds!

I came across something yesterday, that I yelled across the desk to make certain everyone knew... Recall at least a month or so ago, I told you how China had called for a new reserve currency, replacing the dollar with SDR's (special drawing rights), which would be a basket of currencies. This news received a ton of publicity... But one thing that didn't receive a ton of publicity was the fact that President Obama agreed at an economic summit in London that SDR's should now be used to help stabilize the balance sheets of nations struggling to combat the current crisis.

Now... On the outside that looks harmless right? Just helping these struggling nations... But! Could this also be a baby step toward a global currency? Could this be a baby step toward a further devaluation of the dollar, and it's signed off on by the President?

OK, now here's the thing that really caught my eye... The IMF is going to issued $300 Billion worth of SDR's. That's 10 Times... That's right, I said 10 Times the amount of SDR's that CURRENTLY EXIST!

Could this be the facility for China to quietly exchange dollar reserves for SDR's? Come on! Somebody has got to see this the same way I do!

I mean, it was just LAST WEEK, that the countries of Brazil, Russia, India and China (BRIC's) called for a "more diversified international monetary system?" Why, yes, Chuck, it was... Just last week! And then this week, the IMF "just happens" to be issuing 10-TIMES the amount of SDR's that CURRENTLY EXIST! Hmmmm...

I probably should stop there... I'll be accusing people of all sorts of things if I continue on this path... But there's some food for thought, eh? You won't see this on TV... They have more important things to show you and talk about, like... The President killing a fly! That's a really sad thing, to think that our news has come to that!

OK... New Home Sales for May dipped lower, but the inventory of homes for sales also dipped... And, we got the surprise of year when Durable Orders for May showed an unexpected and very strong gain of 1.8%... While I think this is wonderful news, I have to question it... I mean, with the automobile industry basically shut-down, one would think this number to be quite lower... However, I'm told... That non-defense aircraft orders more than offset the auto losses. OK, so, this is NOT a green-shoot folks... This is a One-and-done!

OH! And to follow up on yesterday report regarding Existing Home Sales... I totally forgot to mention that Foreclosure Sales are soaring, and thus a big part of the rise in Existing Home Sales... So, no green-shoot here either!

Today, we'll see the Weekly Initial Jobless Claims, and... The Final print of 1st QTR GDP, which will remain at -5.7%...

So, once again, not much on the data watch for today.

Before I go to the Big Finish... I want to follow up on the news I wrote about yesterday regarding the European Central Bank's (ECB) EUR 300 Billion injection of liquidity out 12-months... The total came in at a higher figure than that, at EUR 442 Billion... Still, much lower than the forecasts, which had seen some call for a number as high as EUR 1 Trillion! And... This morning, the Eurozone announced that Industrial Orders fell 1% in April... So that data isn't helping the euro any either!

And then there was this from the NY Times this morning... "The U.S. House Oversight and Government Reform Committee will question Federal Reserve Chairman Ben Bernanke about his role in Bank of America's acquisition of Merrill Lynch. While Republican lawmakers are launching an attack on Bernanke, who is Republican, Democrats are defending him."

Man, is that all mixed up! But... A week ago or so, we were getting reports about the Bank of America (BOA) purchase of Merrill Lynch... And now, nothing, absolutely nothing, say it again! Any wonder why? Well, maybe it will come out in the U.S. House Oversight and Government Reform Committee questioning, although I doubt it...

And the State of California... The largest economy in the U.S. and in the top 7 economies of the world (used to be 7th, but with their recession, who knows?), announced that they were going to pay their bills with IOU's... The state's controller said. "Next Wednesday, we start a fiscal year with a massively unbalanced spending plan and a cash shortfall not seen since the Great Depression."

And... The Fed believes the recession is easing? Hmmm... Maybe they are too far away from the California books and records!

I'm on a roll here, somebody stop me! OK, I'm stopped!

The Treasury will auction $27 Billion of 7-year Treasuries today... Just keep the supply spigot open must be the Treasury's motto these days!

Currencies today 6/25/09: A$ .7955, kiwi .6360, C$ .8605, euro 1.3940, sterling 1.6280, Swiss .9095, rand 8.0775, krone 6.5170, SEK 7.9350, forint 199, zloty 3.24, koruna 18.72, yen 96.40, sing 1.4575, HKD 7.75, INR 48.65, China 6.8345, pesos 13.27, BRL 1.9705, dollar index 80.78, Oil $69.05, 10-year 3.69%, Silver $13.86, and Gold... $934.20

That's it for today... Draggin' the line today, late night with my little buddy Alex's baseball game. A ringing double and single with two RBI for Alex last night, in his last game of the year. HEY! How about the U.S. National Team, beating Spain in soccer / football? WOW! It's been a while since the U.S. beat a ranked national team. So good for them! No breakfast sandwiches today for the boys and girls, as out little Christine is on holiday... Yay for her! She normally picks them up and I buy, but I forgot to do both this morning! UGH! 11-0 spanking by the Mets last night, leaves the Cardinals only 1 game in front in their division... Well... I'm going to attempt to have a Tub Thumpin' Thursday, I hope you do too!

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

More Stimulus On The Way?

Chuck Butler — Wed, 24 Jun 2009 14:53:55 GMT

.........But First, A Word From Our Sponsor..........
The Ultra Resource Index CD: 6 foreign currencies, 1 unique opportunity

The Ultra Resource currencies (each is equally represented in the CD):

*Australian dollar
*Canadian dollar
*Hong Kong dollar
*New Zealand dollar
*Norwegian krone
*Singapore dollar

EverBank is a Member FDIC and Equal Housing Lender.
......................................................

In This Issue..

* Euro leads currencies higher...
* Commodities rally back on FOMC thoughts...
* FOMC meeting today...
* NZ Consumer Confidence on the rise...

And Now... Today's Pfennig!

More Stimulus On The Way?

Good day... And a Wonderful Wednesday to you! Well... Yesterday, the title of The Pfennig was: So Far... It's A Turn Around Tuesday! And... That theme played well throughout the day, and by day's end, it had been quite the Turn Around Tuesday! Now, we have to see what's in store for us today, as the last couple of weeks have seen the Wednesday trading quite the opposite of Tuesday's trading! Strange trading pattern don't you agree?

Overnight, the euro climbed as high as 1.4140, only to sit at the cusp of 1.41 as I begin to write this morning. Of course 1.41 certainly looks a lot different from the 1.35-1.40 range we've seen in recent days. But then, we've seen these probes above 1.40 before only end with the euro falling back to the 1.35-1.40 range again...

I would imagine that the thing weighing heavily on the euro to bring it back to 1.41 and now a little below that figure is the news that the European Central Bank (ECB) had allocated EURO 300 Billion in 12 month funds for liquidity... I think any sell off from this announcement is strictly a knee-jerk reaction to the announcement. But when the dust settles and the traders / investors realize that EU 300 Billion is far less than the numbers that were rumored (some as high as 1 Trillion euros), this knee-jerk reaction will slow...

One of these times it will shake the cobwebs off, and proceed to either move higher, or lower than the established range... For now, I would have to think that given the sentiment in the market that's growing toward anger with the U.S. deficit spending tactics, the move would look to go higher... But, who knows? I can only look at things from a fundamentals viewpoint and from 17 years experience trading currencies...

Once the euro got going, or the Big Dog got off the porch, the other currencies (little dogs) were also on the rise VS the dollar... And Commodities, after spending Monday circling the bowl, came back with a vengeance! And we all know that when the Commodities rally, so do the Commodity currencies of Aussie, kiwi, Canada, Brazil, and South Africa!

Speaking of Brazil... Recall when I told you that this currency can give you whiplash? The volatile, wild swings in the currency are enough to make someone request oxygen! So, after a day (Monday) that saw the Brazilian real move back above "2", it was posted the best performance of any currency on earth, on Tuesday!

Brazil's real had its biggest gain in more than a month, as Commodities rallied, and... The currency also bounced back after investors "overreacted" yesterday to speculation the Central Bank will intervene to keep the real at "2"... The real gained 2.7 percent, the best performer in the world and its biggest gain since May 4, to 1.9794 per U.S. dollar.

The real has gained 17 percent this year, the best performance among the 16 most-traded currencies, as commodities rallied.

One thing that helped the Commodities rally yesterday was the fact that it finally "occurred" to traders and investors that the Fed's FOMC meets today, and will probably signal that interest rates will be held to near zero in the U.S. for the rest of the year.

Now... Why would that be a feather in Commodities' hat? Ahhh, grasshopper... You have to remember that the underlying fear in the markets is that the Fed will NOT be pro-active in removing their stimulus when inflation begins to knock at the door... And making a statement that interest rates will remain near zero for the rest of the year, simply makes those fears even stronger... And what will people flock to when inflation is racing toward double digits?... Commodities...

Of course, tomorrow will be a different story should the Fed not make an interest statement like that!

I listening to the radio, while I write... And the song that's playing is Elton John's "Friends", which was the theme song of my senior prom! Now, that's a really old song!

OK, I'm back now... See how my fat fingers decide to start typing things that pop into my mind?

So, the Fed's FOMC is today... I just can't see them doing anything but trying to calm the markets' fears about inflation, while keeping rates Steady Eddie. You all know that I'm not a fan of the Fed... I just don't see how a entity, who's main job is to protect the value of our currency, could keep their job, given the fact that the dollar has lost over 90% of its value since they took over! I mean, the Fed is NOT a Gov't Agency, folks... It's supposed to be an independent entity... But now, it's got it's hands in all kinds of things that aren't on their job description, and they are in cahoots with the U.S. Treasury, and before we know it they will be regulating all the banks and financial institutions... All, from doing such a good job at protecting the value of the dollar! I shake my head in disgust... And I should NOT be the only one doing so!

