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?

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

Good day… And a Terrific Tuesday to you! Well… Let the Data flow begin! And let Big Ben Bernanke’s “green shoots” wilt under the bright summer sun! Not that I want to see the U.S. in economic muck, but come on! He was banging the drum for these “green shoots” when they simply looked like weeds to me, and I just think for him to say those things when I believe he knew better was wrong… Very Wrong!

I came in this morning, and turned on the currency screens to see that the dollar has taken a step back for the 4th consecutive day VS the euro. The single unit is up to 1.41 again, as it makes those probes out beyond the 1.35-1.40 trading range we’ve had in place now for some time. Yield demand is what’s driving the dollar downward, and while the euro doesn’t exactly have a “yield differential” to the dollar, the thing to remember, as I always tell you… The euro is the “offset currency” to the dollar. So, just by nature of the crosses to other currencies, the euro benefits whenever the dollar is sold.

So… If Yield Demand is what’s beating the dollar up like a rented mule (no animals were hurt here, just a saying… ) Then the “high yielders” should be doing the beating… And as I look at the currency screens, that’s what I see! The Aussie dollar is trading above 81-cents, kiwi above 65-cents, rand is 7.75, and the Brazilian real which has to fight with the Central Bank for every inch of gain VS the dollar, is holding its own right now… A month ago, I was telling you about the gains VS the dollar since March 1st… Well, an updated look at the 3-month gains tells us that the move against the dollar has continued… Albeit with several steps backward along the way!

Shoot Rudy! Even the beaten and left for dead Mexican peso has rebounded in recent days as the “other” high yielders drag the peso along for the ride.

4 months of gains VS the dollar doesn’t exactly qualify this move as a “trend”, which is normally associated with long sweeping moves. This does look as though it could become a “trend” though, as it has all the qualities of a long sweeping move, just concentrated in a 4-month span… Like, when a “trend” is in place, it’s not a One-Way street, there’s volatility within the trend… And we’ve certainly experienced that! Personally, even if this does turn into a long sweeping downward move for the dollar, I would just say that it’s a return to fundamentals, and not a new trend… Simply a return to the underlying weak dollar trend that began in 2002, and saw a pause in 2005, and then another one from July 2008 to March of 2009…

OK… Remember when I made such a BIG DEAL out of China and Argentina agreeing to swap currencies in trade settlement and remove dollars from the equation? I told you then that China was trying to gain a wider acceptance for their currency, the renminbi. And… That China had locked up Southeast Asia with similar agreements, which led me to believe that since they had traveled to South America, that Brazil could be next in line… And, the rumors began circulating…

Mom… He’s doing it again! Yes… China and Brazil have agreed in principle to remove dollars from trade settlement, and replace them with renminbi and reals respectively! This follows up what I told you about 10 days ago, and that is that China had become Brazil’s number one trading partner, knocking the U.S. down a notch. So… If that’s so, it’s not like we’re talking small sums of money folks… No, this is the BIG KAHUNA for China, and that not so big kahuna for the U.S. / dollar…

So, while China claims to be on the dollar’s side, and “see’s no alternative currency”… They are working to get their own currency in the mix… Looks like it’s all a “plan” to me, folks… Before we know what hit us, renminbi will be everywhere!

But… Still manipulated as to it’s value VS the dollar by Chinese officials. So… Don’t think, for now any way, it could all change though, that you should sell everything you own and go out and buy truck loads of renminbi… I think you would find yourself to be a bit disappointed… That is, unless you have time on your side… Time is on my side, yes it is…

I got a HUGE kick out of my friend, The Mogambo Guru, reading his weekly letter on the Daily Reckoning site (www.dailyreckoning.com) I’m looking forward to catching up with the Mogambo in Vancouver in 3 weeks time. We keep missing those opportunities to meet up, with first my cancer, and then his stroke… But, there we will be together, two of the biggest smart alecs you’ve ever met in your entire life… I need to see if he’s up to going on the road with me to do a two-man show! HA! Any way… The thing I was going to talk about was that the Mogambo, told his readers yesterday, that in his latest visit to John Williams’ web site: Shadow Stats, he was surprised to see that inflation is really running at 6%, which is quite different from the stupid CPI the Gov’t tries to shove in our faces of -1.3%! Here’s the Mogambo…

“As for inflation, his calculation of the Consumer Price Index “reflects the CPI as if it were calculated using the methodologies in place in 1980,” which I note is back when inflation was a measurement of the change in prices of things that you buy, and not, as it is now after the villainous Alan Greenspan and Michael Boskin came up with their ludicrous “hedonic” measurements of inflation with which to disguise it.”

