Consumer Confidence Drops!
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In This Issue..

* The dollar continues to hammer!                     
* Jim Rogers on the dollar rally...                            
* C. Fred Bergsten talks of a dollar alternative...                                       
* Lord Monckton's thoughts...                                                                                       

And Now... Today's Pfennig!

Consumer Confidence Drops!                             

Good day... And a Wonderful Wednesday to you! It's still raining here... Quite frankly, I don't know how people that live in rainy areas do it! I don't mind rainy days, as long as they are sprinkled in with the days of sunshine!

Well... The dollar rally that began for a number of rumored reasons continued on yesterday... Remember when I said on Monday that the data this week should show us that the economy is healing somewhat, which would be bad for the dollar? Well, that thought got cold water thrown on it yesterday when Consumer Confidence surprisingly declined last month...

You know how I like to question just what people that were surveyed for this Consumer Confidence report are so confident about? Well, apparently, the Conference Board surveyed the wrong people this month! Consumer confidence in the U.S. declined in October to 47.7 versus expectations of a 53.5 reading. Both consumers' perceptions of current conditions and their expectations for the future declined. Hmmm...

So, Consumer Confidence is fading this month? That sure wasn't the outcome I was expecting... Sure, I would have questioned the dolts that were confident as people that obviously had no idea what was going on, but still, these people that get surveyed had not allowed negativity to enter their minds before, why was this month different? Maybe... Just maybe, people are waking up to smell the coffee that's brewing... And with that I mean, the deficit situation here in the U.S. and all the games the Gov't, the Fed, and Treasury are playing to pull the wool over our eyes... You think? Do you really think that's the case? Because if it is, then the next step is to stand up and shout out loud that you want Government to stop spending! Shout it, Shout it, Shout it out loud! And if they won't listen to you, fire them the next chance you get!

So... The dollar continues with this rally that began Monday mid-morning... One of our fave old friends, Jim Rogers was in the news last night... Let's listen in to what Jim had to say! "Everybody is pessimistic on the dollar, whenever you have everybody on the same side of the boat, you know what you have to do. We may have a rally in the dollar, a decline in Commodity prices or stock prices for a while." He went on to say that while there may be a rally in the dollar, it won't be "sustainable"

He also said something that goes right along with my "Treasury Bubble Story"... Rogers said, that he "certainly wouldn't be buying U.S. Treasuries, and couldn't imagine lending money to the U.S. government for long periods of time."

You know what? I don't think I could imagine that either! So... One has to wonder, just when the Chinese and Japanese begin to feel this way? It's not like we've spent the money and won't have a need to borrow again... The Gov't is finding new ways to spend money! The Budget Deficit is forecast to be $9 Trillion for the next 9 years! And that was before the Gov't got their hands on these "new ways to spend money"!

And getting back to what Jim Rogers said in about the dollar... Isn't this the same thing I've been warning about for a couple of months now? So, this shouldn't sound like anything new to Pfennig Readers... I've warned that the stock market was overbought, and that the U.S. economy was going to do a double dip, which would cause stocks to sell off, and that stocks would probably drag the other risk assets of non-dollar currencies and commodities along with them...

But again, this kind of move, just like the one in 2005, and the one from July 2008 to Feb 2009, will not be sustainable! There's trading themes, and there's trends that are moved by fundamentals... The fundamentals will win out eventually... And when the markets get all the excesses out of their system, the fundamentals will be there like that navy suit... Always in style, always dependable, always there for you!

This next story is very interesting indeed... Here's the skinny... C. Fred Bergsten, the former Treasury executive, is warning that dollar deficits might no longer be funded by foreign nations, including China! He also wrote in the current issue of the Council on Foreign Relations' Foreign Affairs magazine that he would recommend that the White House join with the international community in creating an alternative to the dollar for international trade... What? Are you kidding me?

This is not a joke folks... This is a real person, that is well respected... And he's telling the White House to help create an alternative to the dollar for international trade? That's like telling the fox he can guard the hen house!

That story leads me to this one... Quite a few readers have asked me to talk about this and while I wasn't sure I would, because it's so political, it now plays well with story I just told you about!

Have you heard of Lord Monckton? Well... He gave a speech in Minnesota last week, that you can find on U-Tube. In the speech he says that he has read the global climate change bill, and that if our President signs it, he will be signing away our sovereignty, our prosperity, our freedoms, for global rule...

