Good day… And a Tub Thumpin’ Thursday to you! Let’s hope it remains a Tub Thumpin’ Thursday later today, as I head downtown to watch my beloved Cardinals play a day game! For those of you who are baseball fans, you know what I mean when I carry on about how baseball should only be played during the day!

OK… Before I get to the currencies, economies and the dolts in the world, I wanted to briefly talk about the SEC, who made an announcement yesterday that they had done an investigation of the Madoff audits, and did not find any fraud… Just mistakes… Really? Mistakes? That’s what they call them? Even Bernie Madoff himself says that he was “astonished” that the SEC failed to shut him down after interviewing him in 2006!

Well… The currencies, led by the euro, have scratched and clawed their way back to levels they traded at before Tuesday’s sell off… The European Central Bank (ECB) is meeting this morning, and while the markets are not expecting rates to move here, they are holding out hope that ECB President, Trichet, will announce that the economic growth expectations have been raised. So… With these thoughts going through the markets, it’s no wonder the euro is back to 1.43 this morning.

However, not knowing what Trichet might say, opens Pandora’s Box of risks for the euro… For if Trichet does not talk glowingly about the economic growth expectations for the Eurozone, the euro will be hung out on a line. So… Let’s hope, Mr. Trichet had a good breakfast, and is feeling spry today!

But for now, it’s all skipping in the sun for the euro… The ECB rarely ever ends their meeting before I hit the “send” button on the Pfennig, so… I guess we’ll take it all up tomorrow!

The euro isn’t the only currency that has scratched and clawed back against the dollar… Yesterday, I told you how the Aussie dollar (A$) was rallying on the back of a stronger than expected 2nd QTR GDP report… Well, now that the euro has joined in, the A$ is really making tracks higher, trading right now, within spittin’ distance of 84-cents…

And… Not to gloat or anything… But, let me go back to yesterday’s Pfennig and quote something I said… This is from the Pfennig 9/2…

“Talk about getting “dumped” that’s what happened to the Brazilian real yesterday… Yes, most of the currencies sold off… But real was really sold off! That makes some sense in that real had out performed most currencies this year, and therefore, the selling, or profit taking would be on a larger scale… I think this selling was overdone though, and I would look for the real to make an attempt to come back today…”

Well… Guess what happened yesterday? That’s right! The real came back with a vengeance! Yesterday morning the real was trading 1.9140… This morning it’s trading 1.8850! OK… It’s not that I’m auditioning for some kind of “spot trading” position… Geez Louise, no! I like to sleep at night! I just wanted to show that sometimes even a blind squirrel can find an acorn! (with me being the blind squirrel, in case that was confusing!)

The real, and not Brazilian real, but real winner in terms of moves VS the dollar yesterday were the Precious Metals of Gold and Silver… Kicking sand in the face of the dollar, and laughing! Gold and Silver are both stronger again this morning too!

There’s a great report going around by Frank Holmes, CEO and CIO of U.S. Global Investors. (NASDAQ:GROW) I had dinner with Frank Holmes in Las Vegas about 5 years ago, and run into him at conferences throughout the years… Any way… Frank Holmes put together a strong report on how September is the best month for Gold… “The gold price has risen in 16 of the 20 Septembers since 1989, by far the best success ratio of any month of the year.” My good friend, David Galland, has the full story in his daily letter from yesterday… I think you can sign up for it here… http://www.caseyresearch.com/casey-services/free-publications/caseys-daily-dispatch/

OK… Chinese stocks rose 5% overnight, and that has the risk takers coming out the woodwork! That’s quite a rebound for Chinese stocks. With all the talk going around about how it’s time to get out of stocks before the BIG sell off, one has to wonder if this isn’t akin to a star burning out… It’s burns brightest just before going dark…

The Swedish krona got hit with a blow to the mid-section yesterday when the central Bank (Riksbank) announced that they were going to keep rates at historical lows until the 3rd QTR of 2010! What? How can they say that? I mean I know, they open their mouths and begin to use their voice box… But what I’m talking about is what backs up what they are saying? How do they know that? What a bunch of dolts! I used to think the Riksbank was a good Central Bank, but this blows it for them! (Not that they will be worried that the Pfennig no longer believes them to be a good Central Bank!) So… These are the cards that have been dealt to the krona… Too bad…

So… The Fed is tossing around the idea of removing pieces of the stimulus… Treasury Sec. Geithner, a.k.a. the cheater, and not the song by Bob Kuban and the In Men from the 60’s! (if I recall correctly that was printed on the Pepsi label!) Any way, Geithner doesn’t agree and has stated that he believes it to be “too early” to exit stimulus strategies… Geithner is getting ready for the G-20 meeting of finance ministers and Central Bankers beginning tomorrow in London, and had this to say… “We’ve come a very long way but I think we have to be realistic, we’ve got a long way to go still.”

