OK… I heard a great song on the radio this morning on my way to work… And I said to myself… Chuck, now that’s a great song to start a day with, that everyone should hear each day! It’s a song from the 60’s (of course!), by the Rascals, called… It’s a Beautiful Morning… Here’s the first verse, and if you know the song, I’m sure you’ll want to sing along, but if not… Look it up, I’m sure, you’ll agree that it’s a great way to start a day!

It’s a beautiful mornin’ Ahhh
I think I’ll go outside a while
An jus’ smile
Just take in some clean fresh air boy
Ain’t no sense in stayin’ inside
If the weather’s fine an’ you got the time
It’s your chance to wake up and plan another brand new day
Either way
It’s a beautiful mornin’ Ahhh

OK… I know, some of you are getting ticked right now, because you remind me all the time, you don’t read this to sing songs, etc. But hey! You’ve got to have a song in your heart, I truly believe that!

One of the reasons I thought it to be OK to go off on that tangent was the fact that the currencies remain in a range… The euro’s range has been between 1.41 and 1.43… One day up a bit, the next day down… No direction… I think the culprit behind this is that there are so many people on each side of the fence right now, claiming that they know what is going to happen to the economy… I, for one, still believe that we’re going to experience a “W” affect…

Joseph Stiglitz, the Nobel Prize-winning economist (and don’t get me started on the questionable people that have won Nobel Prizes), believes there is a “significant” chance of a “W”… “it’s not inevitable, but there’s a “significant chance of a “W”…” he went on to say… “It’s not clear that the U.S. is recovering in a sustainable way.”

So… There you go… In the past two days, you’ve heard me, Bill Gross, and now Joseph Stiglitz, all talk about a “W”, which in it’s simplistic form is double dipping for the economy…

As I said yesterday morning… The real winners of the day were the Precious Metals… It could be repeated this morning too! And most likely Monday morning too! Gold is taking off in flight right now, and if you blinked the last two days, you’ve missed it! It’s off about $3 bucks this morning, but give it a chance to have investors see it heading to $1,000 again!

The thing I think you need to think about here is the fact that there are tons, and tons of money sitting in bank accounts right now, and I wouldn’t be surprised to see that money begin to make its way toward Gold purchases! This is normal isn’t it? I mean, an asset class, like Precious Metals / Gold, begins to move higher, and then the money begins chasing the price higher and higher… There’s an old saying about how you can lead a horse to water, but you can’t make it drink… That’s how I feel about Gold… I’ve have given the wink and nod for so many years about Gold… But I can’t make you buy it!

Ok… Enough… Let’s go to the Eurozone and see what’s up there! The European Central Bank (ECB) met yesterday, and you may recall that I said that the markets were looking for ECB President, Trichet to get them “pumped up” on economic growth expectations… I said the risk for the euro yesterday was that Trichet disappoints the markets expectations… Well, I believe that’s one of the reasons for the move down from 1.4330 yesterday to the low 1.42 handle…

Trichet basically told the markets that it’s premature to call the financial crisis over… And that was enough for the markets… But in reality, Trichet did the right thing… The ECB does not, bow to the markets! If it wasn’t the right time to talk about growth expectations, then don’t do it! I raise a glass to Claude Trichet this morning…

I mentioned that the Trichet statement was one of the reasons the euro had a tough row to hoe yesterday, the other reason was the Weekly Initial Jobless Claims… Weekly Initial Jobless Claims printed at 570,000 (last month was revised up to 574,000), and the Continuing Claims continue to be quite the heavy load for this economy. Continuing Claims hit 6234K! People who know that these things don’t stack up when talking about a strong economy, took money off the risk assets table…

Yesterday, I talked about how the Fed officials had begun to talk about exiting the stimulus measures, or monetary candy, as I prefer to call it, but Treasury Sec. Geithner, spoke out against that. Well, we have a G-20 meeting that begins today in London… I suspect that G-20 will issue a communiqué that basically said that the members do not believe that now is the time to exit the monetary candy…

The price of Oil rebounded yesterday for the first time in a week… I would have to think that with the price of Gold heading toward $1,000 again, it’s taking Oil along for the ride! The weak dollar, feeds higher Oil prices… I would think that we all would recall that to be the case, from the spring and early summer of 2008! The euro was 1.60, Gold was near $1,000, and Oil was $140+!

