Silence Is Golden...
Daily Pfennig

Blog Subscription Form

  • Email Notifications


..But First, A Word From Our Sponsor..
Gain exposure to currencies of emerging BRIC countries-and don't lose a dime on market risk

Don't let market risk get in the way of potentially rewarding exposure to the BRIC currencies. Our 3-year MarketSafe® BRIC CD shields you from any market risk and provides 100% principal protection on deposits held until maturity.

* 4 BRIC currencies: Brazilian real, Russian ruble, Indian rupee, Chinese renminbi
* High upside potential
* No market risk to deposited principal
* Low $1,500 minimum deposit

Some experts believe these 4 countries may become economic powerhouses in coming years. Now could be the right time to add these currencies to your portfolio. And you can do so-safely-with the U.S. denominated MarketSafe BRIC CD.

Don't miss this unique opportunity. Deadline to buy the BRIC MarketSafe CD is Dec. 3rd, 2009. Apply today or learn more at

In This Issue..

* A HUGE dollar sell off overnight...                          
* BLS admits the Birth/Death model was wrong...                              
* The 20th anniversary of the fall of the Berlin Wall...                                     
* Kiwi is best performer overnight...                                                                                       

And Now... Today's Pfennig!

Silence Is Golden...                                

Good day... And a Marvelous Monday to you! A Spectacular weekend, weather wise, here in the Midwest... And Indian Summer, is what my dad would have called it. The news from the Sports teams wasn't so spectacular, but we had the weather going for us!

Welcome to Monday's edition of A Pfennig For Your Thoughts... I'll start off today with a note about the currencies, then do a recap of Friday, and then a look ahead to the rest of the week... So... Strap yourself in, and make sure to keep your arms and legs inside at all times during the ride!

I checked the currencies last night, as is my tradition of taking a peek at the Japanese open... And the dollar was getting sold... I thought to myself, self... I bet G-20 got things going here! And then this morning, when I turned on the currency screens, I saw that the dollar really got sold overnight, and in the morning session of Europe. The Big Dog, euro is flirting with 1.50 again, the Aussie dollar (A$) is flirting with 93-cents, and the Swiss franc is not only flirting, but holding hands with parity against the dollar!

So, what's behind this big move in the currencies VS the dollar? Well... The move has been fueled by G-20... And it's not anything that the G-20 members said... In fact, G-20 said nothing, nada, zero, zilch, a great big goose egg, on the currencies... Traders are taking this to mean that the G-20 member nations don't have a problem with the weak dollar, and that's akin to giving them the green light to sell the dollar further... Proving once again that Silence is Golden... (to non-dollar currency and precious metals holders!)

I had said in one of my recent videos that I do for the Sovereign Society and my "paid for" Newsletter, The Currency Capitalist, that I truly believed that the weak dollar and the rise of the non-dollar currencies would be a "hot topic" at the next G-20 meeting... So, I was wrong with that thought... So, since G-20 was given the reins of the currencies, they haven't said a word... I find this to be very significant folks... You know, it's not like if G-20 said the dollar's fall was too deep, they could do anything significant about it... But the fear of something would be enough to wrap a tourniquet around the dollar's bleeding. But... They didn't! And so we go on with the dollar selling, which in reality is what the U.S. Gov't really wants anyway! A general slow depreciation of the dollar is the way the Gov't would like to see the trading go...

So... There we have it! A non-dollar currencies rally, that's wrapped around G-20's silence on the weakness of the dollar.

Friday... We saw the Jobs Jamboree, really surprised on the "good side" of the job losses which according to the BLS (Bureau of Labor Statistics) was "only" 190,000 for October... Now, that's quite the fall from the +500K job loss months we saw 6 months ago... The Unemployment Rate, however, spiked to 10.2% in October... The first time the Unemployment Rate has been above 10% since the recession of the early 80's...

And then there was this, regarding Job losses... Chris Manning of the BLS stated last month that payrolls were overestimated in the twelve months ending March by 824,000. The source of this error was the birth/death model. BLS used "plug" numbers for the number of births and deaths. These "plug" numbers were wrong. They led to estimated positive contributions to employment that were too high. Most of the error (675,000 out of a total 824,000 jobs) occurred in the first quarter of this year. The birth/death model was adding significantly to payrolls when all other payrolls were falling. In reality the contribution from net births and deaths was in fact negative.

How long... has this been going on? (A great old song!) But, haven't I ripped this Birth/Death model for years now? And here you go! Even a BLS employee says they were wrong to add these jobs!

So... The question is when do this job losses get posted? Well... I don't think you'll see that folks... It's just the way the Gov't does things... Hides them, cheats you, and then says, "we made a mistake" and goes on about their business of hiding and cheating you!

Oh... And one more thing here regarding the Jobs Jamboree...  According to BLS, payrolls fell at a 188,000 a month rate over the last three months. But their own household survey says employment fell at a 589,000 a month rate.

I shake my head in disgust... But, shoot Rudy, we all know how "the game is played" so, we just adjust our numbers and go on...

So... I guess you heard that the House passed the Health-Care Overhaul Bill this past weekend... I'm not going to go into this for this would be a "hot button" for a lot of people... I just want to know what this is going to cost, and don't believe anyone in the Washington D.C. that tells you that it won't cost anything! Their track record on that stuff is horrendous! Which also means that if they tell you it's going to cost $1 Trillion, it's going "really cost" double or triple that!

So, we just keep adding on to our deficit, folks... The people in D.C. are so worried that they need to spend more, instead of reducing spending... I really think that anyone that voted for this new spending program, needs to get "fired" the next time their term is up...