Well… That’s the most intelligent thing I’ve heard him say so far!

Hey did you see that bond king, Bill Gross of PIMCO, chimed in on this… “To the extent that we have had a trillion dollars worth of stimulus, from the standpoint of deficits, and more, the government basically has to continue to do that and to add to that in order to keep the economy chugging along,” he said. “To the extent that that’s limited, to the extent that they pull back on some of those stimulus programs — ‘Cash for Clunkers’ and those types of things — then the double dip moves into the realm of possibility.”

Yes… Double dipping… It’s my call for this economy… And I’ve said that for a lonnnnnnngggggg time now!

The OECD… The Organization for Economic Cooperation and Development, issued a report yesterday that says the global economy is emerging from its worst slump since WWII, and much faster than the OECD forecast just 3 months ago!

That’s nice…

You know… Whenever the currencies rally, the dollar and yen get sold, and vice versa… But… Sometimes, the yen rallies alongside its currency brothers, which is an indication of a real rout on the dollar. And that’s what we’ve got going on this morning… The Japanese yen has joined the “dark side” and is rallying alongside its currency brothers…

Well, yesterday’s data cupboard printed a stronger than expected Productivity number here in the U.S. So, doesn’t that make you feel better, that you probably had to work longer hours at the same wage, because 1 in 5 American workers are out of jobs, and you have to take up the slack? That’s the root of Productivity folks… Sure there are other things like technology, etc. but at the root… It’s all about you…

That’s why I don’t like this report… So now I’ve given it more Pfennig space than it deserves! UGH!

Today, we’ll see the Weekly Initial Jobless Claims as usual on a Tub Thumpin’ Thursday, and we’ll also see the color of the “services” piece of the ISM… Tomorrow is the Big Kahuna though, with the Jobs Jamboree for August…

Last week, I told you that the U.S. had to deal with another large amount of Treasuries to auction off… Last week it was $197 Billion… And no word of problems dealing with these… But, have you noticed that the 10-year yield, which just a few weeks ago was 3.80%, has fallen to 3.34%? Hmmm… I wonder how that happened? It means that the price of the 10-year has been rising, which would only happen if there was a truckload of buying… Hmmm… I had better go to the Big Finish here before I blow out a gasket!

Currencies today 9/3/09: A$ .8395, kiwi .6785, C$ .9090, euro 1.4310, sterling 1.6380, Swiss .9460, rand 7.7650, krone 6.0270, SEK 7.20, forint 192, zloty 2.8820, koruna 17.8720, RUB 31.67, yen 92.40, sing 1.44, HKD 7.7510, INR 48.91, China 6.8305, pesos 13.57, BRL 1.8850, dollar index 78.22, Oil $69.15, 10-year 3.34%, Silver $15.75, and Gold… $984.50

Chuck Butler

Source: Time to Remove Stimulus?

I’m still of the opinion that we’re not out of the woods yet. The 50-day moving average for gold has moved up three dollars from Monday and now sits at a hair over $841…and soon the 50-day m.a. will cross the 200-day moving average….which is an important point for some market technicians. I’m not expecting this correction to be deep, or very long…if it happens at all…unless the boyz have something special planned…like what they did to us last July. What we have now is an intermediate top with some cartel-inspired ‘backing and filling’. I’d be surprised if we saw a price below $825…except on a brief spike down. Whatever correction we have, I figure we’ll soon see new highs after that. My money is still ‘all in’.

click to enlarge

Despite Monday’s price correction, open interest was up once again in both metals. In gold, o.i. rose 4,889 contracts to 347,515. In silver, it was 871 contracts to 93,861. I don’t know what to make of that, unless the boyz are piling on the short positions before they really whack the prices. In the past, I’ve sometimes noticed that the boyz like to start a major take-down as soon as the Comex closes after Tuesday’s trading, so little or none of their subsequent activity shows up in Friday’s Commitment of Traders report. Then you have to wait a week and a half to see what they’ve been up to. We’ll find out in a few hours whether that’s their game plan or not.