With both Gold and Oil prices percolating… The Canadian dollar / loonie gets to get in the game! The loonie is so dependent on commodity prices, but especially those of Oil and Gold. So… If this rise of Oil and Gold becomes a trend, I think you could look for loonies to make a run at parity again… But, only if, the rise in prices of Oil and Gold become a trend…

Well… All eyes are focused on the Jobs Jamboree this morning. Hmmm… The ridiculous Bureau of Labor Statistics (BLS) will print their adjusted nonfarm Payrolls this morning… It is forecast to show job losses of 230,000… I know, you’re saying but Chuck, just earlier you told us the Job Claims filed just last week was 570,000, how do we only show 230,000 for the month? Ahhh grasshopper… It’s two different methods of reporting… The Jobless Claims is a “real” number… They have the claims and all they have to do is add them up! So… In my mind wouldn’t it make sense to just add up 4 of these for the monthly total? Unfortunately, that’s not what the BLS does… Instead they do a “survey”… And then make adjustments where they believe they need to be made, because they’re so smart and know all these things… NOT! Geez Louise, even though I was being facetious I still can’t believe my fingers would allow me to write that the BLS was smart!

So… We get stuck with a massaged survey… But, it is what it is, and nothing more… So… I guess we carry on despite the dolts we have to deal with and their cooked books! But, be it as may be, the 230,000 job losses is still bad… Let’s go back a year ago, before we had the eye-opening 600,000 job loss months… If the BLS had printed a 230,000 job loss month, the Chicken Littles of the world would have been screaming that the sky was falling, for crying out loud! But now? The dolts will be spouting off about how that’s a “good number”!

I had better stop there, I was really beginning to pound on the keys! Speaking of which, we were talking the other day, and saying that keyboards some day, will be able to describe the emotion of the person typing! Wouldn’t that be cool?

I’m working on a report about what the IMF did last weekend that most people don’t even know about… But, I’ve got more research to do, so, hopefully I can have that ready for the Review & Focus monthly letter that goes to customers of EverBank World Markets.

I just did a video the other day on a brief but chock-full-0-information history of the dollar. You all know that I write another monthly letter for my friends over at the Sovereign Society, called… The Currency Capitalist. You actually have to pay to receive that letter, but as a subscriber you not only get the letter, but weekly videos of me, answering questions that readers send in… Pretty cool, eh? You can subscribe here… https://www.web-purchases.com/CUC/WCUCJ900/landing

OK… That was a shameless plug… But I couldn’t pass it up! Besides this I my letter, I can talk about anything I want!

The Chinese renminbi finally moved below 6.83, which it held for months! It will be interesting to see if this move higher VS the dollar continues, or if the renminbi pops back over 6.83 next week… I’ll keep an eye out for that!

Well… We went through yesterday, and touched on what’s going on today… (Jobs Jamboree and G-20), and spent a lot of time talking about Gold… It’s a Beautiful Morning isn’t it?

Currencies today 9/4/09: A$ .8430, kiwi .6845, C$ .9150, euro 1.4270, sterling 1.6365, Swiss .9415, rand 7.6775, krone 6.0450, SEK 7.2120, forint 192, zloty 2.8850, koruna 17.90, RUB 31.65, yen 92.80, sing 1.4380, HKD 7.75, INR 48.88, China 6.8299, pesos 13.55, BRL 1.8590, dollar index 78.34, Oil $68.50, 10-year 3.37%, Silver $16.07, and Gold… $990.75

That’s it for today… It’s a Friday before a 3-day holiday weekend! YAHOO! Tomorrow, my beloved Missouri Tigers start their football season VS Illinois… M-I-Z! (you’re supposed to come back with Z-O-U!) The Butler family is going to the game (except darling daughter Dawn and beautiful Delaney Grace). Sunday is the annual Butler House end of summer bar-b-que with neighbors, family and friends. It’s always a good day! And Monday I’ll try to relax and recharge the batteries, for I’m dragging the line today! Next week, the NFL season begins… WOW! All these sports going on at one time is too much excitement for me! HA! Well, I guess I’ll end this here, and hope you have a beautiful morning… And a Fantastico Friday!