So... While I'm on my soapbox, and ranting at the Fed, and the people making the decisions... Big Ben Bernanke is up for reappointment... I think the thing I would like to see from Big Ben before I would reappoint him is for Big Ben to come out and say... "I'm in favor of Ron Paul's Bill to audit the Fed" Now, that would cause me to fall out of my chair from the shock of disbelief!

Speaking of the bill to "audit the Fed" I believe every voting citizen should contact their representative and let them know you support the bill to "audit the Fed"...

And... While I'm up here on the soapbox, I might as well get this rant off my chest too... Well folks... I think we're in for yet another stimulus package... yesterday, during a press conference the president was asked about that very thing, and his reply was not a resounding "NO"... it was a "not yet"...

Now you know me... I said after the first $150 Billion in the spring of 2008, that there would be more... and I said after the $787 Billion this past winter, that there would be more... and does a "not yet" from the Gov't that loves to spend money, give you a warm and fuzzy that there won't be another one? I didn't think so!

Yesterday, the data cupboard gave us Existing Home Sales data... For the second consecutive month, sales of previously owned homes in the U.S. increased, but the improvement was less than expected, further fueling fears of a slow, weak recovery for the economy as a whole... And the most important thing from the report is that the Home Sales were driven by two things... A drop in home prices... The median price for an existing home last month was $173,000, down 16.8% from $207,900 in May 2008. And... The low mortgage rates that existed up until about 3 weeks ago... Mortgage rates have climbed back above 5% (remember when we thought that was a low rate?) and the message that I'm getting is that mortgage lending is drying up once again... Most of the lending had centered on re-fi's any way, not Home Sales...

Hey! Remember earlier this month when the Jobs Jamboree number printed and everyone (except those that knew better because of the BLS) was celebrating? Well... I saw a piece on Reuters last night that caught my attention... Mass layoffs -- at least 50 job losses by a single employer -- grew to 2,933 last month, from April's 2,712, the U.S. Labor Department reported. That is practically a tie with March's figure, which set a record. Hmmm... That certainly paints a different picture of the labor market than the BLS Jobs Jamboree now doesn't it?

The Data cupboard will also give us the latest readings on Durable Goods (don't expect miracles here!) New Home Sales (no miracles here either!) and then the FOMC... The U.S. Treasury will also be auctioning $37 Billion of 5-year Notes today... Good luck!

Down in New Zealand... Consumer Confidence surprised to the upside, and is helping to boost the kiwi performance this morning... These are "index" numbers so they probably don't make much sense on the outside... Just look at them as "better"... New Zealand Consumer Confidence rose to an 18 month high in 2nd QTR from 96.0 to 106. Optimism about near term prospects improved from -57 to -28.

And finally... Gold and Silver have taken some tough shots to their respective mid-sections this week... I even said to Chris Gaffney yesterday... "Silver sure is tempting below $14, isn't it?" I'm reminded of an old saying we use to have on the Margin Desk in my early years in the brokerage business... Just input the asset and price to make this saying work... For instance, we'll use Silver... "Hey! If you liked Silver enough to buy it at $15, you'll Love it at $13.98!"

Of course, I personally don't expect Gold and Silver to remain at these bargain basement prices too long, but then that's just my opinion, and according to the Legal Beagles, I have to say that I could be wrong!

Currencies today 6/24/09: A$ .8010, kiwi .6435, C$ .8740, euro 1.4085, sterling 1.6585, Swiss .9320, rand 8.0830, krone 6.4120, SEK 7.85, forint 197.30, zloty 3.2180, koruna 18.56, yen 95, sing 1.4525, HKD 7.75, INR 48.52, China 6.8330, pesos 13.28, BRL 1.9790, dollar index 78.75, Oil $68.77, 10-year 3.64%, Silver $13.92, and Gold... $928.40

That's it for today... The Heat Wave continues here... But, like I told someone yesterday... Hey! It's summer, it's supposed to be hot! When I was a young man playing my guitar around the country out of VW micro-bus, I built in-ground swimming pools as a day job. In Oklahoma! Now talk about a HOT job! YIKES! I know there are hotter jobs, but that was the worst for me! Nice game last night for my beloved Cardinals... And, my little buddy, Alex, has his last baseball game of the year tonight. At least it is an 8:15 game! Well, the doctor visit yesterday was interesting... He's happy that I've done so well... But the honeymoon on the weight is over according to him! Of course, I have no idea what's he's talking about! HAHAHAHAHA! Let's get this going... I hope you have a Wonderful Wednesday!

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

So Far... It's A Turn Around Tuesday!

Chuck Butler — Tue, 23 Jun 2009 14:42:11 GMT

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

* Currencies bounce back...
* Commodities and Commodity Currencies get hit hard!
* China's recovery a myth?
* Devaluation in the dollar's future?

And Now... Today's Pfennig!

So Far... It's A Turn Around Tuesday!

Good day... And a Terrific Tuesday to you! It's too hot in the hot tub! You can't make me get in the hot tub! Ahhh... When I walk outside and my eye glasses fog up from the heat and humidity, I think of that old Saturday Night skit, with Eddie Murphy playing James Brown!

OK... Well, yesterday we saw the currencies stop the bleeding from the overnight sell off, and although they range traded on the day, the bias was to sell dollars once again. That bias has played through on our Turn Around Tuesday theme, and the currencies are higher today than yesterday, but lower than they were 3-weeks ago week ago. Yes, the month of June has not been kind to the currencies, as some of the euphoria that was going on from March thru May, regarding the global economic recovery is being thought about again, and this time, not with the same rose colored glasses...

Yesterday, I told you about the story in the Australian Morning Herald that shook the A$'s confidence, when the Economics Editor said the markets were wrong to believe the Reserve Bank of Australia (RBA) were finished with their rate cuts. Well, that story was followed up by one that shook the confidence of the Commodity Currencies... This one was about China, and how analysts had gotten the stimulus all wrong in China, and that the Chinese had NOT put the money toward infrastructure and Capital improvements but instead into investments, thus making the Chinese disguising the stimulus in China as a recovery... Hmmm... I don't live in China, so I can't really pass judgment here, but I will say that most people that comment on China in the past 6 years have been mostly wrong.... And more wrong than right for sure!

But... As they say on the farm, it's too late, the cow's out of the barn! That Chinese stimulus story, hit a nerve with the Commodity Currencies, and before you knew it, the high flying currencies of Aussie, kiwi, Brazil, and South Africa were all looking at figures that thought for sure were in their rear view mirror! The sell off was damaging for sure...

This looks like a classic case of "getting cold feet"... Traders were all lathered up to take these currencies higher last week, but read a story and "got cold feet"... They would say they are being prudent... I would say that they are being wimps! Because in the end, folks... This has nothing to do with whether or not the RBA cuts rates again or not! In the end, this is all about what the U.S. is going to do about all their debt! I've harped on this for years, and the thing that really gets me is that IT HAS GOTTEN WORSE! The National Debt, is now over $11 Trillion, and will probably reach $14 Trillion this year, after all the deficit spending by the administration... This is just awful folks, just awful... Because... And here I go again getting up on my soapbox, but come on, this is important! And Yes, I know, you've heard this at least 100 times if not more before!

But, the only way the U.S. is going to be able to pay down their debts, and the $11 Trillion is just the tip of the iceberg with the baby boomers starting to retire, is to pay it back with cheaper dollars... But... Hey! Don't take my word alone for this... Let's listen in to the IMF's Chief Economist, Olivier Blanchflower, who was speaking at a conference in Paris yesterday...

"A U.S. economic recovery will only be sustainable if there is a "large increase" in net exports, which may require a dollar adjustment. It may not be very easy, It may require "an adjustment in the dollar, but it is needed."

Did you hear that? The IMF Chief Economist is saying out loud, and not under his breath, like most economists that see this but don't want to go out on a limb, that the U.S. needs to devalue the dollar!

Now... That might be a shock to you, folks... But it's not to me! And if you've read the Pfennig for a long time, and heard me harp and harp about the deficits and not being able to pay them back unless we do so with a cheaper dollar, then now it might just all come back to you... Like what the blind man said when he spit into the wind, Ahhhh, it's all coming back to me now!

But again... It's not just me that thinks these things, although I will say that sometimes it sure feels like I'm the only one saying them out loud every day of the work week!

Today, I have a special treat... And once again, I'm as proud as a peacock this morning, because, I have a quote to share with you, from the one and only Richard Russell... This comment plays well with what I've just been talking about... Check this out!

Richard Russell - "It's clear (at least to me) that Obama is following the path Roosevelt took during the Great Depression.

In 1933, the government devalued the dollar by 41% by raising the official price of gold from $20.67 to $35 an ounce. Devaluation makes debt easier to handle. In a devaluation, the dollar value of debt remains the same, but all other assets would be worth more (in nominal terms) whether it was a house, a stock, a car or an ounce of gold.

How our creditors who own trillions of dollar in their reserves will react to a dollar devaluation I really don't know, but a devalued dollar is a lot better than nothing. The Bernanke Fed is trying desperately to bring back inflation, and devaluing the dollar is the surest and quickest way to inflate."

WOW! It's not every day that I get to use a quote by Richard Russell! But now... Think about this stuff that's in the Pfennig this morning... And then think about what I told you last week, about how all this going back and forth in the currencies and precious metals, is just "noise"... Ahhh, now I want to hear you say... "I get it, I get it!"