In gold and silver news, the first story is from the Economic Times in India. It appears that there is some serious worry amongst bullion dealers about the fact that the Reserve Bank of India has not yet renewed anyone’s licence to import silver in 2009. Last year, both gold and silver import licences were issued together. This year they’re separate. Gold import licences have been renewed, but so far, not silver. India imports about 3,000 tonnes of silver a year. I’ll keep you posted if I hear anything further. And from the usual N.Y. commentator, comes this…”The European Central Bank’s weekly statement of condition indicated a rise of €1Mm (0.05 tonnes at the current book value) – said to be caused by a purchase of gold coin by one subordinate CB (Central Bank – Ed). This is, I believe, only the second time in the 9 year history of WAG sales agreements that an increase has been reported. Last week’s sale was 2.35 tonnes.” Lastly, I see in a story filed at marketwire.com that Central Fund of Canada completed its sale of 12.5 million Class A shares. This sale has raised their bullion levels to 1,049,328 troy ounces of fine gold…and 52,670,793 troy ounces of silver…give or take. Now let’s see how long it takes to get the silver they ordered. And this just in…the SLV ETF added another 2.5 million ounces yesterday…another record high. There was no change in GLD.

In ‘other news’, I note in a Bloomberg story that at the end of 2008, there were 19 million vacant homes in the U.S.A. “There were 2.22 million new foreclosures in 2008, an average of 6,090 a day, according to Washington-based Hope Now Alliance.” Based on a four-person family, this many homes would house all of Canada’s population more than twice over! In a marketwatch.com story, the headline read…”GM U.S. (NYSE:GM) sales fall 48.9% to 128,198 units in January”…”The automaker also forecast its North American production to total 380,000 vehicles in the first quarter–118,000 cars and 262,000 trucks, down 57% from the same quarter last year.” [It's hard to believe that these numbers are going to much worse as the year progresses...but they will. – Ed] And in a headline out of The Telegraph in London…”Let banks fail, says Nobel economist Joseph Stiglitz”…”The government should allow every distressed bank to go bankrupt and set up a fresh banking system under temporary state control rather than cripple the country by propping up a corrupt edifice, according to Joseph Stiglitz, the Nobel Prize-winning economist.” And lastly…Monday was Ground Hog Day…even here in Canada. New York Mayor, Michael Bloomberg, got bitten by the ground hog that he was holding up at a photo op. [Note to Michael: It could have been worse...just think of the alternative! – Ed]

click to enlarge

Today’s first story is from Bloomberg. In it, Eric Sprott, of Sprott Asset Management in Toronto says that the “U.S. Depression Will Boost Gold Price”…”Sprott, who manages $4.5 billion, said (last) March that the world was in a ‘systemic financial meltdown,’ a call that presaged the collapse of financial institutions including Bear Stearns & Co. and Lehman Brothers Holdings Inc.” The link is here.

And as further background to the previous story, here is the January edition of “Markets At A Glance” from Eric Sprott himself…and co-author Sasha Solunac. It’s a ‘must read’ and the title says it all “So You Think 2008 Was Bad? Welcome to 2009″. The link is here.

There were two stories on the following issue today. One from the Financial Times in London…and the other from the National Post in Canada. Both deal with the same issue…”U.S. set for ‘big bank’ financial clean-up” as the headline in the FT read. The story from the National Post is the story that I’ve selected. It’s written by Diane Francis and is entitled “U.S. dollar devaluation on its way”. The link is here.

In a story from the German newspaper spiegel.de comes this very related story. “The bailout packages aimed at shoring up financial markets in Europe are getting increasingly expensive. A creeping depreciation of currency is inevitable and state bankruptcies can no longer be ruled out. Could the euro zone also fall victim to the global financial crisis?” The headine reads “Iceland on the Thames: Can Countries Really Go Bankrupt?” and the link is here.

And lastly is silver analyst Ted Butler’s latest commentary. He reviews the shorting of the exchange-traded fund SLV and concludes that the market is not only manipulated, but tighter than ever. It’s entitled “Unfinished Business” and the link is here.

There’s a rumor going around that states cannot go bankrupt. This rumor is not true. – German Chancellor Angela Merkel

As the cartoon I used yesterday hinted at, it will be interesting to see what lipstick the Obama team will put on this rescue pig that’s coming out. Let’s face it, world governments and their associated banking systems are making things up as they go along. But “this time it’s Austrian”…and sometime in the next twelve months or so, there will only be a smouldering crater to show where the world’s current economic, financial and monetary system used to be…unless some country “goes for gold” along the way.

I suggest you do exactly that yourself…right now.

See you tomorrow.

Source: And Then There’s This…Wednesday, February 04th, 2009