It's A Risk On Monday!
Daily Pfennig

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In This Issue..

* Currencies recover from Friday sell off!                           
* Gold also recovers!                               
* RBA to meet tonight!                                     
* Canada to exit their recession?                                                                                            

And Now... Today's Pfennig!

It's A Risk On Monday!                                  

Good day... And a Marvelous Monday to you! I hope your Thanksgiving was special. I had a great time on my day off on Friday, as we went to the country and cut down our Christmas Tree. Quite early for us this year, but you have to take advantage of the "windows" of time when they pop open! I have to say something front and center this morning though... Last week when I would say we need to give thanks to groups of people, I missed out on something very special to me... My health... I'm thankful that I was allowed to fight cancer, and be around now when my little granddaughter, Delaney Grace is so darn cute!

OK... Front and center on the currencies this morning, we have the fears of a default in Dubai, fading, and that brings the risk takers back out... So, we had one day of bloodletting on Friday, and come Monday, it'll be alright, Come Monday, I'll be holding you tight, no wait! Come Monday, the tourniquet had been applied, and things are back on track. The Big Dog, euro is off the porch, chasing the dollar down the street once again, and is trading at 1.5050, as I begin to write this morning.

I had a long time customer send me a note on Friday, asking me about the selling going on in the currencies and commodities because of the news that Dubai World was asking for help with their loans... I replied that the research I had read led me to believe that this would fade, in that the ruling families of Dubai and Abu Dhabi have bloodlines, and even though they had feuded in the past, blood would run thick, and the country would step in to help with the loans, which would mean a return to dollar selling once it all got straightened out... WOW!

This morning, there is news that the U.A.E. will back the banks and the loans, so... It's a Risk On day once again!

After the Treasury auctions of last week, and a "supposed good covering" the end result is that we have this pile of debt, and Treasury yields very reminiscent of something right out of the time warp of Eisenhower! But! Here's the thing that U.S. Treasury Sec. Geithner is hanging is hat on... These low yields reduce the interest expense for the U.S.... Yes, Timothy, that my be true... But when you are issuing the amount of debt that's on your plate to issue, then the "net" reduction to interest expense is a fallacy... Go ahead, do the math, Timothy... I dare you!

Speaking of deficits... I know that the "Special Saturday Edition" of the Pfennig, ticked a few of you off... But let me be clear about something... I work hard to "educate" people about diversification, and the reasons they need to diversify a portion of their investment portfolio to currencies and metals. And when I'm going to go out on the road to do this, I want people to know about it. And I know of no better way to get that information out, than through the Pfennig! Besides, I thought I gave a great history lesson about deficits!

One thing that I left out though, and I don't do this when I speak on the road, is that the deficit spending of President Johnson, with the "great society" and the Vietnam War, was a real start to the deficit spending, but... That was during the time when the dollar was tied to Gold, so... I simply skipped ahead to when most people believe that the deficit spending began, in the 80's...

OK... Now back to the task at hand today... Can you believe that tomorrow is December 1st? WOW! Let the Holidays begin! But what comes to us on Dec. 1st, that I've been talking about for a month now? That's right, Johnny! You get a gold star today! It's the Reserve Bank of Australia (RBA) meeting. I've pinned my colors to the mast of another rate hike by the RBA tomorrow, and by the looks of it, Traders are beginning to pin their colors to that same mast! The reason I say that is the performance of the Aussie dollar (A$) overnight. The A$ has a 91-cent handle this morning, which is far better than that .8998 figure that Mike reported on Friday morning!

Before I headed home on Wednesday last week, Gold had pushed to a $25 gain in one day! WOW! I thought, can't wait to see what the price looks like on Monday when I return! But the Dubai loan problems took the wind out of Gold's sails, and the shiny metal lost $25 on Friday! UGH! Oh well, it gives buyers the opportunity to buy more at a cheaper level, I thought to myself... Then I said to myself, self... You should go check out what your good friend Addison Wiggin has to say about Gold... So I did!

Addison Wiggin from the Friday, Daily Reckoning ( "Gold is on track for its best monthly performance in a decade. The money metal reached $1,180 earlier this week, another all-time high.
There's buzz that India, which bought 200 metric tons of gold from the International Monetary Fund earlier this month, might well buy the rest of the 203.3 metric tons the IMF has put up for sale."

Then we had Gold Aficionado, James Turk, talking about Gold... Here's James Turk... "Don't be misled by what you may hear or read in the mainstream media, and even much of the alternative media," he writes.
"After all, how many commentators have correctly identified gold's bull market, now a decade old?" Or for that matter, how many correctly identified the tech bubble in the '90s or the housing bubble this decade?

"Gold has moved from apathy and neglect - stage-one characteristics - to growing attention. But importantly, instead of embracing gold and analyzing it to determine relative value, today's attention is one of widespread disbelief and skepticism that gold can climb higher. These are exactly the responses one should expect to emanate from stage two."

OK... Back to Chuck...

Great stuff from Addison Wiggin and James Turk, eh? I mean, Gold continues to be in strong demand... And why not?

