A Relief Rally!
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In This Issue.

* Euro sees some healing.

* China posts strong manufacturing data.

* Australia & Canada post softer GDP reports.

* Fed has to reveal recipients of $3.3 Trillion!

And, Now, Today's Pfennig For Your Thoughts!

A Relief Rally!

Good day... And a Wonderful Wednesday to you! And. Welcome to December! One of my fave months, because of the warmth, and good will that everyone has. The decorations, the gussied up houses, the gathering of friends and family. the sparkle in a child's eyes. I always read "the Night Before Christmas" to my darling daughter, Dawn's kindergarten class. the excitement that those kids have, always puts me in the "mood". Dawn is on maternity leave this year, so I won't be reading to her class, and I don't think it would be the same reading to son Andrew's High School kids. I'll have to find it somewhere else this year, but I'm sure that having Delaney Grace around it won't be difficult!

Watch out today at noon, eastern time. That's when the Fed / Cartel, is going to post on its website, just who were the recipients of $3.3 Trillion in emergency aid back in 2008, during the financial crisis. The Cartel, or "Bernank" has fought to hide this information, but one of the items in the financial overhaul regulations makes the "Bernank" comply with the demand to disclose the recipients.

I find this to be interesting. but 2 years later? Wouldn't it have been "real news" to know 2 years ago? But then, that's just me. I don't like being told 2 years later, that a certain Corporation was about to collapse, but the "Bernank" saved them. UGH!...

Ok. well. it looks as if we're seeing a "relief rally" if you will in the currencies. The euro is back to 1.31 this morning, after visiting the 1.29 handle yesterday morning. It seems that the markets are getting comfortably numb with the thought that the European Central Bank (ECB) will announce, at their meeting tomorrow, steps to prevent the spread of the region's debt problems. or Contagion risks, as I explained yesterday.

This all stems from a speech that ECB President, Trichet, made yesterday in Brussels, where Trichet was reluctant to rule out the possibility of more bond purchases by the ECB. Now, if only this was cast in stone, eh? I mean. the euro could continue this relief rally if the markets knew in their heart of hearts that the ECB wasn't going to need to buy bonds again to help the GIIPS. But, that's not going to happen. and therefore the relief rally in the euro will end up being just that! Unless. Trichet comes out and slams his fist on the podium, and tells the media to read his lips. "no new bond purchases" Well, maybe something different, because that tact didn't work out so good for George Bush, the father.

Well, I saw first-hand the affects of the rise in Oil prices this morning. sounding like Lloyd Bridges in one of the greatest comic movies ever, Airplane. I picked a bad day to fill my gas tank! Gas was back over $3.00 this morning. Hmm. Oh well. it is what it is.

Yesterday, I told you that both Canada and Australia would print their 3rd QTR GDP reports and that while both would be softer, I thought Canada would outperform Australia, for the 3rd QTR. Unfortunately, both reports showed growth slowed more than forecast. So, in the end Canada grew at 1%, while Australia grew at .2%... So, Canada did outperform Australia, but this is like comparing wrecked cars, to see which one is less "wrecked"!

There has to be some looking over the shoulder for Aussie dollar (A$) bears though. Last night, China posted a very strong manufacturing index report, as the index rose to 55.2 in November, from 54.7, the prior month. The Aussie dollar (A$) is so driven by commodities, and. China's demand for those commodities.

Over time, we'll see China implement further measures to cool down their economy, and every time they do, the A$ will see weakness for a day or two, or until the markets forget about what they were doing! Because. all we have to do is look back at the measures China took to cool down their economy in 2010. and we'll see that while it may have helped, the resiliency of China's economy continues to shine.

And, the Canadian dollar / loonie. is softer this morning, on the 3rd QTR GDP print of just 1%, but annualized that's 4% growth, which isn't half bad, right? Shoot Rudy, the U.S. would love "real growth of 4%", and not the stuff that we get now, which is so dominated by Government spending.

Speaking of GDP reports. India posted a very strong growth report. India's 3rd QTR GDP came in above estimates, rising 8.9% (y/y), matching the revised pace of growth in the 2nd QTR, boosted by farm and manufacturing output. This is the third quarter in which growth exceeded 8% due to strong domestic demand as evident by rising car sales and expanding bank credit.

Now. if only the Indian Central Bank (the RBI) will keep their hands out of the cookie jar, and leave the economy alone, and the rupee the ability to rise in value. In the past few years, every time the rupee gets on its horse and heads to higher ground, the RBI does something to keep that from happening. and Yes, I understand that India is an Asian country, and they too, have to play that game of keeping one's currency in line with the others in Asia, but not to the degree that say, Singapore has to.

Speaking of Singapore. I was talking to a customer yesterday, that stopped by the office to chat, and he asked me about Singapore. I said, "I like Singapore dollars, a very good example of a Central Bank that uses the currency to help fight inflation". And so it is with Monetary Authority of Singapore.

There's a lot to be said for this method of allowing a currency to rise to combat inflation. China would do good to follow this method. And I think that China is heading in that direction, I just don't think they are fully committed to it just yet.