So... We have the global rule rumors and the global currency rumors back to back! I'm not here to debate what Lord Monckton said, for all I know he's bang on with this thoughts... My thing is to point out that there's smoke... And you know me... Where there's smoke, there's fire...

Is this the method the U.S. will use to get us from beneath this deficit rock? I certainly hope not! And that's all I'll say about that!  Now at least!

Remember my rant about allowing bad corporations to fail and not bailing them out? Well, I took a lot of heat on that one from some readers that didn't agree, and that's OK... But to my point... GMAC Financial Services and the Treasury Department are in advanced talks to prop up the lender with its third helping of taxpayer money.

The U.S. government is likely to inject $2.8 billion to $5.6 billion of capital into the Detroit company, on top of the $12.5 billion that GMAC has received since December 2008.

Another example of throwing good tax payer money at bad money...

Remember last week when I told you about the Pay guy (I refuse to call him a Czar!) was getting the Gov't involved in pay cuts for the bailed out firms? Hmmm... It was reported yesterday by the Wall Street Journal that while he cut total compensation by half, he substantially increased one important element -- regular salaries, according to a Wall Street Journal analysis. The move reflects the complexity of regulating something that mixes politics and economics. Yes, indeed it does!

So... I've gone on and on this morning about what we have to look forward to in our future (near?)... What about what's going on today? Well... As I said yesterday, Norway's Norges Bank will announce a rate hike this afternoon... They will be the first European Central Bank of raise rates, and the third overall Central Bank to raise them. We all know that the Reserve Bank of Australia (RBA) raised rates first... But who was second? Ahhh... In a not so publicized move, the Bank of Israel raised rates second!

Norway is experiencing accelerating home prices and the Norges Bank has to step in before another housing bubble gets started. No, the Norwegian economy isn't going great guns, but the recovery is going on, and a rate hike here would probably nip the housing price acceleration in the bud... The question remains of will the Norges Bank be aggressive with the rate hike and go for 50 Basis points (1/2%) or just 25 Basis Points (1/4%)? If they have any intestinal fortitude they'll go for the 50!  But the markets expect them to be gradual about their approach to raising rates... And so, 25 BPS will probably be the announcement this afternoon.

Gold has really gotten the snot knocked out of it recently... Gold is trading more than $30 per ounce less than it was 10 days ago! And this plays well with the comment above about risk assets being dragged down by stocks... You know my thoughts on price drops in Gold... Need I say more?

And then there was this... Just when you thought the yield on the 10-year Treasury was going to keep moving higher... An invisible hand sweeps down and knocks the yield back 10 Basis points! Well... In this case, it's probably more "safe haven buying" driving the price up and the yield down, than it is hanky panky from the Fed... You would think that anyone that played this "safe haven" game before and got burned badly would not go down that road again... But... Maybe they didn't even realize that they took losses on their "safe haven" purchase! HA!

To recap... The dollar is on the warpath, as a drop in Consumer Confidence in the U.S. has investors dumping risk assets again. C. Fred Bergsten, former Treasury official, recommends the White House to participate in forming a new alternative currency for international trade  and dump the dollar, and we talk about Lord Monckton's speech about the climate change bill... Norway will raise rates today, and safe haven buying seems to be on the docket once more.

Currencies today 10/27/09: A$ .9035, kiwi .7335, C$ .9315, euro 1.4780, sterling 1.6325, Swiss .9785, rand 7.7610, krone 5.7190, SEK 7.0425, forint 184.75, zloty 2.8830, koruna 17.8380, RUB 29.29, yen 91, sing 1.4015, HKD 7.7507, INR 47.35, China 6.8281, pesos 13.26, BRL 1.75, dollar index 76.24, Oil $78.86, 10-year 3.43%, Silver $16.46, and Gold... $1,033.05

That's it for today... Well... Thanks for all the kind notes regarding my cancer update... The did find the problem in my left leg... I have a blood clot! UGH! I'm not taking this one as well as I did the one in my right leg after my surgeries! But, we'll get it dealt with, and move on... I know that some of you don't like these health updates, but many do... I forgot a trip when I was talking about my upcoming travel yesterday... At the end of January I'll be heading to San Antonio... Time to batten down the hatches once again... And the World Series starts tonight... Good thing Colorado didn't make it to the World Series, they would be "snowed out"! OK... Time is here today... Time! I hope your Wednesday is Wonderful!

Chuck Butler
EverBank World Markets

Posted 10-28-2009 9:22 AM by Chuck Butler