OK... Enough of that! The Data Cupboard is empty today, and doesn't really get re-stocked with Tier 1 data until Thursday... So... The data isn't going to help the dollar out the front-end of this week.

The IMF issued a report this past weekend that isn't helping the dollar... The IMF said that there are "indications that the U.S. dollar is now serving as the funding currency for Carry Trades" was one of the things that hurt the dollar... The other thing was that the IMF felt that the dollar was still "overvalued"... Which in anybody's book means it can fall further!

The IMF also said that the euro had "experienced the most appreciation among major advance economy currencies and that it remains on the strong side of its equilibrium."

Hmmm... So... First it was the silence by G-20, and then the slap in the face by the IMF that has the dollar on the run this morning... I wonder what direction this will go once the New York traders arrive at their desks, and see what the overnight markets have done to the dollar... My guess is they will first take some profits, and then add on to the dollar's woes... But that's just a guess, who knows what those "fickle" traders will do!

So, like I said above, the euro, A$, Swiss are all moving higher VS the dollar... But the "winner" for best performing currency overnight is the New Zealand dollar / kiwi! At one point overnight, kiwi traded at 74-cents... It has since given back some ground, but the move overnight was impressive! Kiwi got a nice bump when Dairy Giant Fonterra raised their forecast dairy payout... With farmers' incomes representing .7% of the GDP, this was good news for the economy, and thus the thoughts begin to switch to a rate hike by the Reserve Bank of New Zealand (RBNZ), which just last week was downplaying any such rate hike... This might change their mind...

Today is the 20th anniversary of the fall of the Berlin Wall... That was HUGE in our lifetime wasn't it? I'm reminded of President Ronald Reagan telling the Communists 2 years earlier to "tear down this wall"...

And... Chris Gaffney left me this note from Friday...

"The government extended the first time homebuyers $8,000 tax credit on Thursday.   While this tax credit was intended to help alleviate the glut of housing left by the credit crunch and resulting downturn, housing analysts have found the tax credit did little for home sales. Between 80 percent and 90 percent of the people who have bought homes using the credit would have purchased those homes without it.  Sounds a lot like the cash for clunkers program; Taxpayer money wasted in order to try and make the data look good in the short term. 

But not only did they extend the first time homebuyer's credit, they also approved what I think is a really stupid addition.  The expanded program introduces a $6,500 tax credit for people who already own homes but want to buy new ones. Unlike the cash for clunkers program, the old homes which these buyers now occupy will not be destroyed; they will be placed onto the market.  So what does congress think this $6,500 credit is going to accomplish??  It isn't going to decrease the number of homes on the market.  It will help the banks, title companies, and mortgage lenders, who make money on the transaction.  But it won't help the homeowners who are facing foreclosure, or the taxpayers who don't take advantage of."

Yes, Chris... That's what's going on here... And again, people are still wondering why China has such a problem with the direction of the U.S. and our deficit?

And Gold... The shiny metal reached $1,100 on Friday... And with the dollar weakness overnight, Gold has moved even higher... I know it sure seems to be that Gold has moved really quickly through the $1,000 level, and it did! I'm still waiting for the "correction" to buy some more... But, right now, it looks like that correction might not every materialize!

Speaking of this... I'm also still waiting for a decoupling of the risk assets... Getting back to the fundamentals... It could be happening right now, folks... We can only hope!

And then there was this... I received an email the other day from a reader, who said to me that he thought I enjoyed seeing these things happen in the U.S.... WHAT? I do not revel in these things I talk about... I merely point out what I think will happen given a tax cut, or more deficit spending, or protectionism, etc. It doesn't take a rocket scientist to figure these things out! And... Besides... I live here, my kids live here, my granddaughter lives here... I think in some way that as long as I point these things out, and ways for people to profit from them, that I'll make things better for them...

Ok... That was good to get out of the way this morning... Let's go to the recap and then the Big Finish, eh?

To recap... G-20 was silent about the currencies and weak dollar, which has given traders the green light to sell the dollar further. The IMF didn't help the dollar either, saying that the dollar was still "overvalued". The BLS admitted the Birth/deal model had made HUGE errors in the past years, and

Currencies today 11/9/09: American Style: A$ .9280, kiwi .7380, C$ .9280, euro 1.4990, sterling 1.68, Swiss .9395, European Style: rand 7.43, krone 5.62, SEK 6.87, forint 181.75, zloty 2.8140, koruna 17.0975, RUB 28.7525, yen 89.90, sing 1.3850, HKD 7.75, INR 46.4475, China 6.8263, pesos 13.34, BRL 1.7045, dollar index 75.10, Oil $78.44, 10-year 3.51%, Silver $17.71, and Gold... $1,108.40

That's it for today... A tough weekend for our football teams... My beloved Missouri Tigers lost again, while the undefeated high school Flyers and the 8th grade Flyers became undefeated no more... UGH! Oh well, on to wrestling for my little buddy, Alex! I took my beautiful bride to see an old band mate of mine Saturday night! Old buddy, Preston, was still quite the showman on stage, with his drums! The band sounded great! My spring training buddies, made tentative plans for our annual trip to Jupiter on Friday... 16 weeks till pitchers and catchers report folks... And with that... It's time to see what's on my desk from Friday, and get going on today's trading! I hope you have a Marvelous Monday!

Chuck Butler
EverBank World Markets

Posted 11-09-2009 9:27 AM by Chuck Butler
Related Articles and Posts