Hitting A Bottom?
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In This Issue.

* Currencies & metals see some healing.

* Gold sees a super ball bounce.

* Fed Heads question the need for inflation.

* A new conspiracy thought.

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

Hitting A Bottom?

Good day. And a Tom Terrific Tuesday to you! Cardinals fail in their attempt to pull even with the Braves, who made pulling even with them an option by losing their game. But, the Cardinals couldn't win theirs, so now we're down to the last two games of the season. I shuddered when I saw the schedule, showing the Cardinals would play their last 3 in Houston, losers of 104 games this year, because the Cardinals tend to play to the level of their competition. UGH!

Thank you for bearing with me through that. but long time readers know my love of baseball, and the Cardinals.

So. the currencies and metals are looking a bit healthier this morning. The healing going on is courtesy of a feeling in the markets that the European leaders are nearing an agreement to contain the debt debacle in the Eurozone periphery countries. See how fickle these traders are? Two weeks ago, they had priced in a 91% chance that Greece would default, and now they are believing that Eurozone leaders have the answer.

Whatever the plan, short of forming a Eurozone bond, will only be temporary. Sort of like putting a tourniquet around a gaping wound. But temporary is better than nothing. right? Hmmm. can't believe I just said that. for I really don't believe that temporary is the answer. On a side bar. an astute reader sent me a note last week, when I mentioned the Eurozone bond idea again. He wondered why I would "want" a Eurozone bond, which would just be another step to the one world economy idea that I've talked about before.

I said that I never said that I "wanted" a Eurozone bond. What I was describing was what I thought was needed for the Eurozone to survive. So.. now that we've got that cleared.

So.. did you hear the latest goings on in Greece? Apparently the next tranche of their bailout funds is being withheld because auditors if you will, can't confirm whether or not Greece is actually implementing the austerity plans previously agreed to. Hmmm. I wonder who they learned that trick from? Could it be U.S. lawmakers? Why, yes it could! Unfortunately for Greece. They aren't the U.S. and don't get a get out of jail free card, that allows them to go past go, and collect their $200, without nary a person questioning them.

Speaking of the U.S. I see where I'll now be able to sleep tonight, for the U.S. lawmakers agreed on a deal to keep the Gov't running. Whew! I was really concerned that the Gov't might shut-down! HAHAHAHA!

Ok. back to the currencies and metals. After seeing more selling yesterday, Gold finally found a bottom, or so it appears, and bounced back up about $70 overnight. I wonder what the alleged price manipulators thought about that? All that work they did, to bring the price of Gold & Silver down.. the secured more margin increases, they traded in the afterhours markets, and then they have to watch Gold shoot up $70? Serves them right!

I have to say that yesterday, I'm watching Gold fall another $60 and briefly fell below $1,600, and at the same time I'm listening to the people on the trade desk, and almost every metals trade they were doing was a "buy". I said to Tim our metals trader, that it made no sense whatsoever. the demand is strong, but we're watching Gold slide down the slippery slope. He told me that he had done more buying in the past two days than he had done in the past two weeks!

Then I saw a guy being interviewed on the Bloomberg TV channel, and he confirmed what we were experiencing on the trade desk. demand for Gold & Silver is very strong.

And then a story/ rumor begins to spread through the markets that the Eurozone leaders have a plan, and everything turns around. the risk on meter is showing that risk aversion has been put away for today. One has to wonder, when we might ever return to the good old days of not allowing rumors to drive markets. The Big Boss, Frank Trotter, like to point out in his presentations, that the markets are so driven by the glut of information that's available these days, and at the same time, that glut of information isn't always correct.

So, late last week, I was shocked to see the high yielders, like Aussie dollars (A$) getting sold, because the U.S. had pulled a rabbit out of its hat, or so they think, with their Twist & Shout program. The Fed was going to attempt to lower rates. That's right. the yield differential between the U.S. and Australia is so wide you could drive a Mack Truck through it, and the Fed was going to widen that differential, but the currency with the yield advantage was getting sold? Made no sense to me.

Well.. with the Eurozone rumor going around this morning, and risk taking coming back today, the A$ has rebounded alongside the euro.