Source: A Jobs Jamboree Friday!

“The Obama administration, for example, expects to run $9 trillion in deficits over the next 10 years – and that number is based on a recovery! Imagine what will happen if the economy doesn’t recover?”

Now, that’s a nice comforting thought to start our day right? NOT! WAKE UP! Morning has broken, and the coffee is on… If you are still of the thought that this is all going to end up seashells and balloons, then you need to stop and smell that coffee!

Oh brother! Looks like I’m full of you know what and vinegar this morning! Let’s try to calm down, Chuck, you’ve only just begun to write, you don’t want to peak so soon!

OK… Yesterday, I told you that the Asian stocks had sold off and that risk assets were being taken off the table. But that didn’t last long, and by mid-morning, I witnessed a nice currency rally, that wiped out the overnight selling. At one point during the morning a customer called to buy some euros, and when the sales person asked me for a price, I said, “you know, they may want to come back tomorrow morning, after the overnight markets beat the euro up, like we’ve so many times lately.”

But wait! That did not happen last night! So, I was wrong! The euro is getting some real love this morning after German unemployment fell in August, which was totally unsuspected. Euros and Swiss francs are the only currencies I see that have gained on the news this morning. So the Big Dog, euro, must have told the other little dogs to “stay on the porch”… Stay Rex!

German unemployment fell by 1,000… OK, now I know that this has the same feeling as removing a bucket of sand from a beach, when unemployment in Germany is 3.46 million! But, I never said that Germany’s economic recovery was a tidal wave! It’s smoking embers, that are in need of stirring, some small twigs, and leaves… My beautiful bride is an “expert” and getting a fire started like that, I should send her over to Germany, that would really kick the domestic demand to another level! HA!

Baby steps… That’s the way we’re going here… So, we’ve had IFO and ZEW think tank reports on Confidence all print stronger… We had the GDP surprise on the upside… And there was something else last week, but it slips my mind right now. The point here is that the Eurozone’s largest economy is waking up… We just have to hope it doesn’t hit the “snooze” button, now!

A reader sent me a note yesterday asking if I thought there would be a collapse of the Eurozone and thus the euro… If I had $5 for each time these stories have hit the streets, I would be sipping on a multi-colored drink in a tall glass with one of those tiny umbrellas, in a tropical setting… The point I’m making here is that on the outside Spain and Italy have problems… But what’s changed? These two had problems before they joined the Eurozone, and have had problems since joining the Eurozone… Me? I totally believe that these two get down on their knees each night and give thanks for being allowed to join the Eurozone!

So… In case you missed my answer in there… I don’t see that happening, at least not in the near future…

OK… Enough of that! The Reserve Bank of Australia ( RBA )met last night, and left rates unchanged, as suspected they would, and the following statement regarding their thoughts on the economy was relatively upbeat… However, the markets were looking for an indication of “when” the RBA would hike rates, and that didn’t happen… So… The markets were disappointed, and when they are disappointed with a Central Bank, they take it out on the currency! So the A$ got pounded overnight.

Now… Aussie GDP for the 2nd QTR is going to print tonight, I would have to think that the RBA maybe had a peek at the report, and thus their gearing down the interest rate hike talk… So… We could be looking at even weaker A$ prices tomorrow morning… Unless, that is, 2nd QTR GDP is as strong as it was once believed it would be!

Did you see where Canada printed a HUGE Deficit last week? Not a good thing… But, the Canadian balance position has teetered back and forth between Surplus and Deficit, but recently has remained in the red… You know me and deficits, so, I put a red mark next to the Canadian dollar / loonie… But then, you hear news like last night… Get this! PetroChina has agreed to pay C$ 1.9 Billion for a stake in a Canadian oil sands project. PetroChina will buy 60% of Athabasca Oil Sands Corp.’s MacKay River and Dover oil-sands projects.

That’s 1.9 Billion Canadian dollars / loonies that will have to be purchased… And You would have to think that China will be spending the “few loose dollars” they have in their pockets, which would put pressure on the green/peachback!

Canada is still in a recession, here folks… But… Could these be cheaper levels given the merger and acquisition activity? Only the shadow knows!

