Francs & Copper Trade At All-Time Record Highs!
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In This Issue.

* Tight ranges, with bias to sell dollars.

* Euro recovers.

* China's manufacturing slows.

* Foreclosures soar! UGH!

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

Francs & Copper Trade At All-Time Record Highs!

Good day... And a Tub Thumpin' Thursday to you! Ever hear the song Sleepwalk, by Santo and Johnny? That's kind of what I felt I was doing on my way in this morning. Sleepwalking! But, I'm good to go now. I have a nice big cup of cold water to drink while I pound on the keyboard, so that should do the trick! Sleepwalk by Santo and Johnny is one of the greatest guitar songs ever! Brian Setzer did a great job of copying the song, but. there's nothing like the original!

Well. the Swiss franc is at it again this morning. The franc is trading at a new all-time record high VS the dollar! And on the Commodities side, Copper is also trading at an all-time record high VS the dollar! And the Aussie dollar (A$) is trading at levels that haven't been seen since 1982. yes, back in the day of Tommy Tutone (867-5309), the Cardinals were World Champions for the 9th time, and my son Andrew was born!

Shoot Rudy, even the euro is joining in on the dollar selling this morning. The single unit has gained back the ground it lost earlier this week. But still, no great shakes. I continue to hear pundits telling people that the euro is going to collapse. These are the same guys that said that in 2005, and it didn't happen. they said it again in 2008, and it didn't happen. they said it again last winter, and it didn't happen. Now. I'm not saying that it can't ever happen, all I'm saying is that these guys were all wrong many times before, not just once, but many times, so why listen to them now?

The Commodity Currencies, as I've been reporting this week, are really trading with some strong wind in their sails. Yesterday, I mentioned the tight trading ranges, and Ty Keough told me that even kiwi was up 2% in the past week. So. yes, the trading ranges are tight each day, but each day the bias to sell dollars going into year-end, has picked up steam.

The thing that got the commodities and commodity currencies going overnight was a report out of China that showed Chinese manufacturing, while printing at the slowest rate of growth in 5 months, is still expanding at an index level of 54.4 (previous was 55.3). I think this report shows that the Chinese Gov't's attempts to slow their economy and keep it from overheating are working. And. Like I've said many times before. these attempts are to "slow" or "moderate" their economy, not collapse it, as many pundits told you was happening in 2010.

And with that revelation, that China's economy isn't going to collapse. the wagers on forward prices for the renminbi are soaring higher! In fact, the renminbi is now trading in the spot market at its highest level since 1993. (don't worry, I won't go into a recap of 1993).

The other thing going on here with the renminbi is the Chinese Gov't's willingness to allow a greater appreciation of the renminbi. If you ask me, this is long overdue. I've said many times in the past, that with rising inflation the Chinese Gov't would do well to allow the renminbi to appreciate, for a strong currency is as good as rate hikes, in fighting inflation. I think the Chinese Gov't sees this now, or maybe they saw it all along, I'm sure they are far beyond me in the brain power department! If you cut your import costs, you don't import other country's inflation... It's that simple.

Another country seeing this right now, is Brazil. The knuckleheads that run the Central Bank and Gov't here, have been fighting the rise of the Brazilian real, but if they just sat back and took a look around, they would have seen that the strong real was helping them in their fight against rising inflation. So much so, that now interest rate futures are no longer rising in Brazil, which means that maybe, the rate hike cycle is nearing an end. The propeller heads that figure these things out, with the interest rate futures see the currency's strength as an asset.

Well.. here in the U.S. we'll see the color of the latest Weekly Initial Jobless Claims, which has been falling lately, but remains above 400,000 each and every week! We'll also see the November Pending Home Sales data. You know, I've beat on Housing pretty much this week, so I see no reason to let up now! You all know about these loan modifications that the Gov't has ordered. Well, more and more, people aren't qualifying for these loan modifications. In fact, loan modifications declined as more delinquent homeowners lost their properties. The number of foreclosures and short sales, rose to 244,840 in the 3rd QTR, which is up 63% from a year earlier, and up 11% from the 2nd QTR.

I just don't see any silver linings for housing. I've said for some time now that the unemployment problem will throw gas on the Housing sector fire. and that's exactly what is happening. Do I want to see this happening? NO! But do investors need to know that it's happening? YES!

My friend, Addison Wiggin, of I.O.U.S.A. fame, and the Daily Reckoning ( wrote a great piece in the Daily Reckoning the other day about how Municipal Bonds are the "son of subprime". He highlights the problems of cities, counties and states with falling tax receipts. I don't think the website has updated to include this story yet.