Oh... And to follow up the Blanchflower, Butler, and Russell comments... Ty sent me a quote my Mark Twain that sums it all up... Mark Twain - "History doesn't repeat itself, but it does rhyme."

U.S. stocks sold off 200 points yesterday, making it a tough row to hoe for the Commodities, and Commodity Currencies... The Brazilian real posted the worst performance on the day, with the real moving back above the "2" level for the first time in about a month... Recall, that the Central Bank Gov. said in the middle of May that he would everything he could to keep the currency above "2", only to watch it move below and then well below "2" in the next weeks. The Central Bank Gov. did try, by cutting interest rates about 10 days ago, but in reality, he has little at his control if the markets / traders / investors decide to buy the currency... He does not have a treasure chest of reserves like the Bank of Japan and Bank of China... No, in reality, the only way the real was going to move back above "2", was to have the sentiment toward Commodity Currencies change...

And again, I can't believe that the one story in the Australian newspaper, has caused a sea-change of sentiment like this! Maybe, the story's writer will be proven to have been bang on... That's not what I'm saying... I'm saying, his opinion, caused a sea-change of sentiment, and that surprises me!

I had someone write me yesterday and say, I might add, once again, that Europe is in worse shape than the U.S. that they didn't even have stress tests there because they fear what they might show... Hmmm... I wonder what they'll think when they read this... ECB member, and President of the Bank of France, wrote in his annual letter to French President Sarkozy, that the "worst has passed for the economy and that he was favorable to releasing the results of the banks' stress tests." Hmmm... Guess we're back to the "ugly car" comparison, eh?

Recall last week when I told you about the Chinese announcing a "buy China" protectionist program? I said then that these things usually spread and other countries announce their own versions of protectionism measures... Of course, we all know who started this round of protectionist talking... The current administration and their "buy American" plan... The Chinese measures were placed to offset the U.S. measures... But now, Germany is feeling pinched... Germany's economy minister, Guttenberg, is voicing concerns about the Chinese announcement last week, and that he would bring this up at the next G-8 meeting in July...

Well... The problem with that is that China isn't a member of G-8, so this could just be a "you-know-what session" of finance ministers, getting them all wound up to write protectionist measures of their own! Watch for these protectionist policies to spread like Bermuda grass! And, if that happens, the global recession will get even worse, folks! Thanks to the "buy American" move... Geez Louise, when will they ever learn? When, will, they, ever... Learn?

Looks like more and more people are jumping on my bandwagon, that the stimulus would not work... Two months ago, 59% of Americans thought the $787 billion stimulus would restore the economy, but since then, the number has slid to 52%. And... As unemployment heads to 10%, even with the adjustments and ghost jobs the BLS adds each month, that number of those that thought the stimulus would restore the economy, will continue to slide...

And finally a not so serious story... Say it ain't so Paul Simon! Kodak will retire Kodachrome! Eastman Kodak has announced it will discontinue the legendary 74-year-old film that revolutionized color photography because of slow sales and dwindling demand in the film, due to digital cameras...

Kodachrome
You give us those nice bright colors
You give us the greens of summers
Makes you think all the world's a sunny day, oh yeah!
I got a Nikon camera
I love to take a photograph
So Mama, don't take my Kodachrome away

On a sidebar... I saw Paul Simon in concert this past spring... A great concert!

Currencies today 6/23/09: A$ .7870, kiwi .6330, C$ .8670, euro 1.3960, sterling 1.63, Swiss .9295, rand 8.24, krone 6.5375, SEK 7.9650, forint 202, zloty 3.2535, koruna 18.71, yen 95.50, sing 1.4565, HKD 7.75, INR 48.54, China 6.8345, pesos 13.33, BRL 2.0325, dollar index 80.44, Oil $67.08, 10-year 3.68%, Silver $13.81, and Gold... $922.73

That's it for today... OK... Are you as fearful of what could happen in this on-going N. Korean ship following by the U.S.? That kind of stuff is scary... Somebody gets a nervous trigger finger, and... Oh well, I had better think of more peaceful things this morning, eh? For those that send me notes asking me about my left eye... I don't have anything new to report. My lack of vision with the eye is the same, the good news is that it hasn't gotten any worse! I told a good friend of mine the other day, when he expressed his concern that I've taken more than one hit with this cancer... "So far, the Good Lord has only allowed me to be attacked by cancer in places where I have two of"... Kidney, hip, leg, and eye! And... That's the way I see it! I love those east coast starting times, I can actually watch the whole game! Of course I didn't like it last night when the Metropolitans took it out on my Cardinals... Time to go... I hope you have a Terrific Tuesday!

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

Currencies and Commodities Sell Off...

Chuck Butler — Mon, 22 Jun 2009 15:15:09 GMT

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

* Overnight markets ambush risk assets...
* Germany's IFO Business Confidence gains again...
* A$'s get pounded by opposite thought story...
* More supply to auction off for the U.S....

And Now... Today's Pfennig!

Currencies and Commodities Sell Off...

Good day... And a Marvelous Monday to you! I hope your Father's Day weekend was grand... Mine sure was! I'm feeling the affects of the "grand" weekend this morning too! And... It was the first day of Summer! So we had all that going for us, eh?

Front and center this morning, I'm as proud as a peacock this morning. I just read an email from good friend, and excellent market analyst, Mary Anne Aden... Mary Anne sent me a note letting me know that the one and only Richard Russell had quoted me in his letter June 10th... She said it went something like..."this is from Chuck Butler's always terrific column..." WOW! Being quoted in Richard Russell's letter is like the top of the list for me!

OK, Chuck, you have to come down from cloud 9... Hey You, get off of my cloud! Even the fact that the currencies and commodities have sold off in the overnight markets can't stop me from this seashells and balloons feeling...

Yes... The currencies and commodities have sold off in the overnight markets... Even a good print by Germany's think tank IFO on Business Confidence, hasn't wrapped a tourniquet around this sell off... This wasn't a "one and done" for Business Confidence in Germany either! This happens to be the third consecutive month of positive gains for this data. Now... One would think that this should signal something, right? I mean, if I walked up to you on the street and said, "Germany's Business Confidence has posted positive gains for 3 consecutive months"... You would probably, no wait, definitely think (because I know you are very astute, and pay attention in class each day), that Germany's economy must be coming out of their recession... Hmmm... Yes, that's what I would think too! But... The euro isn't showing any thoughts by traders like that!

I think that in the next print of GDP in Germany (the Eurozone's largest economy), we'll see a nice improvement from the previous quarter's negative -6.7% decline! I'm not thinking that GDP will go to a positive print... But if it knocks out half of that decline, that would show that things are improving... And if things are improving in Germany, the rest of the Eurozone will grad on to the coat tails!

The U.S. Fed meets this week, in an otherwise quiet week data, and talks, and we'll have to see what's up Big Ben's sleeve now... I would suspect that this week will be a non-event... But in August, the Fed will most likely be setting off some late fireworks, with an increase in their bond buying program... Quantitative Easing... UGH! And that thought leads me talk about the amount of supply hitting the markets in the near future... But I wont' bore you with my description of the supply... Here are my friends, Addison Wiggin and Ian Mathias...

My friends, Ian Mathias and Addison Wiggin over at the 5-Minute Forecast, never cease to amaze me the way they describe things! Here's a piece of their letter from Friday, June 19th...

"The U.S. government announced yesterday it will auction a record $104 billion in debt next week. Despite obvious warning signs that the world has had its fill of American paper, the Treasury will forge ahead: $40 billion in 2-years Tuesday, $37 billion in 5-year notes Wednesday and $27 billion in 7-year garbage on Thursday.

They must "get it." Last week's sharp rise in 10-year yields was as sure a sign as any that investors everywhere are getting cold feet. A prudent government would take a break. let things cool off. But there's no rest for Uncle Sam, or his Treasury. They've got the mother of all Ponzi schemes to run:"

I'll get to meet up with Ian and Addison next month in Vancouver... I'm looking forward to that!

So... Like I said, the data is pretty weak this week... So, we'll be scratching and clawing for the markets to throw us bone.

Down Under... The Aussie dollar (A$) has taken on some water overnight after a story printed and quoted the Morning Herald's economic editor... The quote went something like this... "the market was wrong in discounting little to no chance of another RBA cut this year, and a high chance of a hike in the first few months of next year" ...

You might recall last week I told you that the market in Australia had basically decided that the Reserve Bank of Australia (RBA) had come to an end of their rate cut cycle... I then threw in my own 2-cents and said that the first rate hike would come in the 1st QTR next year... Well, the Economics Editor at the Morning Herald doesn't agree... And the A$ has sold off big time since the paper hit the news stands! Come on! That's just one person's opinion, isn't it? Last week, the market players were all about the end of rate cuts... And they are now going to be swayed by one opinion? Where's the intestinal fortitude?

And then there was this... Not happy with having their heavy hand in just about everything these days... The Fed is reviewing the Repo market... Apparently, the poor old Repo market is getting blamed for exacerbating the financial turmoil that followed the collapse of Lehman Brothers last fall. For those of you not familiar with this market... It's a utility for overnight funding... (some go longer than overnight, but the overnight repo and rev repo market is what is being reviewed) So... Look for more Gov't. reforms in a market that has existed for many years just fine and dandy...

I'm going to stop there this morning, as I forgot to print a "Corporate feel good story" on Friday, I will do so today... So, look for that after the "that's it for today" segment...