OK… So, here I am, 1 hour from when I began writing this morning, and all that glossy and shiny talk about the euro’s rally is fading… The Big Dog has lost 1/4 euro in the past hour… So… I wasn’t wrong after all!

OK, you’ll love this, or maybe you won’t, but I do, and since I’m writing this letter, I get to talk about it! HA!

Here’s the title of the story that flashed across the screen, and of course, caught my attention… “Goldman Sachs Wrong on Economic Recover, Macro Hedge Funds Say”

You’ve got me on this one! I’ve got to read on… “Paul Tudor Jones, the billionaire hedge-fund manager, who outperformed peers last year, is wagering that Goldman Sachs Group, Inc. and Morgan Stanley to it wrong in declaring the start of an economic recovery.”

“If we have a recovery at all, it isn’t sustainable.” One Hedge Fund Manager said… Calling this a “ski-jump recession, with short-term stimulus creating a bump that will ultimately lead to a more precipitous decline later.”

WOW! These guys must be reading the Pfennig! OK, I kid, because these guys would never bet caught with the Pfennig in their hands… They probably put it between the pages of the “Economist” so that others think they’re reading the Economist! HAHAHAHAHAHAHA!

Speaking of “must be reading the Pfennig”… I saw a thing that came across my desk yesterday that 57% of Americans would vote out every politician if the vote were taken right now! WOW! I didn’t know the Pfennig was read by so many people! Recall, I said weeks ago, to “fire them all”… Well, let’s hope that 57% grows to 95%, and Americans really do go through with their threat to vote them all out, if they continue to take us down the road to socialism / fascism / collectivism…

OK… You may recall a couple of weeks ago, I started asking you questions about the stock market rally, and it’s ability to continue on… I truly believed that the stocks were overbought, and the P/E ratios were out of control… Now, I see quite a few jumping on that bandwagon, and calling for a stock market reversal.

Do we really think the Gov’t will allow that to happen? Didn’t the President himself, say that he thought it to be a good time to buy stocks… Isn’t that sort of like a wink and a nod from the President that everything will be OK?

Beyond those conspiracy thoughts, let’s just say the markets get to go where the participants take them ( I know, it’s not reality, but let’s just play along ), and stocks begin to reverse their gains from March… I would think it to take an adverse affect on the currencies and their gains since March too… Throw Commodities in there too!

Now, in the old days, I would look at a stock sell off and say, currencies will rise… “Honey, put on the red dress tonight, we’re going out on the town!” but… These aren’t the old days… This is the new improved way of throwing all risk assets into the same barrel! And I don’t like it at all!

Ok… The Norwegian krone, traded with a 5 handle yesterday for the first time in a month of Sundays! It has traded back over 6 overnight… But, it was a good strong move from the krone yesterday nonetheless!

Well, today, we’ll see the ISM Index (Manufacturing) from August, and for the first time in 19 months, it is expected to be above 50! New readers might wonder what I’m talking about here… But it’s simple… 50 is a line in the sand that says any number below it represents contraction of manufacturing, and any number above it represents expansion of manufacturing… So, if it prints above 50 as expected one would say that manufacturing must be recovering…

Let’s look at that closer… Come on, closer, closer, closer! We’re experiencing a global recession, and global trade has been sketchy at best… But here’s U.S. manufacturing showing expansion… And… The rise has been quite steady since March… With March printing at 36.3, April 40.1, May 42.8, June 44.8, and July 48.9… See the steady rise?

What else has happened since March? That’s right, thank you for paying attention there in the back of the class! Yes, the currencies have been rallying VS the dollar… So, the dollar is much weaker than it was in March… The dollar index was 89.05 on March 5th, and today it is around 78… So… How did manufacturing / exports rise during this period of time? Because the dollar was weaker!

Let’s keep that in mind, eh? For if we get an adverse affect on the currencies from a stock sell off, this recovery in manufacturing could go kaput!

We’ll also see Pending Home Sales for July, and Vehicle Sales for August… Cash for Clunkers will push up the Vehicle Sales… But what happens next month?

Gold has backed off by about $8 in the past two days… It’s a dip… Therefore it must be an opportunity to buy at a cheaper price! I was reminding all my friends that we spent the weekend together at a lake, that I had told them to buy Gold $400 dollars in price ago… I was booed out of the room at that point, because you see, they didn’t buy it $400 dollars in price ago!