And… He also found that unemployment, which I tell you all the time is very, very, very, and maybe one more very, understated by the BLS, is… At 20%… 1 in 5 are unemployed…

So… Thanks to the Mogambo, and John Williams for giving us data that backs up what I’ve been spouting off about!

This morning, Norway got the data flow going early with Norwegian retail sales surprising to the upside in May, rising 1.9%! The experts had forecast a -.2% decline… This rise in May gives brings the year-on-year figure to a negative -1%, which still sounds bad… But much better than what was forecast… -3.2%!

Norway seems to be just sailing along, out to sea, without any wind in its sails, not joining the other Commodity Currencies like Aussie, kiwi, and South Africa and Brazil… I think that won’t last too much longer… You see, Norway had a governor put in its currency when it’s neighbor, Sweden experienced bad times due to the Latvian banking crisis… So, as more and more miles of road get put between the thoughts of Latvia and Sweden, the better it will be for Norway… That… And… Getting Oil’s price back to the rally mode!

Canada is another currency that is not gaining along with the other Commodity Currencies, even with Oil moving higher again… Here’s the diff… Those other Commodity Currencies all have YIELD! While Norway and Canada do NOT! However, having said that, I just don’t see these two energy driven currencies wallowing around in the mud too much longer. Playing catch-up with Aussie and the rest of the bunch will be difficult though, and the “other” Commodity Currencies have such a big head-start!

OK… Time for the data set-up for today…

The S&P/ CaseShiller Home Price Index for April will print this morning, and is expected to show a decline of -18.6%, which those that wear rose colored glasses will say, “Hey, Chuck, that’s down from previous declines”… To which I will respond… Yes, it is… But, not much… And if you chart out the monthly prints you’ll see that it hit the low of -19.01% in Jan… February’s print was -18.67, and March’s print was -18.7%, you’ll have to agree with me that the move to “down from previous declines” has been quite slow, eh? And… At this pace it would take until 2011 before we got back to 0% YIKES! So… While you’re wearing those rose colored glasses you might, just might, want to dig deeper into the data before you start sounding the “all’s clear horn”!

We’ll also see Consumer Confidence, which, because of the better times in stocks, is expected to inch upward to an index number of 55.3 VS 54.9 in May… While this data is more like what I believe it should be, it’s still higher than I would think… But then, so are stocks!

And… Then there was this… Recall last week, when Big Ben Bernanke gave his impression of Sgt. Schultz, when asked about pressuring Bank of America (BOA) to take over Merrill Lynch, claimed he “knew nothing”! I thought that he had thrown former U.S. Treasury Sec. Paulson under the bus… Well, today, Paulson will appear before the same committee that’s looking into this mess, that BOA Chairman Ken Lewis claims to have happened. I wonder what Paulson’s thinking after hearing Big Ben last week? I guess we’ll find out today!

It’s the last day of June, my younger brother David’s birthday… David was born when I was nearly in high school, while my youngest brother, Mike was born while I was in high school! Anyway… What I was going for with the last day of June, before my mind wandered, was that it will close the books on the 2nd QTR… And soon enough, we’ll begin to see earnings reports for the quarter… Should be interesting…

Currencies today 6/30/09: A$ .8140, kiwi .6520, C$ .8675, euro 1.4125, sterling 1.66, Swiss .9255, rand 7.7435, krone 6.3955, SEK 7.6630, forint 193, zloty 3.1555, koruna 18.3360, yen 95.80, sing 1.4465, HKD 7.7499, INR 47.90, China 6.8305, pesos 13.12, BRL 1.9565, dollar index 79.64, Oil $71.67, 10-year 3.48%, Silver $14, and Gold… $940.75

That’s it for today… Whew! What spanking by the Giants last night! OUCH! It’s bad enough to get shut-out on two hits, but when the other team hangs 10 on you… Like I said, OUCH! Now that’s going to leave a mark! Tomorrow, we turn the page on the calendar to July, which means the All-Star Game is almost here! I’m as excited as a kid at Christmas for this… You’ll have to look for me at the Home-Run Derby, and All-Star Game… I’ve got some primo tickets right at the end of the visitor’s dug-out (3rd base line), 2nd row! Now, you know why I’m so excited! Well, that’s enough of that… Mary and Suzy Q are here, so that must mean that I’m late! So… Let’s make this Tuesday Terrific, eh?