But... First, speaking of feel good stories... I saw this flash across the screens this morning... New York Times reporter David Rohde, who disappeared in Afghanistan in November 2008, has escaped from his Taliban kidnappers and is under U.S. military protection.... Cool, eh?

Currencies today 6/22/09: A$ .7960, kiwi .6350, C$ .8745, euro 1.3845, sterling 1.6440, Swiss .9190, rand 8.1575, krone 6.4950, SEK 8.00, forint 201.65, zloty 3.2575, koruna 18.80, yen 96, sing 1.4580, HKD 7.7503, INR 48.59, China 6.8355, pesos 13.42, BRL 1.9750, dollar index 80.75, Oil $68.30 (this has really backed off the past couple of days!), 10-year 3.73, Silver $13.88, and Gold... $925.35

That's it for today... My little buddy, Alex, and I were on our own for part of the weekend, and we did just fine! Last week, I bought a used Bass Guitar, and now I can add some bass to Alex's guitar playing... It's fun! The two of us, "jamming" in the basement! All we need is drummer, so people can feel a beat, yeah..... HA! It's alive! It's alive! My beloved Cardinals actually had their offense come alive this past week... A nice weekend sweep of the cross state Royals, was sweet! I just heard on the radio that the "heat index" could hit 110 today here in St. Louis! My mind immediately flashes back to when I was a kid, and we didn't have air conditioning! Then we got one that cooled one room... I had 6 siblings so the 9 of us would all sleep in that one room! We were NOT allowed to go in that room during the day! And look! We survived! HA! OK, thanks for going with me on the trip down memory lane... Time to go to the Corporate Feel Good Story... I hope you have a Marvelous Monday!

*********************************************************************
I have my own business, working out of my home, representing a small agency called Markle & Associates here in the Pacific Northwest. We represent six wool carpeting mills and a bamboo and hardwood importer. And because our products are "green", environmentally friendly, we do have an edge over the synthetic products and anything tied to petroleum. But nevertheless, we have still been affected by the economic downturn. What I've found to keep the business coming is a simple tool we all know about: networking. Years ago I heard a statement about the success of networking that said it was the single most powerful way to increase business. Faster results than advertising, and cheaper than any other marketing attempt.

So, I've made that my thrust over the years and make sure I stay involved in my industry organizations, participate in meetings on the chapter and national levels and volunteer for positions to help these organizations grow. In my industry, it meant remaining connected over the years with design organizations like NKBA (National Kitchen & Bath Association), NWSID, (Northwest Society of Interior Designers), American Society of Interior Designers (ASID) and International Interior Design Association (IIDA). The reason networking works is because people buy from people, rather than simply from businesses. Learning that key has helped my business to keep going in diverse economic climates, including this one.
*********************************************************************************

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

A Sustainable Economic Recovery?

Chuck Butler — Fri, 19 Jun 2009 13:15:10 GMT

.........But First, A Word From Our Sponsor..........
The Ultra Resource Index CD: 6 foreign currencies, 1 unique opportunity

The Ultra Resource currencies (each is equally represented in the CD):

*Australian dollar
*Canadian dollar
*Hong Kong dollar
*New Zealand dollar
*Norwegian krone
*Singapore dollar

EverBank is a Member FDIC and Equal Housing Lender.
......................................................

In This Issue..

* More range trading...
* Eurozone doesn't need more stimulus...
* A$'s outperform on rate outlook...
* A double whammy for the dollar...

And Now... Today's Pfennig!

A Sustainable Economic Recovery?

Good day... And a Happy Friday to one and all! The end of another week... I was out on Monday, and it still seems to have been another long week! UGH! Oh well... It's Friday, and this weekend is Father's Day... So, we've got that going for us, eh?

More range trading in the currencies yesterday, with the euro leading the currencies higher for most of the day, only to see their gains slip, sliding away by the late afternoon. In the overnight markets, the currencies, once again, have moved higher, but nothing to get all lathered up about...

This morning, the euro got a boost when, in a draft statement from European Union leaders, it was reported that they believe they are seeing the first signs of a "sustainable economic recovery", and that there will be little to no need for further stimulus of the economy... Now... Normally this would have sent the euro on a trip to the moon, soaring ever higher... But, these days, everyone has to take a statement like that, and temper it a bit with a dose of reality... These guys don't really know if the economy is going to have a "sustainable economic recovery"... Every country is in uncharted waters with their economy right now, and it remains a possibility that the economy could rebound a bit, and then take a double dip...

That's what I see happening in the U.S. later this year... Double dipping, which is taboo when dipping chips into salsa or the myriad of different dips... But is a possibility with an economy so deep in a recession / depression, that with all the stimulus, it does show signs of recovery, only to fall back... Because, it was never on terra firma...

Speaking of the economy here in the U.S... Yesterday, we saw the Weekly Initial Jobless Claims remain above 600K for the week, but... The Continuing Claims dropped drastically... And this is where I draw the line between make believe and reality... First of all, no one in the media had covered the Continuing Claims data while it was going up, up and away in its beautiful balloon... But, show a drop, and these knuckleheads were all over it like a cheap suit! OK... So the number dropped... Well... I don't see that as a "sign that the job meltdown is over", like many in the media said... When Chris Gaffney told me that the number had dropped, I told him...

That means one of two things... 1. That people are going back to work... Or 2. that unemployed people saw their unemployment benefits expire, which means, and I've explained this many times before, so it shouldn't be a surprise, but it means that they are DROPPED from the list of unemployed! Now... What mental genius came up with that one? Any way... I would put my money on what's behind door number 2! Wouldn't you at this point?

When the Bureau of Labor Statistics (BLS) can report a strong jobs number without all the adjustments, then I'll jump on the job creation bandwagon...

OK... It looks as though the story I told you about the other day, as a potential hoax, but wondered why the media wasn't covering it, regarding the $130 Billion in bearer bonds confiscated from two Japanese men at the Swiss, Italian border, turns out to be a non-event after all... The bonds, which at first were reported to be "real", are now being called fakes / counterfeit... So... So much for the secret war financing under the cover a dark knight stuff, eh?

OK... Enough of that... Let's see what the Fed has up its sleeve these days... The Fed is looking for ways to communicate to the markets that they will NOT be raising interest rates until, at the earliest, 2nd half 2010! Now... They also want everyone to know that they will be quick to remove the stimulus from the markets... One, doesn't add up to the other one here, folks... And just as the Fed has always been... Cagey... They're just not being truthful to us...

You see, they don't want the markets jumping ahead, and moving yields higher on bonds, which would basically shut down the nascent mortgage business recovery... But, they are very quick to say that they will remove the stimulus... I wonder how many people out there really, truly, in their heart of hearts, believe the Fed will 1. know how to remove their stimulus without damaging the economy, and 2. will do it at the right time?

You won't see me signing up on the roster of those that believe in those two things! Just look at their track record! If you want some insight to the bumbling, tumbling, fumbling that has gone on at the Fed over the years, you should check out a book by William Fleckenstein, "Greenspan's Bubbles: The Age of Ignorance at the Federal Reserve... You can get it on Amazon... It will open your eyes wide open to all the things I talk about regarding Big Al's incompetence and the Fed's bungling...

Today is called a Quadruple Witching Friday... No... It's not because there are 4 witches flying around! Quadruple Witching Friday is a day on which contracts for stock index futures, stock index options, stock options and single stock futures all expire. There have been some strange things happen in the markets on a Quadruple Witching Friday... So, watch out!

The data cupboard has been emptied out this week, which means there are no scheduled data releases today in the U.S. So, we just have the stock stuff to deal with...

I would think that the currencies would just drift today for the most part... However, there's one currency that seems to be in the mood to outperform all others this morning... The Aussie dollar (A$), is seeing a nice bid and wind in its sails from an overall general feeling that the Reserve Bank of Australia's next rate move will be up, and not down.

Just like I talked about yesterday with Norway, and their Central Bank (Norges Bank) stating that they believe that they will raise rates next, this gives traders something to "trade on"... And there's nothing better for a trader to trade on than interest rate differentials...

That makes two Commodity Currencies that are on the list of reversing their interest rate cut cycles... New Zealand / kiwi should be the next to get on this list, but not for some time in my estimation, as the Reserve Bank of New Zealand (RBNZ) is not as optimistic, at this time... South Africa, Brazil, and Canada round out the Commodity Currencies, and I really don't see any of these three getting on the list any time in the near future... But, South Africa, and Brazil, already enjoy strong interest rate differentials VS the dollar, so it's not so bad not having them on the list at this point... And Canada? Well... If the price of Oil continues to inch higher and higher, so too will the Canadian dollar / loonie... At least, that's how I see it!

Australia and Norway don't see the end of their rate cut cycles because inflation is under control! It's quite the opposite... And here's where I think the dollar gets squeezed once again... A double whammy if you will... First you have the Commodity Currencies / high yielders gaining VS the dollar because their interest rates will be higher than the interest rate a dollar can give... But their interest rates will be going higher because inflation is going higher... And... This is the second whammy for the dollar... If inflation is moving higher... Than that too will cause the dollar to be weakened, for an inflated currency is one that is having its value eaten away by inflation...

And then there was this... All my ranting about the Gov't getting more involved with the markets, and our private lives, led a couple of people to question me regarding this... You see, I keep harping about the Gov't getting involved in regulatory matters in the markets... Some thought that I was saying that there should be no regulations in the markets... I never said that! I said I didn't think having the Gov't involved in the regulatory matters in the markets was a good thing... I mean, we now have a Gov't that can... Sell you a car, maintain that car, finance that car, and provide you insurance on that car... It's all just beginning...