And on that note… I’ll head to the Big Finish!

Currencies today 9/1/09: A$ .8355, kiwi .6820, C$ .9125, euro 1.4295, sterling 1.6220, Swiss .9440, rand 7.7975, krone 6.0275, SEK 7.15, forint 192, zloty 2.8780, koruna 17.9110, RUB 31.8325, yen 93.10, sing 1.4430, HKD 7.75, INR 49, China 6.8303, pesos 13.44, BRL 1.88, dollar index 78.35, Oil $69.69, 10-year 3.38%, Silver $14.75, and Gold… $949.50

That’s it for today… Well, it’s been an unusually cool summer here in St. Louis… We had two separate weeks of hot weather, and that was it! It normally is much hotter, with very high humidity… I wonder what that means for this coming winter! UGH! Just found out yesterday that I won’t be going to Marco Island this December to speak like I had the previous two years… UGH! September is the last full month of baseball, and with the Cardinals in first place in their division, this should be a good month! There are two middle of the week day games in September, and I always enjoy those! So… Summer may be coming to an end, as along as September takes a long time to work through, I’ll be OK! All righty then, let’s get going on this Terrific Tuesday, the first day of September!

Source: More Baby Steps For A German Economic Recovery

Sales of existing homes rose for a third consecutive month in June to an annual rate of 4.89 million, which was better than the forecast of 4.84 million that most economists were expecting. May’s figure was actually revised down to 4.72 million from the original posting of 4.77, so the month on month rise came in much higher at 3.6% than the expected 1.5% increase. June is traditionally seen as one of the busiest months in the real estate market as families try to make the adjustment in between school years so it wasn’t exactly a surprise to see better than expected numbers.

Lower borrowing costs, foreclosure driven price declines, and tax incentives also contributed to these higher numbers. This is certainly good news to hear and I hope the bottom has already passed us by or is near, but as I mentioned yesterday, I won’t get too excited until unemployment gets back to a supportive level and the full backing of the consumer underpins this move. If anything, this may end up being a protracted bottom and a slow road to normalized levels.

We also had the weekly initial jobless and continuing claims released yesterday but was overshadowed by the positive housing numbers that came out. The initial jobless figure came in 30,000 higher than last week to 554k but continuing claims backed off a bit to 6.23 million from last week’s revision up to 6.31 million. Bernanke said earlier this week that job insecurity, together with declines in home values and tight credit, is likely to limit gains in consumer spending. With that being said, it still looks like we have plenty of breakers to get through before we reach the safety of calmer waters.

Today doesn’t bring us much in the way of reporting as the only data due out is the final printing of the U. of Michigan consumer confidence number for July. The preliminary figure was released a couple of weeks ago and fell more than forecast to 64.6 from June’s 70.8 reading. This generally isn’t a big market mover but its expected to settle in a tad higher at 65. This one is a tough call as the stock market has risen quite a bit in that time period but we’ll see if job and income concerns keep this month’s number grounded. Since this is all we get today, it will be interesting to see how much attention the markets give this report.

Just as we saw the Dow hit the 9000 mark for the first time since January and the euphoria of the housing market has gained momentum, well respected economist Nouriel Roubini, had a different take on things. In a report released today, concern was expressed that a perfect storm of fiscal deficits, rising bond yields, soaring oil prices, weak profits, and a stagnant labor market could blow the recovering world economy back into a double dip recession. He went on the to say that its getting more likely unless a clear exit strategy from the massive monetary and fiscal stimulus is outlined even before it is implemented. I guess the moral of the story here is to proceed with caution and buckle your seat belt because the ride could get bumpy.

Moving on to currencies, the Swedish krona and the Canadian dollar both posted 1% gains yesterday while the Japanese yen, New Zealand dollar, and Swiss franc rounded out the bottom. The two currencies at the top of the list had much different reasons for ending the day where they did as the krona traded higher primarily on the back of risk appetite. As investors feel more comfortable with buying riskier assets, the thinner traded currencies like the krona, benefit even though Sweden’s unemployment rate rose for a second month in June to 9.8%.

