The Boy Who Cried Wolf? NOT!
Daily Pfennig

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In This Issue..

* Currencies rally in early morning Wednesday               
* But see selling the rest of the day.           
* German Consumer Confidence surprises...                              
* GDP to be revised downward?                                                                     

And Now... Today's Pfennig!

The Boy Who Cried Wolf? NOT!                     

Good day... And a Tub Thumpin' Thursday to you! I get knocked down, but I get up again, you're never gonna keep me down... Yes, a little Tub Thumpin' this morning... I'm all geeked up because I'm sneaking out to go watch Chris Carpenter pitch for the Cardinals this afternoon! A day game... YAHOO!

OK... Enough of that! Well, another day where the currencies bumped higher early morning, but then were sold the rest of the day. I know the currency guys (and gals) are all wonder where do they go from here... Which is the way that's clear? Well... Short term currency forecasts are proven to be wrong, most of the time... Long term? Well, that can't be argued... The deficit spending, the money creation, and the monetizing of debt will all come back to haunt the dollar... And as Aaron said yesterday, "we've only just begun"... (he was telling a joke), it holds true for the U.S. deficit spending picture...

I know, you all are beginning to think I'm becoming the boy who cried wolf, when it comes to these warnings about deficit spending, and where it will take the dollar in the future. But... I was thinking about an interview for the Oxford Club yesterday... I told them that since Feb 2002, the dollar, as measured by the dollar index, is down around 40%, and against some other currencies that aren't a part of the dollar index, the dollar has lost even greater amounts. And the precious metals of Gold and Silver? They are off the charts when it comes to their gains VS the dollar in that same time period...

And why did all that happen? Because of Deficit Spending... So... I'm not really the boy who cried wolf... Back in 2001, I wrote a White Paper called "The Decline of the dollar"... In 2002, I wrote a White Paper called "The year of the euro"... So... You can see that I was warning people way back then... And what has happened in 8 years? The Deficits have gone off the charts! That's what's happened! I told you yesterday that the Budget Deficit is going to add (at least!) $9 Trillion to the national debt, which will put us way over the $20 Trillion national debt mark! UGH!

So... Go ahead and mock me... Go ahead and call me names... But, this is my story and I'm sticking to it!

OK... Now... Yesterday, the U.S. economic data printed some pretty good looking data... Durable Goods orders (fueled by airplane orders, which won't happen again next month), and the housing numbers shined a bright light on the U.S. economy... In the past 6 months, whenever the U.S. data was good like it was yesterday, the dollar would get sold like funnel cakes at a State Fair. But that didn't happen yesterday... It started out that way, but an announcement by China really threw the cat among the pigeons...

China announced that they were going to prevent further excess capacity in several industries, including steel and cement... You see, China is afraid that the markets are getting ahead of themselves, and they don't want their economy to overheat before it really gets legs under it! Pulling back on the reins if you will... And I don't see that as a bad thing, especially for an economy that can take off on a moment's notice like China.

Unfortunately though, the markets took this as armegeddon... It was the Hindenburg all over again... Oh the Humanity! China is going to put a governor on their economy while the rest of the world attempts to play catch up! What a bunch of dolts, these guys are that are calling for an end of the global recovery because of this news... So... The currency that acts as a proxy for global growth... Aussie dollars, took one to the gut... But before the upper cut from the markets could hit the A$ on the chin... A good piece of data printed in Australia, and it blocked the upper cut... But still battered and bruised, the A$ carries on...

Private capital expenditure, in Australia, surprised significantly to the upside in the 2nd QTR at +3.3%, which was much greater than the forecast (-.5%). Plant and equipment components  rose by a strong 5.3% while spending on buildings was up by 0.7% in the quarter. This is all good stuff for the Aussie economy... The Plant and Equipment components, I'm told, feed right into the national accounts measurements... So, one would have to think that would boost Aussie GDP!

In Germany this morning, Consumer Confidence followed the positive prints of Investor Confidence and Business Confidence, with a positive print of its own! German Consumer Confidence rose to a 15-month high, thus telling me that economic pessimisms are being chased out of town! And as I said yesterday, perception or sentiment toward an economy is half the battle folks!

OK... You know how I always tell you that the Unemployment Rate, as reported by the Bureau of Labor Statistics (BLS) has games played with it, and as a result it is too low? I've said as recently as last month that the Unemployment Rate is probably closer to 20% than it is 10%, that the BLS reports... Well... What do we have here? Ahhh... A Fed Head, Lockhart, that must be reading the Pfennig!