Souce: A Week Dominated By Data

Serenity Now! Serenity Now!!
- Frank Costanza, Seinfeld

Let’s see, how can I put the appropriate subtlety and nuance on this…

Get. Out. Of the U.S. Dollar. NOW.

Do not pass go, do not collect $200, do not stop to conduct an impromptu inventory of your unmentionables.

In the slightly profane vernacular of internet slang, just GTFO. Do not walk, RUN, to the nearest exit. Barring that, find the most appropriate hedge for your dollar-denominated investments and GET THAT HEDGE ON. Toot sweet.

If you don’t know of a high quality dollar hedge off the top of your head – other than those oldies-but-goodies, gold and silver – then you’re in luck. I’m about to tell you (yet again) about an excellent anti-dollar counter measure that is smart, IRA eligible, FDIC insured, and set to deliver potentially staggering returns over the next 12 to 18 months.

But first, let me catch my breath.

Whew. That’s better…

Cool Customer Nearly Spits Out His Coffee

Now that I’ve composed myself a little, let me apologize for the above outburst. Your humble editor is normally more reserved than that… a cool customer, if you will (except for the occasional temper flare-up in response to what comes out Washington).

The reason for this morning’s mini freak-out was a Financial Times bulletin that, quite literally, almost made me spit coffee all over my keyboard. Here are the first two paragraphs, reproduced just as they hit me between the eyes:

China wants dollar replaced as reserve currency
By Jamil Anderlini in Beijing

Published: March 23 2009 12:16 | Last updated: March 23 2009 14:22

China’s central bank on Monday proposed replacing the US dollar as the international reserve currency with a new global system controlled by the International Monetary Fund.

The goal would be to create a reserve currency “that is disconnected from individual nations and is able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies,” Zhou Xiaochuan, governor of the People’s Bank of China, said in an essay posted in Chinese and English on the central bank’s website.

Remember that old advertising jingle, “Uh-Oh, Spaghettios?”

One might say this could mean, “Uh-Oh, Confetti-O,” for the greenback.

On Friday we talked about Financial MADness and the complex gamesmanship playing out between Washington and Beijing.

If Beijing’s mandarins are engaged in a high stakes game of poker with the Fed, then Monday’s thinly veiled “death to the dollar” statement from China was the equivalent of raising the stakes by an order of magnitude.

This is huge news, folks. I don’t know how else to put it. It may take a little time for the forex market to further digest the implications of this blow – due to shell-shock from last week’s big news and whatnot – but the fallout shouldn’t be long in coming.

Now, getting back to that ideal dollar hedge… one which could do BETTER than just gold and silver by the way… to explain why it looks so compelling now, I first need to lead in by telling you about a very small country set to reap an astonishingly large windfall, courtesy of Fed Chairman Ben Bernanke.

This Tiny Country, Pop. 4.8 Million, Could Reap Hundreds of Billions From the Fed

When the Fed announced its intention to create a trillion bucks out of thin air last week (by printing up dollars with which to buy bonds and mortgages), few had more reason to be pleased than a quirky, introspective man named Yngve Slyngstad.

Not to be confused with Yngwie Malmsteen (the glam-rock ‘80s-metal guitarist), Yngve Slyngstad is a former scholar of German philosophy. With his slim build, shaven head, and Teutonic goatee, he certainly looks the part.

But Slyngstad is no philosopher or academic… he is the CEO of Government Pension Fund-Global, Norway’s (rather clumsily named) sovereign wealth fund. Thanks to Norway’s $300 billion pool of assets – the third largest in existence – that CEO title also makes Slyngstad one of the most powerful investors in the world.

The reason Yngve Slyngstad (and all of Norway) should be deeply grateful to Fed Chairman Bernanke is because of the electrifying effect the Fed’s dollar-destroying actions will have on hard assets – with China’s recent announcement pouring kerosene on the flames.