The Canadian dollar, on the other hand, rose to a 7 week high as the central bank said the recession is nearing an end brought on by higher commodity prices and consumer confidence. The central bank kept rates at the record low of .25% a couple of days ago and reiterated they will stay there for a while unless inflation becomes a problem. Since Chuck is across the border in Canada right now, it’s a perfect time to get our daily dose:

“I was reading the local paper the other day, and the business section had a big story on the Bank of Canada’s (BOC) Gov. Carney and how he vows he will intervene to keep the loonie from going higher… In the last two days since that story appeared, the loonie has done nothing but gain vs. the green/peachback… 91-cents it traded through yesterday! I can’t help but think that traders are beginning to believe that Central Bankers are imitating the boy who cried wolf… We had the Brazilian Central Bank, the Swiss National Bank, and now the BOC… They all are giving verbal warnings about traders taking their currencies higher…

The Central Bankers do this under the disguise of “we don’t want deflation in our economy” opting for the weaker currency to introduce inflation… I think this is all a smokescreen! I think this is a coordinated effort to keep their currencies from going hog-wild VS the dollar… The Central Bankers all know that the dollar is teetering, and without speed bumps we could see a mad exit for the door for dollar holders… Just what I think… Nothing more, nothing less… Just my thoughts… ”

Thanks again Chuck, its always great to get your insight. Since we’re already talking about central bank intervention, I saw a report today that has some looking for the Swiss National Bank getting back into the game. According to the Big Mac index, which is a purchasing power parity figure using the cost of a Big Mac as the measure, the Swiss franc is the second most expensive in Europe. Its just a fun little tid bit I thought would be good to break the monotony. Anyway, the Swiss franc is largely influenced by the euro and risk appetite so while the SNB may step in, there’s really no way to stop the moving train. As Chuck has said many times before, the markets have much deeper pockets than a central bank.

As I got to the office yesterday, the euro was hovering around 1.42 and climbed just shy of 1.43 to 1.4291 before we saw the profit taking drag it down to 1.4150 on my out the door. I saw a report where the euro had established a base at 1.4050 and calls to buy on dips, which is certainly a strategy that would be consistent with our views. As I touched on above, the Asian and overnight markets have run things right back to the levels from yesterday but as the European traders hand the books to those in New York before heading out for the weekend, the dollar is still getting sold. Don’t look now, but I see the euro at 1.4250…hopefully we can hold on to this and finish the week on a positive note. It looks like the euro is also getting some help from within as reports showed the contraction in European manufacturing and services slowed more than expected and German business confidence improved.

While I’m talking about Europe, we had some positive new come out of the UK as retail sales quadrupled the estimate and surprised the markets with a June gain of 1.2%. Year over year sales are actually up 2.9% and has economists looking for a near zero GDP figure in the second quarter. HSBC actually raised their forecast for the pound from 1.60 to 1.75 by year end 2010 and justified the call by saying the likelihood of an interruption in the asset buying program from the BOE could be as soon as next month. They also feel rates will rise before the Fed but this is a long way off and a lot can happen. Just like the US, I don’t see enough at this point to be comfortable buying this currency, but hey, we’ve been early on some calls too.

One of our newest multi-currency CDs, the Global Power Shift CD, has also been keeping the phones busy lately. With commodities and commodity based currencies leading the charge, it seems like we talk about at least one of them everyday, so I thought I would give it a mention. This CD combines the Australian dollar, the Brazilian real, the Canadian dollar, and the Norwegian krone into one instrument and just provides you with a little bit of everything…not a bad way to provide that hedge against a weakening dollar and gain exposure to commodities at the same time. Well, its about that time and I need to wrap it up so on to the big finish…

Currencies today 7/24/2009: A$ .8170, kiwi .6573, C$ .9214, euro 1.4230, sterling 1.6462, Swiss .9353, rand 7.7236, krone 6.2308, SEK 7.4710, forint 188.04, zloty 2.9538, koruna 17.9280, yen 94.86, sing 1.4407, HKD 7.7500, INR 48.2750, China 6.8316, pesos 13.1903, BRL 1.8991, dollar index 78.686, Oil $67.25, Silver $13.7850, and Gold… 952.86

That’s it for today…its your Friday!! I just wanted to send congrats toward St. Louis native Mark Buehrle, pitcher for the Chicago White Sox, as he became the 18th player to throw a perfect game…truly a remarkable feat. Our office has a team in a local kickball league so I wonder if our pitcher, Tim Smith, was able to match that performance…lol. It was a rough go this morning as the words just didn’t come all that easy for me but hopefully I was able to make some sense of it all. Alright, its really getting late so I need to get going here. Have a great Friday and a wonderful weekend…Until next time.