Yesterday, The Senate Banking Committee questioned U.S. Treasury Sec. Geithner about these plans to regulate the financial markets... And his answer is something that I've told you over and over again would be the answer to everything... "Our economy has been brought too close to the brink for us to let this moment pass." It's just more of the old..."these are extraordinary times, and they call for extraordinary measures" talk...

OK... I know, I know, I've written the Pfennig for 17 1/2 years, and tried to stay out of politics the best I could... But to see what's going on now, and now say something is beyond my control!

Of course long time readers will remember me taking the Bush administration to the woodshed too when they placed tariffs on steel earlier this decade, and the spending... So, I'm not just "picking" on this administration!

Errors and omissions... Yesterday I said that Ty Keough's dad (Harry) had played on the U.S. national team that beat Great Britain in the 1950's World Cup... It obviously wasn't Great Britain... It was England... I apologize for that error... And someone also chastised me for calling it soccer... Hey! That's what we call it here in the U.S!

And then one final note... I guess the Fed wasn't in buying Treasuries yesterday, as the yield on the 10-year spiked higher to 3.82, from 3.69 yesterday morning...

Currencies today 6/19/09: A$ .8065, kiwi .6415, C$ .8875, euro 1.3935, sterling 1.6440, Swiss .9225, rand 8.11, krone 6.3910, SEK 7.8725, forint 200.50, zloty 3.24, koruna 18.9150, yen 96.80, sing 1.4550, HKD 7.75, INR 48.11, China 6.8363, pesos 13.35, BRL 1.9720, dollar index 80.39, Oil $72.25, 10-year 3.82%, Silver $14.32, and Gold... $937.82

That's it for today... Well, Sunday is Father's Day... And the first day of Summer! Speaking of Fathers... I lost my dad in 1995 to cancer. I still think about him every time I'm at a ballgame and the national anthem is played. He always told me to stand tall, and sing loud! He was a great patriot, and father... The Detroit Tigers finally won a game at our new stadium, as they kept my beloved Cardinals from sweeping them last night. It's less than a month away from the All-Star Game here in St. Louis. I am beginning to get geeked up about this! When my tickets arrive, I'll really be geeked up! I'm sitting here yawning my head off. I woke up an hour before my alarm was to go off this morning, and couldn't get back to sleep! UGH! As if, I don't already get up earlier than farmers! OK... It's hotter than blazes here, but that shouldn't stop us from having a Fantastico Friday and Wonderful Father's Day Weekend!

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

Gold Vending Machines!

Chuck Butler — Thu, 18 Jun 2009 14:59:35 GMT

.........But First, A Word From Our Sponsor..........
The Ultra Resource Index CD: 6 foreign currencies, 1 unique opportunity

The Ultra Resource currencies (each is equally represented in the CD):

*Australian dollar
*Canadian dollar
*Hong Kong dollar
*New Zealand dollar
*Norwegian krone
*Singapore dollar

EverBank is a Member FDIC and Equal Housing Lender.
......................................................

In This Issue..

* More range trading...
* SNB doesn't target the franc...
* Norges Bank cuts rate but looks forward...
* Buy your gold and Snickers!

And Now... Today's Pfennig!

Gold Vending Machines!

Good day... And a Tub Thumpin' Thursday to you! It was 95 here yesterday, and forecast to be even warmer, or should I say hotter, today! WOW! Like overnight, it turned to summer, after the coldest, most wet, spring I can ever recall... I know, I'll get 100 emails reminding me that summer doesn't officially start until next week... I'm just talking about the summer-like weather!

The currencies remained in that range I talked about yesterday, with a slight bias to sell dollars, but not much of one. Crude Oil prices moved higher on the day and overnight, which doesn't play well with a dollar rally, and therefore, has pushed the dollar down a bit... But again, we're talking minor moves. It's as if someone (traders) are waiting for something BIG to happen with data, the Fed, the Treasury, before taking one direction.

Did you hear about the Gold vending machine in Germany? I saw this yesterday morning, and thought it to be a hoax... Then someone in the office brought me a print out of a story in the U.K. Telegraph... OK, so maybe it's not a hoax... Any way... Here's the skinny... In Germany, they've come up with a vending machine that can update prices of Gold every few minutes, and... Dispense 1 gram Gold wafers, 10 gram Gold bars, or coins... There's about a 30% increase in the market price! WOW! Imagine that, you need some Gold in your pocket just for GP, and you simply walk up to a vending machine and buy some, as simple as getting that Zero bar, or Snickers!

OK... What gives a guy this kind of idea to make a vending machine that disperses Gold? It's all about taking advantage of the times, folks... I may have told you this in the Pfennig before, I don't recall, but I use it in my presentation for Gold... Investment in Gold increased 427% last year... To put it into Tonnes of Gold, retail investment purchases of Gold reached approximately 108 Tonnes of Gold in 2008, up from 36 Tonnes in 2007, and 28 Tonnes in 2006!

I was talking with the Big Boss, Frank Trotter, who, by the way scored a goal from about 30 yards out in his soccer match the other day... Ty Keough, our one-time national team player, and long time pro, was quite impressed, and that says a lot, because Ty has seen some soccer in his years... You may know Ty or heard of him... But do you know his dad? His dad is a soccer legend, playing on the U.S. national team that beat Great Briton in the World Cup in the 50's, and then went on to be the winningest college coach, with multiple national championships at St. Louis University...

Oh, I digress, there, I'm so sorry... But once I got talking about soccer, of which I played a ton of in my youth, I just started typing... UGH! Any way, I was talking to the Big Boss, Frank Trotter, the other day, and Frank mentioned that he was concerned that Gold could be the next bubble... I assured him that I didn't see it that way, not until my neighbors are asking if they can buy Gold at $1,200 oz! (I tried to get them to buy it at $800 oz, to no avail!)

Remember when we were kids? No wait, we wouldn't all have been kids at the same time you dufus Chuck! OK, when I was a kid... We used to have these bomb shelters in our schools, and we would practice going into them... It was a different time, the cold war was strong, and the fear was put in all of us toward Russia... I had a teacher, many moons ago, that told the class that it was a good thing that Russia and China didn't see eye-to-eye... Well... I wonder what he thinks about the news that China and Russia have agreed to use each other's currencies and eliminate the use of dollars in their trade?

It kind of feels like Russia and China are ganging up on the dollar!

The other "new kid on the block" Brazil, is joining in with Russia and China... But that news didn't help the Brazilian real yesterday, as it saw one of its worst days in weeks! But that's the real... I watch it trade some days, and your eyes grow very wide open in amazement of the wild swings in this currency. It will move 2-3% in a day, either way, in a heartbeat! Which tells you that the "number of players" in real, is smallish when compared to the second most liquid currency in the world... The euro! So... If you're going to own reals, you need to be aware that it has these wild swings!

Speaking of the euro... It's getting a boost this morning from an improved outlook for risk today, as U.S. stock futures are stronger. The "Big Dog" looks a little tired of chasing the dollar, and then being pulled back on to the porch over and over again recently... But, as always, always I tell you tutor turtle, be yourself... No wait! I always tell you that all this is "noise"... Investment portfolio diversification into currencies and precious metals is a long-term relationship... The dollar didn't lose over 90% of its value overnight! The euro didn't gain over 50% VS the dollar overnight! These things are long sweeping moves, and you have to drown out the "noise"... Otherwise, you'll become a currency and metals "trader", and chasing these assets all over the board!

Pound sterling is getting hit on the chin this morning, as retail sales fell in May, which was the first drop in 3 months... Retail Sales fell .6% in May, and pretty much squashes those so-called "green shoots" that have been talked about for the U.K. economy... I think you can expect to see stuff like this for the next year... Up and down, in and out, green and brown shoots... And... Like I've said before, if it's happening in the U.K. it won't be long before we experience the same, as the U.K. just seems to be ahead of the U.S., time-wise...

The Swiss franc is stronger this morning than recent trading sessions as the Swiss National Bank (SNB) met, left rates unchanged, and made a statement that has given a green light to franc traders to buy... The SNB announced that they were not targeting a specific exchange rate for the currency. You may recall that the SNB had previously stated that they were not happy with franc strength, and had intervened on occasion to keep the currency from strengthening... I would be careful here, as this could be a "trap" Oh, you don't think Central Banks set traps for traders? OK, well, maybe they don't really set a "trap", but they do send mixed messages that cause losses!

Big Al Greenspan was famous for these "mixed messages" that were called "Greenspeak"... After reading two books on Big Al, I can tell you that I personally think that "Greenspeak" was gobble-de-gook! Confuse everyone so they think you are some sort of messiah! Right Big Al? When... In reality, he was just "a guy", who really screwed things up!

Today, we will see the Weekly Initial Jobless Claims, which for me has turned into watching the "Continuing Claims"... This part of the data tells me if unemployed people are being re-hired... I haven't see that happening, as Continuing Claims have continued to grow larger in numbers... We'll also see the Philly Fed Index, (manufacturing)...

The real meat (where's the beef?) will come from a testimony before the Senate Banking Committee by U.S. Treasury Sec. Geithner, on the President's plan to overhaul the U.S. Financial regulatory system... I doubt these Senators will understand what Geithner is talking about, and will "rubber stamp" the plan... Which means, folks... That the Gov't gets its foot in the door further...