Norway, you see, is the fifth biggest oil exporter and third biggest gas exporter in the world. That’s how a country of 4.8 million people – just over half the population of greater Los Angeles – managed to amass $300 billion in savings, or $62,500 for every man, woman and child.

Again, to understand how Norway has just been handed yet another mega-sized windfall, just consider what effects a plummeting dollar will have on the price of oil and gas.

Here Comes the Triple Whammy

If you pull up a crude oil chart (or USO, the popular oil ETF), you will quickly see that oil has already worked its way through a multi-month bottoming process.

But to really understand how the energy markets will respond to a collapsing dollar in the longer term, let’s take a look at a 60-minute chart of the United States Natural Gas Fund (UNG:NYSE).

When news hit the wires of the Fed’s trillion-dollar printing spree last Wednesday, natural gas jumped like a scalded cat with boiling hot water poured on its back. It took oil and gas traders a time span of roughly two seconds flat to realize that if the Fed and Treasury are well and truly going “all in” in terms of printing money to save the U.S. economy, the nominal price of dollar-denominated hard assets should shoot up like a bottle rocket.

China’s remarks on Monday, and the reality of America’s fiscal situation, mean that the dollar has a lot – and I mean a LOT – further to fall. We’re talking journey to the center of the Earth here.

It may well be in fact, too, that many paper currencies have troubles ahead, as country after country engages in a “race to the bottom” in an effort to monetize debt and shore up export sales. But, as we have said repeatedly in these pages, nobody but nobody does it bigger or better than Uncle Sam… and that includes unleashing weapons of mass currency destruction by way of the printing press.

This is great news for gold and silver. But if the period of paper currency debasement comes against a backdrop of global recovery in emerging markets, it could be even better news for hard assets like oil and gas and copper… and hard-asset PRODUCERS like Norway, Australia, Canada and so on.

The potential “Triple Whammy” is an explosive cocktail composed of the following three factors:

• Hard assets rising in price as the result of extreme paper currency devaluation.
• Oil, gas and metals being repriced upwards to reflect economic recovery and renewed global demand.
• Supply constraints, bottlenecks and peak oil concerns coming back to the fore with even more vengeance than before as a result of production cutbacks and outright shutdowns due to the credit crunch.

If we get just two of those factors working in concert, oil is on its way back to triple digits. And if we get the mojo of all three working at once? Whoo doggies. Crude could be back at $150… or even $200… before the decade ends.

And Yngve Slyngstad could well have a big smile on his face as Norway’s investable assets soar from $300 billion to $400 billion… $500 billion… or even beyond.

The looming “Triple Whammy,” in other words, is absolutely fantastic news for the “hard asset” economies – countries like Norway, Australia and so on – that make their bread and butter from hard assets: stuff like nickel, uranium, iron ore, and of course, oil and gas. That means serious upward trajectories for their currencies too.

Which finally gets us around to…

How to Hedge – And Profit Too

Earlier I pledged to tell you about a truly excellent hedge – a way to counteract the diving dollar that could prove as good as, or maybe even more worthwhile than, traditional precious metals holdings like gold and silver.

The hedge I was referring to is the EverBank Ultra Resource Index CD. Conceived by the Taipan Publishing Group and created by EverBank at our request, the Ultra Resource Index CD offers a basket of the following currencies:

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

If the name “Ultra Resource Index CD” sounds familiar, that’s because we’ve already told you about it. As a matter of fact, in a special webinar for Taipan readers and subscribers not too long ago, Sara Nunnally and I specifically went over the attractiveness of the various commodity currencies… and specifically predicted that the dollar would soon crash.

Here’s proof, direct from the webinar transcript:

JL: And when would the time to act be? Do you see a window of opportunity here?

Sara Nunnally: Yes, the time to act would be soon because all these currencies have been discounted by the crash of 2008. When we saw the “margin call to the system” as you put it everything was thrown out the window in the face of a panic rise in the U.S. dollar and Treasury bonds.

JL: So when the global economy roars back to life again and the dollar buckles under the weight of the printing press, these currencies could appreciate extremely quickly.

SN: Absolutely.

Doesn’t get more direct than that, eh?