Source: Today’s Pfennig Friday, July 24, 2009

Good day… We had a very busy day on the desk yesterday, as our newest MarketSafe offering, based on the BRIC currencies, is making the phones ring off the hook. But while we were busy, the currency traders had another slow day as the dollar just drifted throughout the day. The return chart for the last 24 hours shows only one currency made more than a .5% move vs. the US$; and that was the South African Rand which increased .75%.

The markets were watching Ben Bernanke’s congressional testimony through most of the day, but those waiting for a surprise were disappointed. Bernanke stuck to the script which he had laid out the day before in the Wall Street Journal, and the members of the House Financial Services Committee couldn’t get him to commit to any ‘new’ stimulus programs. Bernanke said the economy is showing “tentative signs of stabilization” but the central bank intends to continue to maintain its “highly accommodative” monetary policy for “an extended period”. He indicated that the Fed stands ready to tighten policy, but only after the economic recovery takes hold and pressures holding down inflation diminish.

The Fed Chairman also reiterated his desire to keep the Fed independent from additional congressional oversight. As Chuck reported a while back, 275 legislators sponsored a bill to repeal the immunity of the central bank from audits of monetary policy. Bernanke said the bill would “open a Pandora’s box” for Congress’s Government Accountability Office to probe monetary policy. While I don’t necessarily think the folks in Congress are any more adept at handling the financial crisis (more on that later), I am a fan of opening up the books and letting the ‘owners of the government’, (the taxpayers) see just what all of their taxes are being spent on. Again, I’m not advocating that the Fed should seek congressional approval for every move they make, but I do think an after the fact audit is a good thing. I just get the feeling Bernanke and his pals are trying to hide something.

When pushed about this bill to audit the Fed, Bernanke pushed back at Congress and told them they need to cut the ‘unsustainable’ budget deficits. The Senate took a somewhat symbolic step toward this yesterday, by killing the F22 Raptor fighter jet program. If you hadn’t been following this, it is an excellent example of how spending can spiral out of control. Back in April, Defense Secretary Robert Gates decided, with President Obama’s backing, to scrap the program once it had delivered the 187 F-22s already in production. F-22 supporters in Congress ignored what the military wanted, and went ahead and budgeted another 2 billion dollars to continue production. I know 2 billion is next to nothing with the trillions that we have been talking about, but every little bit counts. If the US Government is going to get spending under control, they have to start somewhere; and killing a program that creates a plane that the military says they don’t need, and don’t want is a good first step.

Budget deficits aren’t the exclusive problem of the US. The Pound Sterling has been coming under some selling pressure lately as the UK budget deficit swelled to a record $21.4 billion in June. This was the largest monthly budget deficit ever recorded, and is increasing pressure on Prime Minister Gordon Brown to commit to a credible plan to cut spending. Recent data coming out of the UK doesn’t paint a pretty picture of the economy. Yesterday data showed that UK house price declines will persist until 2012, and another report predicted gross domestic product will keep falling until the final quarter of this year. BOE policy makers voted unanimously to maintain their asset purchase program in July, another sign that they still feel the UK economy is on shaky ground.

While the BOE and the Fed continue to use their reserves to purchase their own debt, China announced it would be looking to use its huge stash of cash to make purchase assets which have a bit more intrinsic value. A story in the FT yesterday stated that Beijing will use its foreign exchange reserves, the largest in the world, to support and accelerate overseas expansion and acquisitions by Chinese companies, according to Wen Jiabao, the country’s premier.

In an interview published in state-controlled media, the chairman of China Development Bank said Chinese outbound investment would accelerate but should focus on resource-rich developing economies. “Everyone is saying we should go to the western markets to scoop up [underpriced assets],” said Chen Yuan. “I think we should not go to America’s Wall Street, but should look more to places with natural and energy resources.”