Yesterday, I blurted out the "H" word. hyperinflation. I had a reader send me a note, that caught my eye. You know, how I always tell you that you should not pay attention to the Gov't's inflation figures, those aren't real. Instead, you should take into account inflation in your personal life. What's inflation to you, and how does it affect you. In this person's case, it's California University tuition. Let's check in with this note.

Hey Chuck,

Just a quick aside on the subject of inflation. The cost of attending one of the state Universities had already increased by 32% this year in California when they announced another 8% increase in tuition alone. This puts inflation in that sector at 40% based on tuition alone and doesn't factor in the rising costs of gas, rent (exceptionally high due to the increased demand caused by foreclosures in the purchasing sector), food, textbooks, etc.

Yes. Chuck again. that's exactly what I mean, about personal inflation.

OK. on the data front yesterday. the S&P/ CaseShiller Home Price Index (for October) fell from 148.55 to 147.49. While that's less than 1%, that marks the second month of weaker prices, after seeing the index rise from February until September. Now that all the Gov't programs to give people other taxpayer's money are over, I think we'll see home prices begin to slip even more than the last two months. As Margaret Thatcher said. "The problem with socialism is that eventually you run out of other people's money".

OK, Chuck, keep to the program of reporting on the data. Well, Consumer Confidence was stronger in November. Go figure! The Fed basically said that the end is so near that we need to implement $600 Billion in more Quantitative Easing, but the consumers that were surveyed are more Confident. As I raise my hands to the sky, and scream. Serenity Now!

Today, we'll see our own manufacturing data (last night and this morning, we saw China, Norway, Eurozone, Switzerland and Sweden's manufacturing data). let's remember that a number in the manufacturing index above 50 represents expansion. The U.S. index is around 56, so. that's not too shabby. but remember this. the U.S. dollar is weak, and has been weak for 8 years now, going on 9 (in Feb). A country's manufacturing, that is as long they make stuff people want) should be good, given the weakness of the currency.

The ADP Employment Change always gives us a peek at the Jobs Jamboree which is so trumped up the BLS, and begins to make it worthless. And then finally this afternoon, the Fed's Beige Book will print. For those of you new to class, the Fed's Beige Book is the summary of Current Economic conditions by each Federal Reserve District. these reports are always interesting because they haven't been through the Bernank gauntlet!

I wonder what each district's conditions will look like after unemployment payments for about 2 million people in the U.S. are set to stop by the end of December, after Congress failed to extend the assistance. I just can't stop thinking that this year's holiday sales growth will be cut if the benefits aren't restored. Not that I have an axe to grind with having strong holiday sales. I'm just saying.

And finally. as I told you yesterday. Gold and Silver were back on the rally tracks, and a quick look this morning, revealed that Gold is nearing $1,400 once again, and Silver is over the $28 handle! The selling that was quite strong a couple of weeks ago, is in the distant past now. Aren't you glad you didn't attempt to catch that falling knife a couple of weeks ago, and remained steadfast, and battened down the hatches with your Gold & Silver?

Then there was this, (from a reader) on CNN Money. -- The nation's battered state governments face a collective $41 billion budget gap next fiscal year, a survey released Wednesday found.

State officials will have to contend with slow revenue growth, increased spending demands and the end of federal stimulus assistance next year, according to the semi-annual Fiscal Survey of States, released by the National Governors Association and the National Association of State Budget Officers.

To recap. We're seeing a relief rally or healing in the currencies this morning. The markets believe the ECB will take steps to prevent the spread of the region's debt problems. We can only hope, eh? The Fed/ Cartel/ Bernank, has to reveal who the recipients of their $3.3 Trillion in emergency loans were back in 2008, today. Aussie and Canada print much softer than expected 3rd QTR GDP reports, but Oil prices are rising, underpinning the Canadian dollar/ loonie. China printed a very strong manufacturing report, and India posted another greater than 8% GDP!

Currencies today 12/1/10: American Style: A$ .9655, kiwi .7465, C$ .9815, euro 1.3110, sterling 1.5615, Swiss $ .9950, . European Style: rand 7.0275, krone 6.1520, SEK 6.9785, forint 213.30, zloty 3.0680, forint 18.9950, RUB 31.48, yen 83.80, sing 1.31, HKD 7.7675, INR 45.37, China 6.6630, pesos 12.38, BRL 1.7050, dollar index 80.75, Oil $85.25, 10-year 2.87%, Silver $28.80, and Gold. $1,395.40

That's it for today. I was sitting here singing, bopping around in my chair to the Spinners and I'll Be Around, when Suzy Q came in this morning. I'm sure she had a big laugh seeing and hearing that! Dawn and the new "ever-baby", Everett, are home now. Now the fun begins! I get to go back to the retina institute today, for a "follow-up" on my eye surgery last April, and next week it's the kidney doctor, and so on. it's a never ending saga of doctor visits for me. but as long as the visits are good, I have nothing to complain about! My friend, Charlie Tiano is in town today, and we're going to the hockey game together tonight, should be fun! And now, it's time to say. Go out and have a Wonderful Wednesday!

Chuck Butler


EverBank World Markets



Posted 12-01-2010 9:34 AM by Chuck Butler
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