I know, I know, I get quite a few emails from people that take exception to me getting upset with the Gov't getting more involved in the markets, etc. as they say, "Yeah, Chuck, and you think the "markets" have done a better job?" Well... The markets are the markets, folks... If left alone, they will act as markets should... What? You didn't like the fact that the Mr. Market, as my friend, Bill Bonner, calls it, turned the whole credit, and deficit spending on its ear? Mr. Market was just trying to correct what was wrong... Getting the Gov't involved is just plain, wrong! One foot in the door... Then next it's the next thing, and the next, and pretty soon, the Gov't is completely in the door, and hanging out on your couch!

Please... These are just my opinions... If you don't like them, you have that right! It is still a free country for speech! Just delete it and go on with your life! OR... You didn't pay anything for all this, that I've been giving to people since 1992...

In Norway yesterday, the Norwegian Central Bank, The Norges Bank, surprised me and the markets by cutting rates 1/4% of 25 BPS... I did say the other day that the Norges Bank was the only Central Bank that was meeting this week, that had some room to cut rates... The Norges Bank did say in their press conference after the rate announcement that rates were at the "bottom" and that they were looking toward the first quarter 2010 as the timing on the first rate hike!

Well, with traders so forward looking, this was good news for the krone, as the rate cuts was quickly put in the rear view mirror, and now everyone is looking forward to higher rates!

And under the heading of "dirty float"... The Reserve Bank of Australia (RBA) is reported to have sold the most A$'s in the month of May, since February 2004! Now, go back to May and recall the move in A$'s... The currency gained almost 10% in the month... So, the A$ would have gained even more if the RBA had not sold A$1.4 Billion A$'s in the month! I personally think the RBA was just trying to smooth out the trading the A$, which given this information would have been moving up the charts with a bullet in May!

I don't think the RBA would get involved if the move was a slow, general appreciation of the currency... So, I don't look for future intervention to keep the A$ from gaining the ground I believe it will gain rest of this year, as inflation fears grow stronger and stronger...

And on that positive note... I think I'll head to the Big Finish!

Currencies today 6/18/09: A$ .7945, kiwi .6355, C$ .8835, euro 1.3935, sterling 1.6260, Swiss .9280, rand 8.1380, krone 6.37, SEK 7.8725, forint 204, zloty 3.26, koruna 19.16, yen 95.80, sing 1.4570, HKD 7.7503, INR 48.25, China 6.8350, pesos 13.46, BRL 1.97, dollar index 80.42, Oil $71.30, 10-year 3.69, Silver $14.25, and Gold... $938.20

That's it for today... That's a pretty interesting story about the Gold vending machine, eh? Here in the office we have one of those "honor snack trays", where people pay for what they take... Can you imagine one of those that had Gold coins in it? HAHAHAHAHA! Another good win for the Cardinals VS the Tigers last night... Of course I can only watch 5 innings or so, before it's bed time. I get up the next morning, and watch the highlights! This weekend is Father's Day... Don't forget your dad! More on that tomorrow... I just love this time of year when the daylight lasts until 9 pm... The daylight lifts spirits, I believe, and now spirits get lifted longer each day! HA! OK... How about making this a Tub Thumpin' Thursday, eh?

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

Stuck In A Range...

Chuck Butler — Wed, 17 Jun 2009 15:59:22 GMT

.........But First, A Word From Our Sponsor..........
The Ultra Resource Index CD: 6 foreign currencies, 1 unique opportunity

The Ultra Resource currencies (each is equally represented in the CD):

*Australian dollar
*Canadian dollar
*Hong Kong dollar
*New Zealand dollar
*Norwegian krone
*Singapore dollar

EverBank is a Member FDIC and Equal Housing Lender.
......................................................

In This Issue..

* A Turn Around Tuesday?
* BRIC meeting doesn't get covered by the media?
* Are the Bearer Bonds real or fakes?
* QTC's get Gov. backing!

And Now... Today's Pfennig!

Stuck In A Range...

Good day... And a Wonderful Wednesday to you! Remember last week, when I said that we had a "Turn Around Tuesday?" I came in this morning to find a story that Chris Gaffney had printed off the Bloomie for me... The writer refers to the price action yesterday as "Turn Around Tuesday!" OK... I for one, don't even begin to believe that I was the originator of a saying like that for the currencies... I just find it interesting, that a week after I make a big deal out Turn Around Tuesday that it is used in a story with much wider distribution than my little old Pfennig!

Cool Beans, eh? OK... Well... If yesterday was Turn Around Tuesday as the writer said, I sure didn't see it! We had a "stop the dollar at the 1.38 border" Tuesday... But a complete turn around from Monday's sell off, after Russian Finance Minister, Kudrin, threw a cat among the pigeons? Not that I saw!

We do seem to be stuck in a trading range of 1.37 to 1.40... With probes below 1.37 and above 1.40 short-lived. That's OK with me, at this point, but it had better not last too long, or traders will grow tired of the boring range... And, I will be yelling at the walls for some price action!

Well... The BRIC (Brazil, Russia, India and China) meeting didn't really bring about the Thunder and lightening as I thought it would... The leaders of these countries did discuss the need for a "more diversified monetary system to reduce dependency on the world's reserve currency." (read the dollar!) They also discussed selling bonds and swapping currency among the group. Now if we rewind back to Monday, I said that I thought this could be what they would do... The crystal ball was bang on that day! HA!

I can't believe the markets have allowed this to be swept under the rug... This could be colossal if it's carried through... And this way, all of them can smile and say they believe in the dollar and U.S. Treasuries while not dealing with them! Personally, I think the reason the markets aren't paying attention to these goings on, is that the media isn't covering it... The grip that the administration has on the media is really beginning to show just how tight it is...

One other thing from the meeting... The BRIC nations announced that they wanted to take a more active role in the world's financing system... And with $2.8 Trillion in currency reserves among the 4 of them... That would be more than a "kind gesture"...

Speaking of the media... I have to wonder what the media is thinking on this one... Here's the skinny... First of all, this story came to me a week ago... But at first, I thought, I had better make certain this is not a hoax before talking about it... What am I talking about? I'm talking about the report that two Japanese men were caught at the Swiss-Italian border with $130 Billion in U.S. Treasuries!!!!!!! Now, Chris and I were talking about this yesterday, and Chris said, "But I thought all Treasuries were book entry for some time now"... Yes, since 1982 (a great year, with the Cardinals winning the World Series!) Treasuries have been book entry only... So... The question I had from the beginning is "are they real or fake?" Because I didn't want to waste your time and mine if they were fake bonds... But apparently the someone believes them to be real...

Hmmm... $130 Billion in bearer bonds... Does this intrigue anyone? It sure does for yours truly. Does this mean that the U.S. Treasury has been printing bearer bonds and selling them under the cover of a dark night? That's the only explanation I can come up, IF THEY ARE FOR SURE REAL!

I don't know what to make of this except it has my attention, and I can't believe I don't see one story on cable news... But it's all over the news in Europe and Asia... More later, as additional news comes to light on this...

OK... Yesterday, I talked about the Current Account Deficit, which is expected to be $85 Billion for the 1st QTR... What I didn't talk about is that this would be the lowest level for the Current Account in a decade! And would represent just 1.5% of GDP. Now... I used to go out and talk about how the dollar entered the weak dollar trend in Feb. of 2002, after the Current Account Deficit reached 4% of GDP, which historically had been the line in the sand for currency issues...

But let's put this in perspective, eh? Back in 2001 and 2002, our GDP was running at 4-5%... It's now negative... So, maybe this won't be the harbinger to reversing the weak dollar trend, that it looks like on the outside... Besides, as I've said over and over again lately, the whole deficit talk used to center on the Trade Deficit (which account for the majority of the Current Account), and with the global recession going on, the Trade Deficit, while still having issues, is no longer the focal point... Instead, the Budget Deficit (the 2nd of the Twin Deficits) has taken the reins of the focal point... If it's not one thing it's another, my mother used to tell me! (the you-know-what disturber in me just has to make this comment... "no wonder the Current Account is lower, we don't report debts or the bonds that represent the debts!"... That's in reaction to the $130 Billion in bearer bonds!)

I came across a news story yesterday morning that caught my attention... It seems that the Gov't of Australia, has decided to put Government backing on state issued bonds like the QTC's (Queensland Treasury). This is HUGE for these issues, especially since the states in Australia were seeing downgrades in ratings! Now, the country of Australia has a higher rating, and these bonds will carry that rating, since they are now backed by the Gov.! The one thing it will do though, is tighten up the yield on these bonds... Probably by about 10-15 Basis points...

Why am I talking about this? Because... If the QTC bonds now have a higher rating, more institutions will be able to buy them, and the more investment in Australia, the more flows into Aussie dollars! The news brought the A$ back to 80-cents yesterday briefly... But this is going to take some time to work through. The thing here is that in the long run, this is good for the A$!

In China overnight, we had an announcement that could really become a problem with protectionism... China has introduced an explicit "Buy Chinese" policy as part of its economic stimulus program in a move that will amplify tensions with trade partners and increase the likelihood of protectionism around the world.

Now, long time readers know that I've always banged on 1. the Bush administration when they placed tariffs on Japanese Steel about 8 years ago, 2. Schumer and Graham for introducing a bill to place tariffs on Chinese exports to the U.S. Because... Both represent protectionism... And a currency will normally get taken to the woodshed for being associated with a country that takes protectionism measures...

So... Will this hurt the Chinese renminbi? Ahhh grasshopper, remember, the Chinese renminbi is a "manipulated currency". The Chinese Gov. decides what value the renminbi will be... So... In a regular floating currency scenario, yes, this would hurt the currency... But in China's situation, it's all different.