This is a shot across the bow for the US, and a huge boost to countries which are commodity rich, including Australia, Brazil, and Africa. This is further evidence that China is looking to slow its purchases of US treasuries, and reduce its reliance on the US dollar as its reserve currency. Investments will focus not on monetary instruments, but on physical assets in resource rich developing economies.

This may account for some of the increase we saw in the South African rand yesterday. The South African rand is now the best performing currency vs. the US$ in 2009, with an increase of over 22.5%. The news will also benefit the Brazilian real which recently climbed to the highest in more than nine months as stronger earnings and higher metal prices bolstered the outlook for Latin America’s largest economy. The Brazilian real is the number two performer year to date vs. the US$, with an increase of approx. 21.5%. Anyone want to guess at #3 on the list?

It is the Australian dollar which has gained just over 15% vs. the US$ in 2009. Australia’s economy is performing better than expected, with GDP rising .4% in the first quarter, helped by consumer spending and increased commodity exports. Policy makers have left interest rates unchanged two weeks ago for a third month, but the bias seems to be shifting toward tightening rates. Australia could end up being the first of the major economies to start raising rates again, which would be a big boost for this currency.

The Bank of Canada will announce their rate policy today, and are expected to leave rates unchanged. Commodity price rebounds have helped push the Canadian dollar higher, and the loonie’s strength could threaten Canada’s nascent recovery. The big boss, Frank Trotter traveled out to Vancouver to join Chuck yesterday, and had this to report after his plane landed:

“Making the approach into Vancouver has always been a treat. This time, for my first time ever we landed to the west – drifting down down along the Fraser River Valley with Ranier on the left and the Olympic Peninsula in the distance affording a great view out to Vancouver Island across the straights. Once down I jumped in the cab and headed for the Agora Financial ‘Decade of Reckoning’ Conference.

“So are you guys picking up down south?” I was jolted out of my observation of the heavy traffic at 2pm. “Haven’t hit bottom yet I suspect” I replied to the cabby with an understatement. He told me that business was down, but okay. That restaurants were not full but they weren’t closing. That work continues for this winter’s Olympics, but everyone wonders if people will have money to travel. I’ll check in after hearing what some of the experts say at the conference over the next couple days; until then this is a pretty decent place to build a gulch.”

I look forward to sharing both Frank and Chuck’s views from the big Agora Financial Conference up in beautiful Vancouver.

As I mentioned in the opening paragraph, or new BRIC MarketSafe CD is proving to be extremely popular with investors. One reason is the tremendous upside potential of these 4 emerging market currencies without any downside risk. It also gives investors the opportunity to invest into the Russian ruble, a currency which we are not able to offer in any other investment. The ruble has shown some good strength vs. the US$ recently, gaining over 2% in the past 5 days. The ruble has rallied 16 percent in five months, as oil prices have climbed. While recent moves have been excellent, the Russian ruble continues to be a very volatile currency. The only way I would suggest individuals invest into this currency is with the downside protection provided by our MarketSafe CD.

Currencies today 7/22/09: A$ .8158, kiwi .6566, C$ .9064, euro 1.4216, sterling 1.6447, Swiss .9371, rand 7.7793, krone 6.2904, SEK 7.609, forint 191.15, zloty 2.9993, koruna 18.1720, yen 94.43, sing 1.4430, HKD 7.750, INR 48.5225, China 6.8313, pesos 13.286, BRL 1.8980, dollar index 78.897, Oil $64.80, 10-year 3.48%, Silver $13.475, and Gold… $947.40

That’s it for today… And for me the rest of the week. I am heading out to San Diego tomorrow morning for a family reunion. Mike Meyer will be Pfilling in for me and Chuck for the next two mornings. The phone calls are already starting up again this morning, so I’ll hit the send button and log into the phones. Hope everyone has a wonderful Wednesday!

Source: Bernanke Sticks to his Script

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. OK! Time to go, Mike’s here! I hope your Monday is Marvelous! Tell yourself that today will be a Marvelous Monday!

Source: China Is Back On The G-9 Docket

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!

Source: Increasing SDR Issuance

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!

Source: More Stimulus On The Way?

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!

Source: So Far… It’s A Turn Around Tuesday!

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.
*********************************************************************************

Source: Currencies and Commodities Sell Off

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!

Source: A Sustainable Economic Recovery?