Speaking of the Fed's decision to lower interest rates, to promote growth, and throw caution to the wind on the thought that their moves will cause inflation. Well, let me remind you all that Fed Chairman, Big Ben Bernanke truly believes he's fighting a deflationary devil right now. And has publicly stated that the U.S. economy needed more inflation. So, QE1&2, were simply money printing, which is in the root form.. .inflation.

Well. there's hope for the Fed Heads. Two Fed heads, Raskin, and Bullard, voiced their wariness about the idea to spur growth by letting inflation accelerate. Oh, they didn't come right out and trash talk Quantitative Easing, or anything like that. they simply stated that they didn't see inflation as the end-all to the economy's problems. Fed St. Louis President, Bullard, said something that I thought maybe he would have discussed with his boss, Big Ben Bernanke before the Fed rolled out their Twist & Shout program. Bullard said that "faster inflation won't reduce the housing glut."

And then, one of the dissenters to the Twist & Shout program, was the Fed Dallas President Fisher, who actually will be giving a speech today on "dissent".. I actually think I would like to be in Dallas to hear that talk, might be interesting, eh?

And the data cupboard gave us the latest report on New Home Sales yesterday. Sales of new single-family homes in the U.S. declined 2.3% in August to a six-month low of 295K annualized units, which was in line with market expectations. The monthly decline is the fourth consecutive, following the revised drops of 0.3%, 1.6% and 2.5% in July, June and May, respectively (previously reported as declines of 0.7%, 2.9% and 2.2%, respectively), and marks the slowest pace of sales since February.

You know. New Home Sales are really feeling the effect of the competition from the foreclosed homes, short sales, distressed home prices of existing homes. New Home Sales now account for just 6.2% of total single family homes sold in the U.S. Compare that to the level it held prior to the Housing Meltdown of 16.6%!

Then there was this. The Securities and Exchange Commission notified credit rating agency Standard & Poor's that it is under investigation for its role in bringing a mortgage security called Delphinus to the market in 2007. The U.S. Senate Permanent Subcommittee on Investigations identified the mortgage security as an abusive collateralized debt obligation.

Chuck again. boy, my conspiracy blood is really boiling this morning after reading this story. here's my conspiracy theory on this, if you don't like this kind of stuff, skip ahead. OK, those that have come along for the journey, think about this. Isn't S&P the only ratings agency to downgrade the U.S.? Why, yes, Chuck it is! And now after the rating agencies contributed to the housing meltdown, S&P is the only rating agency that's under investigation. now, go ahead and connect the dots.

To recap. there are rumors this morning that the Eurozone leaders are nearing a plan to deal with the Eurozone debt debacle. Although I see this as only a temporary fix, the risk meter has turned back to risk on for today, with currencies and metals rebounding a bit. Gold has especially rebounded trading up over $70 overnight, after seeing it slip below $1,600 yesterday briefly.

Currencies today 9/27/11. American Style: A$ .9915, kiwi .7870, C$ .9780, euro 1.3540, sterling 1.56, Swiss $1.1085, . European Style: rand 7.8545, krone 5.4945, SEK 6.7840, forint 211.75, zloty 3.2255, koruna 18.0530, RUB 32.07, yen 76.45, sing 1.2820, HKD 7.7940, INR 49.08, China 6.3985, pesos 13.40, BRL 1.8240, dollar index 77.95, Oil $82.30, 10-year 1.96%, Silver $33.45, and Gold. $1.671.80

That's it for today. writing from home today, as I have a doctor's appt early this morning. Always a fun gig to write from home, especially if I'm late like I am today, and my beautiful bride and son get up and begin to make lots of noise in the kitchen. I'm used to the quiet with only my I-Pod making noise. a long day at the office yesterday, I need to watch that. Listening to Dixie Chicken by Little Feat this morning. what a great old song! My beautiful bride just brought me a cup of coffee. now that's trey cool! Now.. if you'll excuse me, I'm going to sign off, go to the doctor, and hope you have a Tom Terrific Tuesday!

Chuck Butler


EverBank World Markets



Posted 09-27-2011 12:01 PM by Chuck Butler
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