My public relations guru, Peter, sent me this overnight... Thanks Peter!

"If one considers the people who would like a job but have stopped looking -- so-called discouraged workers -- and those who are working fewer hours than they want, the unemployment rate would move from the official 9.4 percent to 16 percent, said Atlanta Fed chief Dennis Lockhart.

He underscored that he was expressing his own views, which did "do not necessarily reflect those of my colleagues on the Federal Open Market Committee," the policy-setting body of the central bank."

OK... If a Fed Head thinks the Unemployment Rate is 16%, then the actual number is probably closer to my 20% number than he's admitting! WOW! I can't believe that a Fed Head had the intestinal fortitude to call the Unemployment Rate out, as the fraud that it is!

I'm still taken back by this admission by a Fed Head... Oh well, time to go to other things, Chuck, no need to hang around here all day!

Well... Did you hear the news, there's good rockin' at midnight? No wait! The news that for the first time, it has become less expensive to borrow in U.S. dollars than in Japanese yen. Can you say... Dollar, Carry Trade? I thought you could...

And in a follow up from what I reported the other day, regarding the Judge demanding that the Fed disclose the borrowers of the $2 Trillion in loans made, The Fed asked judge Preska to delay enforcement of the decision until an appeals court can act on the central bank's yet-to-be-filed appeal. Yvonne Mizusawa, the Fed's senior counsel, said financial institutions as well as the central bank will suffer irreparable damage if loan-program details are disclosed publicly.

You know... If Ron Paul's bill to audit the Fed Reserve would get the support it needs and is worthy of, then we wouldn't have to go through all this legal stuff... I just don't see how a cartel that was created in 1913 as supposedly a central bank, and independent corporation, can't be audited... They make decisions that affect you, me and the man down the street...

OK, enough of that... Every time I head down the cartel's, I mean the Fed's road, I begin to pound on the keyboard, and curse under my breath!

Today, the data cupboard will yield, the usual suspect of Weekly Initial Jobless Claims, but also a 2nd printing of the 2nd QTR GDP, which printed the first time at -1.0%... The revision is expected to show a downward print to -1.5%, which I believe will reflect the reporting of a huge drawdown of inventories during the 2nd QTR...

That would play well with my thought that I told you about a long, long time ago... And that is whenever it is that we begin to get out from under this depression rock, inflation will be fueled by the fact that there will be consumers attempting to buy things once again, but no inventory on the shelves of corporations...

Hey! Did you see where Eurozone M3, money supply, continues to come down, printing a softer than expected 3.4% growth in July. So... You can see that the stimulus is beginning to get pulled back here... But, before I slap them on the back for bringing their money supply into the atmosphere... 3.4% is still HIGH! And when converted to inflation, would be way over the 2% target ceiling for inflation in the Eurozone... So, there's more work to do here!

So... Let's hope the mental giants that took the Chinese announcement yesterday the wrong way, realize the error of their thinking, and reverse the direction they took the markets after the announcement...

And on the that note, I'll head to the Big Finish! You will notice, or maybe you won't, that I've added Russian Rubles to the Currency round-up, since it is part of our BRIC MarketSafe CD... It will be RUB...

Currencies today 8/27/09: A$ .8330, kiwi .6815, C$ .9120, euro 1.4265, sterling 1.6190, Swiss .9365, rand 7.8710, krone 6.0625, SEK 7.1230, forint 188.40, zloty 2.89, koruna 17.8325, RUB 31.66, yen 93.60, sing 1.4440, HKD 7.7510, INR 48.92, China 6.8318, pesos 13.14, BRL 1.8610, dollar index 78.56, Oil $71.06, 10-year 3.46%, Silver $14.26, and Gold... 

That's it for today... I'm running late, as I overslept this morning... That rarely happens to me, but I just turned off the alarm and went back to sleep! Of course it still was just me and the truckers on the highway to work this morning, after I headed out the door 45 minutes later than usual... Well... Torn cartilage is the reading from the MRI on my knee... Same thing as I had "scoped" on my right knee in 2003. This seems to be much more painful though, I guess because I lean on that leg more since my right leg was taken apart and put back together again! Hey! At least it was just "torn cartilage", I still have fresh in my memory bank the results of when I thought I just had torn a hip flexor! OK... Gotta get this out the door... Get set up for trading, and then to Busch Stadium to watch Chris Carpenter and my beloved Cardinals! I sure hope it remains a Tub Thumpin' Thursday!

Chuck Butler
EverBank World Markets

Posted 08-27-2009 10:49 AM by Chuck Butler