Now there’s good news and bad news here… the bad news is that you would have been better off acting on the opportunity the very first time the webinar aired. Since that time, the “commodity currencies” have jumped substantially. (Just check out charts of the Canadian and Australian dollar to see what I mean.)

The good news is, it’s still not too late to act. One nice thing about currencies is, when they trend they REALLY trend. We could be in the early stages of a new paradigm shift – away from the greenback and towards the currencies of the world’s hard asset producers and “ultra resource” countries – that lasts for years and years. If so, the time to get involved is right now… before the dollar falls down another six flights of stairs.

To make sure you get a full sense of the scope of this opportunity, I asked our web team to set up a special re-viewing of the original webinar – a discussion between Sara Nunnally and me – explaining just what is happening now and why in the world’s major currencies.

Keep in mind that this webinar was originally broadcast a little while ago and basically predicted the flow of current events… with that in mind, you can access a special re-viewing of the “ultra resource” currency webinar here.

Or, if you have already seen the webinar but chose not to act on it the first time… or if you fully understand the argument and simply want to go straight to the details on how to sign up for the EverBank Ultra Resource Index CD… then you can find out what you need to know about the Ultra Resource Index CD here.

Keep in mind, too, that the Taipan Publishing Group has a mutually beneficial relationship with EverBank. They occasionally create CD products for us (like the Ultra Resource Index CD), and we in turn receive a small commission when those products are sold. I feel strongly that it is a win-win-win relationship: not just for Taipan and EverBank, but for you, our beloved readers and subscribers.

And remember: “Uh-Oh Confetti-O” doesn’t have to mean “Uh-Oh” for your investment funds or your retirement. Through various trading and investing opportunities, not to mention “big picture” type opportunities like the Ultra Resource Index CD, you should be able to survive… and thrive… in the midst of the greenback’s flaming demise.

Source: Get Out of the U.S. Dollar Now. Right Now. This Is Not a Drill.

Memo to Professor Lewis: Danger! Danger! You have been misquoted or the government goons are sabotaging you, and that means that people at work are ganging up on you, just like they are around here, which explains why my water heater is acting up all of a sudden, and why that cute new intern down in accounting has filed a grievance against me, and so I can only imagine the horror that is being visited upon you!”

It hardly needed explaining that only a moron would say that you CAN’T have a true deflation when using a fiat currency, when you obviously MEANT to say, “I have never been one to believe that you will get a true deflation with a fiat currency, if for no other reason than there is no reason to believe that a corrupt government long-accustomed to gorging itself with massive deficit spending and obliging various corruptions both in and out of government, all made possible by a fiat currency that has produced inflation in the prices of so, so many things in a series of bubbles is going to one day slap itself on the forehead and say, “Whoa! That’s enough spending! From now on, governments will spend less and less money, no matter how much pain it causes!” Hahaha! Like that’s going to happen!

That’s why Mish should have been quoting me saying, “We’re freaking doomed!” instead of using this Professor Lewis guy, and I was going to tell him so, too, when I was interrupted by Mish going on to ask Paul Kasriel of Northern Trust about the nature of inflation; “How does inflation start and end?”

Mr. Kasriel replies, “Inflation starts with expansion of money and credit”, which is exactly right and perfectly phrased, too, which permits it to be quickly committed to memory, which is a helpful mnemonic that this country sorely needs, as even Ben Bernanke, the chairman of the Federal Reserve and former head of the economics department at Princeton University, thinks that inflation comes from high energy and food prices! Hahaha! Unbelievable but true!

By this time, I am getting really upset that I am not being quoted or being consulted in any of this, and nobody even mentions how my flashing blue eyes seem to twinkle with a light of their own, even though I sent them a memo about it, for crying out loud!

Since nobody liked the suggestion about mentioning my sparkling eyes, I thought that maybe they could instead say, you know, how I am a terrific, wonderful father, regardless of what a bunch of malcontent, whining teenage morons say. But before I could bring it up, Mr. Kasriel said that “Inflation ends when the central bank is no longer able or willing to extend credit and/or when consumers and businesses are no longer willing to borrow because further expansion and/or speculation no longer makes any economic sense”, which is also exactly true, but not as easily committed to memory.