However, the reason I make a big deal out of this is that this announcement could lead to other countries placing their own protectionism measures to offset China... One protectionism measure, begets another, and another, and another... Oh boy! NOT!

Talk about smashing a bug! This would be just like doing that to the promises of a global recovery... Somebody stop them for they know not what they are doing! Or maybe the Chinese do...

Yesterday, Housing Starts in the U.S. surprised on the upside, and so did Building Permits... I don't like this for the simple reason that we already have an "inventory" issue with houses that have been built and not bought or occupied. But, the media was all over this new, because... It's the opposite from what I told you the day before that economists, Shiller, Roubini and Whitney had to say about housing! And the Housing Starts and Building Permits data flies opposite of the report this morning that mortgage applications fell 15.8% this month!

We also saw that Industrial Production fell -1.1% in May... So output was off sharply at factories, utilities and mines, in May, which is completely opposite of those that are saying the recession is over...

Today, in addition to the Current Account data, we'll also see the stupid CPI data for May... You never know what that data has in store for us, because the Gov't doesn't know what they want it to show for us yet! HAHAHAHAHAHAHA! Of course that's my feeling toward CPI, and I've explained it all many times over the years... But, in a nutshell, CPI is kept artificially low by the Gov't by re-weighting things that get too expensive, or substituting things that get too expensive... We all know why CPI is kept artificially low too, don't we? Yes... We do...

Now... I spent more time on CPI this month than I care to! It's just a dumb report that the media will be all over like a cheap suit!

I heard a great old song on the radio this morning that pretty much puts my feelings toward the direction of the country into words... "but you tell me over and over and over again my friend, ah, you don't believe we're on the eve of destruction." - Barry McGuire

And then, I see where the President is going to announce his sweeping regulatory changes today... Hmmm... Do you see what I see? This is a shift from markets driven regulation to Political regulation... Markets to politics... Somebody stop the madness! Serenity now!

Currencies today 6/17/09: A$ .7925, kiwi .6295, C$ .8805, euro 1.3865, sterling 1.6260, Swiss .9190, rand 8.0530, krone 6.4115, SEK 7.8350, forint 204, zloty 3.2580, koruna 19.2570, yen 96.40, sing 1.4580, HKD 7.7505, INR 48.08, China 6.8370, pesos 13.45, BRL 1.9735, dollar index 80.72, Oil $69.69, 10-year 3.67%, Silver $14.10, and Gold... $932

That's it for today... A pretty busy day for yours truly yesterday, with the monthly Review & Focus due, and the regular daily stuff all rolled into one day... Thank goodness, Chris and Mike help me with the Review & Focus these days! Speaking of the Review & Focus, I did a story on whether inflation or deflation is worse for an economy... You'll want to check that out, when it shows up in your mailbox! Hey! My beloved Cardinals scored more than 2 runs in a game last night... YAHOO! It's been a tough month for the redbirds, a June Swoon, if you will. Last night's game VS the Tigers reminded me of the 2006 World Series match-up, and we all know the outcome of that series! 10th World Championship for the Cardinals! OK, enough of that, time is a wastin'! I hope your Wednesday is Wonderful!

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

German Investor Confidence Is On The Rise...

Chuck Butler — Tue, 16 Jun 2009 15:24:59 GMT

.........But First, A Word From Our Sponsor..........
The Ultra Resource Index CD: 6 foreign currencies, 1 unique opportunity

The Ultra Resource currencies (each is equally represented in the CD):

*Australian dollar
*Canadian dollar
*Hong Kong dollar
*New Zealand dollar
*Norwegian krone
*Singapore dollar

EverBank is a Member FDIC and Equal Housing Lender.
......................................................

In This Issue..

* Currencies stop the dollar's run...
* BRIC meeting could get ugly for the dollar...
* RBA meeting notes good for Aussie dollars...
* Depressing data / forecasts for housing...

And Now... Today's Pfennig!

German Investor Confidence Is On The Rise...

Good day... And a Terrific Tuesday to you! Thundering storms moved through here this morning, as I was preparing to leave home and drive to the office. As slow as I am with getting around these days, I got pretty wet from my car to the office building. But, I didn't melt, as most would have thought! HA! And, I'll dry out soon enough... Well before anyone else comes in!

OK... Well... When I left you yesterday, the dollar was on a rampage, from the comments by the Russian Finance Minister, Kudrin... Was it an overreaction, I asked? A resounding YES was my answer... I think the proof is in the pudding on that this morning, as the dollar buying has hit a roadblock, and reversed overnight, with the euro gaining back about 1%...

The euro also got a needed boost this morning, as German Investor Confidence jumped to a three-year high. Seems most investors believe the economic slump in Germany, the Eurozone's largest economy, is easing... Of course, we know that while Investors believe the economic slump may be easing, it may, in reality, not be easing... It's all about perception, right? Any old way, the currencies have rebounded from yesterday's bloodbath... And now the currencies have a bid tone, and not the dollar!

And now a news flash just came across that these countries are "considering buying each other's bonds, and swap currencies" to eliminate the dollar from those transactions... OK... Skip back to yesterday... Here's what I said... Pfennig 6/15/09: "I would have to think that the Finance Ministers of these countries would be interested in knowing how they can avoid another downward spiral caused by dollar buying... And... This... Would be the key, folks... I don't know what it would be, but if they did something like a currency swap / foreign exchange line between each other for trade, that would be colossal! Which is bigger than HUGE!"

The BRIC (Brazil, Russia, India, China) meeting I told you about yesterday, actually happens today. Sorry for the mix-up, as I thought it would happen later this week. There were already comments hitting the news wires that Russian President Medvedev, wants to talk about issue of the dollar as the reserve currency... Now, if he does, and I'm not saying that he will, but if he does talk about that, doesn't that wipe out the Finance Minister, Kudrin's, comments about Russia's belief in the dollar? And... If he does, and again, I'm not saying that he will, but if he does, my thoughts yesterday, that this would happen at the BRIC meeting, would come to fruition...

There's always been a clamoring for a basket of currencies consisting of the BRIC countries... The problem is that the Russian ruble just isn't liquid enough to get this done, like EverBank World Markets does their other CD's... So... How about dropping the "R" and doing a BIC? Well... Again, even though EverBank does offer these currencies of Brazil, India and China individually, it's not easy... In fact it's quite the ordeal to get them done... But, eventually, we'll think of something!

OK... Now back to the goings on in the markets... This BRIC meeting today seems to have quite a hold on the markets' attention today... And it is a BIG thing, IF they do discuss the alternative reserve currency talk... Talk the talk, and walk the walk... These countries can't keep complaining about the need for a new reserve currency, and not do anything about it...

Looks like all the stimulus and money supply in the U.K. is beginning to show up in the inflation data... U.K. May CPI jumped .6%, thus pushing the year-on-year (YOY) figure to 2.2%! Now, this is important for a couple of reasons, folks... 1. it could signal an end of the easy money in the U.K. IF they are prudent in removing the stimulus, as they and their friends over at the Fed claim they will be... And 2. and more importantly... Is... The U.S. has actually been behind the events surrounding the financial meltdown in the U.K.... So... If the U.K. is beginning to see inflation rise, it stands to reason that it won't be long before we see it happening here too...

Down Under... The currencies of Australia (A$) and New Zealand (kiwi) both fell flat on their respective faces with the dollar on the rampage yesterday... But were able to rebound a bit overnight. They were moved higher, when the minutes of the last Reserve Bank of Australia (RBA) hinted that the RBA was going to maintain their easing bias, but move to the sidelines for the foreseeable future... Folks... That's Central Bank parlance for... This is it! Unless the sky falls! This is the bottom as far as rate cuts go! But... It will be awhile until they move up...

Well, that's how I read their statement! And I've been reading Central Bank statement for 17 years now... I think the traders that cover A$'s think the same thing... And kiwi, just grabbed on to the coat tails of the A$...

Did you see the color of the TICs data yesterday? WOW! Or should I say, UGH? The net security purchases by foreigners for April showed a HUGE drop! The total net purchases were $11.2 Billion... VS $55 Billion in March! And... The ongoing holdings of Treasuries feel a net of $2.6 Billion... Now... Here's where I get all ticked off folks... We've had Japan, China and Russia all say publicly that they have full faith in U.S. dollar denominated assets (read Treasuries)... But when it came to backing up the talk with the walk... They failed to show that they have full faith in these assets, didn't they!

These countries and their Finance Ministers caused investors HUGE losses with their statements, but when it comes down to the cheese that binds, these Finance Ministers didn't have the intestinal fortitude to back up the statements... Well, at least in April they didn't!

And $11.2 Billion a month is not going to be enough to finance the Current Account Deficit... Which will print tomorrow, how convenient! But that's for April, and we won't get all that data for months! However...

Right now, the "experts" believe the Current Account Deficit, which consists of the Trade Deficit, and the Federal Direct Investment, will be a deficit of $85 Billion (recall that the Trade Deficit had come down in the 1st QTR) for the 1st QTR... And going back, which is exactly what the Gov. doesn't want anyone to do, I see that the total purchases in the 1st QTR were a mere $40.63 Billion... There's a $46 Billion gap there folks...

I've gone over this financing thing so many times in the past that it make my head spin (yes, you should see it spinning right now!) just thinking about explaining it again... But, for those new to class... When a country has a financing problem (like it looks we had one in the 1st QTR) the gap gets pushed to the next quarter and so on, until... The chickens come home to roost... And then, a country has only two choices... They can raise interest rates aggressively to make the assets more attractive to the foreigners, or... They can allow a general debasement / weakening of their currency, to make purchases of the assets cheaper by discounting the clearing mechanism... The dollar, in this case... So... Which one do you think a Gov., especially one like ours, will choose to use? Yeah, right, like they would choose number 1!