I was sent a note by a reader last week regarding Brazil and the real... The sender asked me if the Gov't's plans to keep the real above 1.70 would hurt the real's chances of getting stronger VS the dollar? Well... I guess it depends on how badly the Gov't wants to fight to keep the real above 1.70... I mean it wasn't that long ago, that the Gov't and Central Bank said that they would do everything they could to keep the real above 2! (real is a European style currency which means as the number gets smaller, the stronger the currency gets VS the dollar)

So... Given the Gov't's and Central Bank's performance in their failed attempt to keep the real above 2... One would have to think that this announcement would only be good for a few days, and when nothing comes of it (like intervention), traders will get back to the business at hand, which is marking the real stronger VS the dollar!  Now... That's my opinion, but, it's based on facts of the previous statement by the Gov't and Central Bank!

The Brazilian Gov't did try a 2% tax on capital flows... But, that did little to stop the real's rise VS the dollar... So, now, we wait-n-see what the Gov't has in store for the markets and traders next...

So... I hear that European Central Bankers, Trichet and Junker, tried their best to persuade Chinese officials to allow greater flexibility in their currency, the renminbi... But... Their efforts fell on deaf ears, much like the efforts of U.S. lawmakers, Treasury Secretaries, and the President... These guys must like to travel to China, because they never get anywhere with their efforts to get the renminbi to float...

I saw / read a story on the Bloomie this morning regarding Swiss francs following the lead of the Aussie dollar (A$) and outperforming the rest of G-10 currencies. Francs this morning are so close to parity they can tell parity what flavor gum they are chewing! HA!

For years, when people thought of safe havens, they thought of Swiss francs... Through the years, especially since the euro came to be, the franc's safe haven status has faded... But, apparently not by much! For instance, Iran announced this past weekend that they would start 10 new uranium enrichment locations. (which is sort of like them rubbing the global community's nose in it, right?) and... The franc bumps up higher VS the dollar... So... Apparently, francs haven't lost all of their power of providing a safe haven, when things in the world look scary...

Gold is also a "safe haven" destination for many investors... And as I tell people when I'm out on the road... With all the nut cakes out there, shooting missiles, ramping up nuclear capabilities, attacking ships, running up deficits, and so on, there hasn't been a better time to seek a safe haven, like Gold...

Well... The Bloomie is reporting this morning, that while there were tons of "shoppers" out in force this past weekend to start the Christmas shopping season, there wasn't a lot of "sales"... Hmmm... That doesn't bode well for retailers, but, hey! They've still got time to cut prices even more!

Ok... The data cupboard gets restocked to the brim this week, and among the data prints we'll see the ISM (Manufacturing Index), Pending Home Sales, The Fed Beige Book, and others... But the real meat in this burger comes to us on Friday, when not only will we be moving our offices to our new digs next door, but... It will be a Jobs Jamboree Friday, when we get a look at the latest sex, lies and videotape by the Bureau of Labor Statistics (BLS)!

Canada will print their 3rd QTR GDP this morning... And while there are boat loads of naysayers about Canada's ability to exit their recession, I'm not one of them... And... I believe that Canada will join the club of countries that have exited their respective recessions... Talking about "clubs" makes me laugh, because I think of Lucy and Ricky Ricardo... "How many times do I have to tell you, Lucy, you can't come to the club!" HAHAHAHA!

To recap... The Dubai loan problems of Friday, have not gone away, but seem to have been more of an "overreaction" by the markets, due to the U.A.E.'s Central Bank announcing that they would provide liquidity at 50bp above the local three month benchmark rate and that it "stands behind" local and foreign banks.  Let's hope that's the case, eh? And The non-dollar currencies have rebounded from Friday's sell off.

Currencies today 11/30/09: American Style: A$ .9125, kiwi .7150, C$ .9455, euro 1.5030, sterling 1.65, Swiss .9980,  European Style: Rand 7.4265, krone 5.6650, SEK 6.9560, forint 182, zloty 2.7580, koruna 17.43, RUB 29.27, yen 86.20, sing 1.3835, HKD 7.75, INR 46.51, China 6.8272, pesos 12.91, BRL 1.7445, dollar index 74.70, Oil $76.06, 10-year 3.22%, Silver $18.18, and Gold... $1,170.20

That's it for today... WOW! What a great game Saturday for my beloved Missouri Tigers! They pulled a victory from the jaws of defeat against heated rival, Kansas! Now, the Tigers wait to see what bowl they go to, and who they'll play. If it's in a warm part of the country, I'll probably see if I can go! Saturday it was 73 degrees here... Sunday it was 40! I was helping my little buddy, Alex, with his Christmas display, and lighting, Saturday, and had to discard the sweatshirt, down to a T-shirt! Little Delaney Grace, was quite impressed with all the lights! I over did it this weekend though, as I was up most of the night with pain in my knee! UGH! Oh well, I carry on! December will bring parties, and "shopping", and decorating the house... I just love it! So... Good bye to November, it wasn't as bad a month as in the past, weather wise, so, I've got that going for me! HA! Elvis is on the radio singing "Blue Christmas"... I guess I had better get going... So I hope your Monday is Marvelous!

Chuck Butler
EverBank World Markets

Posted 11-30-2009 9:17 AM by Chuck Butler