I've long feared these problems for the municipalities and states were coming, and have talked about the plights of states like California, New York, Michigan, Illinois, Arizona, and so on for some time now. In fact, at one point last year, I showed you how the top 4 in-debt states of the U.S. represented a larger portion of the U.S. GDP than the debts of the periphery states of the Eurozone represented.. But that didn't stop anyone from selling euros. Sometimes, traders and investors just don't see the Big Picture. I'm not saying I see it all the time. But I saw this one. and now the U.S. is going to have to deal with the cities and states. Can you say more bailouts? Can you say more Quantitative Easing?

I saw a great story in the USA Today, regarding the past decade's stock returns. John Waggoner, who is a very good writer, put this story together. "Stock investors will look back on the first decade of the 21st century with the same degree of nostalgia they have for their first root canal. How bad was this decade? The Standard & Poor's 500 stock index ended 2010 about 5% below its level 10 years earlier, only slightly better than the returns from 1930 through 1939, when the Great Depression devastated the economy. The Dow Jones industrial average was up about 7%."

And the decade for Gold? Silver? How about the Aussie dollar? Well, they all beat the stock market, by such a large margin that it's not fair to even throw out the figures.

And then one more thing before I go to the Big Finish. the guys over at PIMCO, the world's largest bond fund, sent out a report to their clients telling them that the dollar will remain the reserve currency in 2011. Hmmm.

Hey! I never said that the dollar would lose its reserve currency status in 2011, or 2012, or 2013. The nearest year I see this happening is 2014. But most likely it would be 2017. But then again, by then, the Gov't here in the U.S. could have reversed their deficit spending, and cut spending to a level that allows the dollar to remain the reserve currency. Yeah, and my first wife was a young Elizabeth Taylor. yeah, that's the ticket! HA

Then there was this. just a friendly reminder that: I will be on the radio this Sunday on: on WAAM Talk 1600 ( a weekly radio show, with Doctor Dave Janda, airing Sunday from 3-5pm. Doctor Dave Janda, has really taken to hosting this radio show each week, and has attracted quite a few "name" guests. I'm just filler. but that's fine with me, I always enjoy talking to Doctor Dave, for he truly understands what the Gov't is doing to our kids and grandkids' futures. So. if you're not living in the Ann Arbor area, you can get the streaming broadcast on the internet using that link above. And I bet you can guess what I'll be talking about!

Currencies today 12/30/10: American Style: A$ $1.0145, kiwi .7695, C$ .9990, euro 1.3250, sterling 1.5445, Swiss $ 1.0650, . European Style: rand 6.6320, krone 5.8950, SEK 6.7970, forint 211.30, zloty 2.9930, koruna 19.0670, RUB 30.70, yen 81.55, sing 1.29, HKD 7.7815, INR 44.96, China 6.6070, pesos 12.37, BRL 1.67, dollar index 79.70, Oil $91, 10-year 3.36%, Silver $30.73, and Gold. $1,411.90

That's it for today, this week, and this year! I'll have a special treat for you tomorrow, but it's already written, and in the docket for distribution tomorrow! Like I said, tomorrow is a BIG DAY at the Butler House. And so I'm not walking around at midnight, sleepwalking, I'll "sleep in" tomorrow, which means I'll still probably beat most people into the office here. It sure was depressing to watch the recording of the Mizzou bowl game that took place the previous night. They had the game won! Oh well. I'm singing along with Journey's I'll Be Alright this morning. So. I want to urge you all to have a safe New Year's Eve. Call the cab. or have a designated driver! I want you all back here next week! Judging from the replies I see in the Pfennig mail box, everyone liked our Christmas Card / picture of the group. I do have to admit that I am surrounded by a good looking group of people! And with that, I'll bid you farewell for 2010. I thank you for reading the Pfennig, and I thank everyone that sends along nice notes, and thoughts. I am blessed with wonderful readers, that I consider my friends! I do have a special treat for tomorrow, but there will be no update, no signing songs, no then there was this. You'll have to check your mailbox tomorrow for that special treat. Ok. I think I'm ready now, I've said my good byes, my thank yous, and my wishes for a safe New Year's Eve. Here's to a Happy, Healthy, Prosperous 2011! Now go out and have a Tub Thumpin' Thursday!

See you next year!

Chuck Butler


EverBank World Markets



Posted 12-30-2010 12:06 PM by Chuck Butler
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