Ok... Some more depressing news about the housing sector came through yesterday in the National Association of Home Builders Home Price Index (NAHB) printed worse than expected yesterday... The "experts" forecast the NAHB would be a 17... And it printed at 15... Soon afterward, economist Robert Shiller, said that the housing downturn "was not over yet"... Economist Nouriel Roubini, said that "house prices will fall another 15-20%" and... Banking analyst Meredith Whitney said that "she is even more bearish than either Shiller or Roubini on housing."

That's not good news folks... Nouriel Roubini as been dubbed as a gloom and doomer by the media (I don't think so... He just tells it like it is, he can't help it that it's not all seashells and balloons for the economy, like the media would have you believe!) and when another analyst, as prominent as Meredith Whitney says she's even more bearish than Roubini, you've got to sit up and take notice!

I just can't end the day's letter with those two depressing stories back-to-back... Oh! Here's an interesting story... The Japanese Finance Minister, believes the recession in Japan is nearing an end... Yeah, right... If I had a 1-oz Gold American Eagle Coin for each time a Japanese Finance Minister has said those words since 1990, I would be quite the "rich man"! But, the markets swallowed his statement hook, line and sinker, which is good for the yen! Japanese yen outperformed all the currencies overnight, and is trading with a 96 handle once again!

Speaking of Gold... It has rebounded by $8 this morning, as the sentiment to buy dollars has faded...

Currencies today 6/16/09: A$ .8020, kiwi .64, C$ .89, euro 1.39, sterling 1.6440, Swiss .9220, rand 8.00, krone 6.42, SEK 7.8070, forint 201.50, zloty 3.2550, koruna 19.2780, yen 96.83, sing 1.4575, HKD 7.75, INR 47.75, China 6.8335, pesos 13.36, BRL 1.95, dollar index 80.55, Oil $72, 10-year 3.72%, Silver $14.35, and Gold... $937

That's it for today... The rain that came through this morning was very a "hard rain"... And no, I'm not going to go into Bob Dylan here... We've had our share of "hard rain" lately, and the low lying areas are seeing flooding. The river that runs through my little river town, is on the rise again... I thought I had a doctor's appt today, but my calendar tells me it's next Tuesday! Yahoo! OK... Not too much else to talk about this morning, so, I'll just end it here, and send you on your way to a Hopefully Terrific Tuesday!

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

Throwing A Cat Among The Pigeons Again!

Chuck Butler — Mon, 15 Jun 2009 16:20:40 GMT

.........But First, A Word From Our Sponsor..........
The Ultra Resource Index CD: 6 foreign currencies, 1 unique opportunity

The Ultra Resource currencies (each is equally represented in the CD):

*Australian dollar
*Canadian dollar
*Hong Kong dollar
*New Zealand dollar
*Norwegian krone
*Singapore dollar

EverBank is a Member FDIC and Equal Housing Lender.
......................................................

In This Issue..

* Russia's Fin Min talks up the dollar!
* Currencies, commodities, stocks all lose ground...
* Who's car is uglier
* Gold hit a 3-week low...

And Now... Today's Pfennig!

Throwing A Cat Among The Pigeons!

Good day... And a Marvelous Monday to you! How about that weekend? I actually didn't get a chance to experience much of it outside, but it sure looked great! We have new champions in basketball and hockey, so congrats to the Lakers and Penguins on their Championships! Now, the housecleaning is out of the way... It's time to get to the meat... Where's the beef? HA!

OK... Well, the Russian Finance Minister, Kudrin, threw a cat among the pigeons yesterday, when he stated that Russia has confidence in the U.S. currency. The markets have reacted violently to this statement, sending the dollar much higher, and the currencies led by the euro, much lower. An overreaction? I think so! But... These are the types of things you watch happen, and be glad you're not a currency "trader"! For, you would have either experienced a huge loss or gain, or... Been stopped out, and not allowed to participate in the large move... I'm not the "trading" type... I'm all about diversification... So that, when things like this happen, you realize that it's just "noise" in the markets, and the only thing it creates for you is an opportunity to buy at cheaper levels!

It sure sounds like, looks like, and smells like, a coordinated effort by those that have the most to lose should the dollar continue on it's downward path of the last 3 months, to get put a lid on their losses... Makes sense... But you have to wonder about what they are really thinking and doing... I'm talking about China, Russia, and Japan, who have ALL stated in the past weeks that "the dollar is fine, and there's no substitute reserve currency"... These statements all give dollar bulls a boost, and tell them that these countries are not going to back away from dollars and dollar denominated assets.

Now... There's a BRIC meeting coming up soon... Brazil, Russia, India and China... And while the Finance Ministers of these countries are at the meeting, I doubt seriously that they will hold the same amount of "love" for the dollar... But that sentiment will be kept to themselves, as they don't want to send the dollar spiraling downward. These BRIC nations had it all going for them until July of last year. They were sent spiraling downward like most assets until March of this year. I would have to think that the Finance Ministers of these countries would be interested in knowing how they can avoid another downward spiral caused by dollar buying... And... This... Would be the key, folks... I don't know what it would be, but if they did something like a currency swap / foreign exchange line between each other for trade, that would be colossal! Which is bigger than HUGE!

Well... The G-8 meeting this past weekend was centered on an "exit strategy" for the countries that have implemented the various forms of stimulus. I did see one comment on currency that came out of the meeting... German Finance Minister Steinbrück said he had "no problem with the level of the euro" Now that comment alone should have underpinned the euro coming into Monday's trading... But again, the cat thrown among the pigeons, but Kudrin, has really taken control of the markets' mindset today.

We will see central bank meetings from Japan, Norway, and Switzerland this week... Don't expect much from any of them, as interest rates are near to the bone for all... Norway's Norges Bank has an internal rate of 1.50%, which does give them some leeway for a cut, but again, I just don't expect anything from any of these Central Banks this week...

In that old comparison thing, when you say this car is uglier than that car... The Eurozone has lost 1.22 million jobs in the first QTR of 2009. Unemployment here is near a 10-year high, and not looking as though it will stop the bleeding any time soon... However, we are all aware of the rot in the U.S. employment picture... In the same period (1st QTR 2009) the U.S. lost 1.912 million jobs... And... We all know the "games people play now, every night and every day now" at the BLS! So... Which car is uglier?

So... As we lead off the this 3rd week of June, we have not only the currencies but, commodities and stocks all in the red from the Kudrin words... (see above, in case you skipped over that, which I can't imagine any one would do! HA!)

Speaking of commodities... Gold has hit a 3-week low. The shiny metal has had to endure 3 weeks of battering by China, Japan, and now Russia regarding the reduced need for an alternative to the dollar... I wouldn't think too much of this move... Again, it's "noise", and soon the Kudrin words will be a thing of the past, and we'll get back to the underlying fundamentals of a weak dollar trend eventually... But! It does give those that were thinking they wanted to buy Gold, but it was too expensive, the opportunity to grab some now!

As I turned the computers on this morning, the currencies have lost even more ground, so they haven't found a stop level yet.

Today, we'll see the color of the TIC's data... You know, the Net Security Purchases... This data will be from the month of April...

We'll also see National Home Builders House price index for this month. I know that quite a few economists believe that the housing markets meltdown has bottomed... But I think this data will prove otherwise.

Wednesday, Big Ben Bernanke and FDIC Chair Sheila Blair speak... You never know what will come out of the mouths of these two! So... We had better keep an eye out, and our ears to the ground, for you never know when you might get another quote from Big Ben like the helicopter speech of a few years ago! Don't recall that one? Ahhh...

When asked how he would deal with deflation as the Head of the Fed (obviously before he was the Fed Head!) Big Ben reminded everyone that the Gov't had this technology called a printing press... (he's talking about printing money here ) and that he would throw dollars from a helicopter to keep deflation from happening...

Well... Minus the helicopter, he's kept his word, eh? The Printing Press is working overtime and he sure is passing out the dollars to keep deflation from hitting us hard... (personally, I think he failed miserably, but that's just me!)

So... I see that the President is going ahead with his plans to give the Fed sweeping regulatory powers... Not that I don't want to see some changes... But again, I ask... The Fed? They've done such a masterful job of protecting the value of the dollar since they were created, eh? NOT! 94% loss in value since the Fed took over! Nice job! UGH!

Time to get this out the door, so on to the Big Finish!

Currencies today 6/15/09: A$ .8015, kiwi .6325, C$ .8840, euro 1.3855, sterling 1.6450, Swiss .9170, rand 8.0610, krone 6.4240, SEK 7.8280, forint 202, zloty 3.25, koruna 19.37, yen 98.20, sing 1.4570, HKD 7.7505, INR 48.15, China 6.8363, pesos 13.51, BRL 1.9260, dollar index 80.95, Oil 70.95, 10-year 3.76, Silver $14.33, and Gold $934

That's it for today... Thanks to all that sent along notes regarding my continuing battle with cancer... Yes, it's been two years... Seems like a lot longer! This coming weekend will be Father's Day weekend... Always a good time at my house! The kids will all be here, little Delaney Grace, and others... So... I'm looking forward to that. Two years ago, I spend Father's Day in the hospital with my kids, so this time around it should be in our beautiful back yard! OK... I'm very late! I hope you have a Marvelous Monday!

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