So Mish then asks “So when does it all end?” To which Mr. Kasriel replied, “That is extremely difficult to project”, because for instance, “if there were a run on the dollar in the foreign exchange market, price inflation could spike up and the Fed would have no choice but to raise interest rates aggressively.”

To this I think to myself, “Says who? You? Hell, interest rates are already less than half the rate of inflation because the Fed and other central banks are pouring so much money into the markets! And with a fiat currency and a demonstrated willingness on the part of Congress, and every other government on the face of the planet, to abide every possible corruption in a desperate, clutching-at-straws attempt to forestall the inevitable collapse of the global bubble, they can spend and spend and spend, and it will never end until it collapses in a Big Stinking Heap (BSH)!”

I don’t know why, but the phrase Big Stinking Heap made me think of tacos with their golden shells, which made me think of gold, which made me think about how I don’t have enough gold in the face of such rampant monetary inflation, which made me think about how I can’t buy any gold because I don’t have any money, and I don’t even have enough for a damned taco.

It’s going to be rough in the minutes and months ahead. Take heed and take action!

Source: A Big Stinking Economic Heap

This week, Russian President Dmitry Medvedev and Georgian President Mikheil Saakashvili are already planning to sign a peace plan. But still the damage has already been done – particularly to the Russian ruble.

Honestly, what happened to the ruble this week is pretty common during wartimes. So this begs the question: How does a war affect a currency?

Well, as I often say: Money hates instability. There is nothing more unstable and unpredictable than a war where anything can happen. You also never know how long one will last, who will win, and what will be lost along the way.

As an investor, you’re left to suspect the worst. That’s why most investors grab their money and run to safer, more stable countries until the coast is clear.

Russia Declares War and
the Ruble Sinks 4% in 5 Days

To this day, Russia still has a bad reputation for decades of shady dealings. As such, investors never seem to fully trust the Russian markets. If a conflict breaks out, investors rush in and grab their cash even faster than they would another country.

And that’s exactly what happened when Russia declared war on Georgia.

Check out the chart of the U.S. dollar vs. the Russian ruble below. You’ll notice the ruble tanked over 4% in just 5 days after war broke out.

With Leverage, You Can Turn that 4% move into 400% Profits

Now that may not seem like much to you. But you have to remember that small movements in currencies add up to a lot in trading accounts.

Spot Forex accounts are commonly leveraged 100 to 1 or even 200 to 1. So a 4% move can be magnified to equal a 400% to 800% move in just 5 days.

If you bet against the ruble just as the Russians declared war, then you would be sitting on some healthy profits right now. However, if you bought the ruble formerly because it has done well in this “energy/commodity” boom, then you probably watched your account sink into the negative territory over the last few days.

Most trading accounts can’t take 400% to 800% losses on their positions over a five-day period and survive.

So ruble traders really had a wild ride since this began.

Is the War Over Yet?

Let’s suppose for a moment that the war truly is over and things somewhat revert back to normal (a Russian normal anyway). If that happens, then Forex traders will probably see it as a buying opportunity and grab the ruble once again at bargain prices.

However, if the conflict isn’t truly over, or if another one erupts, then you will see the rollercoaster ride begin again.

It takes a strong stomach to invest in the ruble right now. Much of the time it has been a very profitable “one way bet” against the buck since 2003. However, in times like these, you never know what the Russians are going to do.

On the other side of the coin, if you’re pulling money out of Russia, you’d better hide behind another BIG country. So many traders ran to the U.S. dollar since it’s the “Big Brother” that might be able to protect them and their money.

However, other traders chose to run to the “risk adverse” currencies of the Japanese yen and the Swiss franc. Both of these currencies have torn a chunk out of most currencies over these same five days with the exception of the U.S. dollar.

Right now, the buck can’t seem to do anything wrong and is rallying against any currency I have on my screen.

So war really “stirs the pot” because it not only causes money to run away from the country at war but also it has to find a hiding place. That hiding place won’t be the same for every investor. It may be two or three of the other biggest currencies in the market.

Bottom line: Money tends to run for cover at the first sign of conflict and tiptoes back in later after the conflict ends. Something to keep in mind the next time a war breaks out…

SEAN HYMAN, Currency Analyst

Source: Why a War Can Kill a Currency and ‘Also’ Hand You 400% or More