Attempting To Figure Out The Chinese.
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In This Issue.

* More healing for the currencies.

* Gold can't hold its super ball bounce.

* Brazil to cut rates again?

* Richard Russell on Gold!

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

Attempting To Figure Out The Chinese.

Good day. And a Wonderful Wednesday to you! Cards pull even with the Braves, with one game to go. Win tonight, and they'll at least play a tie-breaker game on Thursday! WOW! They were down 5-0 when I went to bed last night, only to end up winning 13-6. Double WOW!

Yes, I have to admit I was disgusted with them losing 5-0, and since I was worn out, I turned it off and went to bed!

Well. yesterday, I told you how the rumors were flying around about how the markets believed the Eurozone leaders were nearing a deal to contain the contagion debt problem in the Eurozone peripheral countries. The currencies basked in sunlight all day, that they hadn't seen in a couple of weeks, with the euro climbing back over 1.36, and the Aussie dollar (A$) pushing back toward parity.

In the overnight markets, the currencies didn't add to their gains from yesterday, which begins to put pressure on them. Traders are so fickle, folks. they want to see continual movement in a direction or they blow out of the position.

And Gold? Well, yesterday morning I told you how the shiny metal had rebounded by more than $70 at that point. But by the end of the day, that gain was only $22, which meant, that somehow, some way, Gold lost $50 during the day. Talk about being disgusted with something! I've told you all about the goings on in Gold & Silver, with the margin requirements going higher, and higher, and the afterhours trading. But, in reality, the demand for the shiny metals is strong. especially at these cheaper levels. Shoot Rudy, I was going to get some Silver the other day when it hit $28, but forgot! UGH! So, the demand will continue to underpin the metals, and when everyone is finished playing their games with the metals, we can get back to the task at hand. going higher. Sly Stone style!

On a side bar. I saw a blurb that Sly Stone is now homeless. That's sad.

This morning, Gold is pretty much flat, up $4, as I write, with Silver still in the red by 50-cents. I was reading yesterday after getting home, and came across some info that I think is important regarding this "correction" by Gold. And the article / research pointed out that we've seen these huge drops in the price of Gold all the way from $900. So, I went back and checked. yes, we have seen these "corrections" from time to time, but other than the 2008 deleveraging debacle, the "corrections" haven't been as steep as this one. But then, I thought to myself. But Chuck, as the price increases, the propensity for wider swings becomes a part of the trading.

And then did you see that The U.S. Commodity Futures Trading Commission (CFTC) won't vote on limits to commodity speculation until at least Oct. 18. They contend that debate continues over whether speculation is driving up commodity prices. HEY! CFTC! Why not look at the short position accumulation, for they have caused more investor losses than speculation!

And Ed Steer wrote this morning. "Silver dropped from $40 to $26 in two and a half business day...and SLV has had 6.4 million ounces added to it since the bottom was in early Far East trading on Monday morning." Chuck again. SLV is the Silver ETF. So, Ed is as confused as to how metals can be dropping in price when the demand is soaring to the moon, as I am!

So. the euro is stronger this morning VS the dollar, and that is questionable as to whether it can remain stronger, given what's going on in the Eurozone starting today. the member countries will begin to vote on the Eurozone Emergency Fund, called EFSF. (European Financial Stability Fund) Finland bats leadoff. The only country that has voiced opposition pre-vote has been Slovenia. What are they voting on? Ahhh grasshopper, you must have missed class that day. HA! The Eurozone leaders want to expand the EFSF so that they can deal with Greece from a position of strength.

The really interesting vote will take place tomorrow, when Germany decides. I believe that even with all the sawdust on the floor, the Germans will vote yes. Why do I think that? Well. go back to the days of Chancellor Kohl. the euro was his baby. He leaned heavily on the other countries to join the euro, so. when it's all said and done. it's their baby, if they want to see it continue, they'll have to vote yes.

Continuing on with Germany, but in another direction. Four German states printed their latest inflation reports overnight. and it looks like inflation in Germany is going to remain at current levels, and not weaken as expected. Therefore the European Central Bank (ECB) will have to keep interest rates at current levels, to combat inflation, and won't be able to participate in the rate cutting party going on in other parts of the world.

Like Brazil. These guys in Brazil just make me scratch my balding head over and over again! First they want their currency to weaken, so they cut their interest rates, in the face of an inflation rate that remains over their ceiling target. But the currency loses too much ground, so the Brazilian officials have to come into the markets and intervene, buying reals, to prop up the currency. Well. now the Brazilian officials are talking about more rate cuts. What? Are their memories that short that they don't recall just two weeks ago, seeing their currency getting sold like funnel cakes at a state fair, because they cut rates? I guess so, folks. sad, but true.

The Canadian dollar / loonie, continues to trade at the weaker side of parity, with no movement to the upside in sight. The price of Oil has really taken a nose dive, and that weighs heavily on the loonie, as we've talked about many times before.

My friend Tom sent me an article on the Chinese renminbi, where the writer talked about how the renminbi isn't a One-Way Street, and that the Chinese are probably ready to discontinue their call for "faster appreciation". I found the article interesting. and then come in this morning to read that the Chinese moved the renminbi higher VS the dollar this morning. But the interesting part of that was that the Chinese moved the renminbi to the highest level in the band that it allows each day. Just shows to go you, that you can't pin the tail on the donkey with the Chinese. They will do what they want, when they want, and no country, politician or economist can sway them!

Here in the U.S. The S&P/ CaseShiller Home Price Index for July printed. another -4.11% drop in prices from a year ago, is in the books. There's more rot on that vine folks. it will be exposed in future months. And Consumer Confidence did tick up from last month's figure of 45.2, but. not as much as was forecast, printing at 45.4. (consensus was 46). I know, you're expecting me to go into my usual tirade about who are they surveying, and how could they be so confident? They obviously haven't checked out the debt clock, eh? Well. I've grown tired of complaining about this report, and from now on, I'll just report the facts, and leave them laying there. Yeah right!

Another regional manufacturing index (Richmond) saw significant weakness as measured by their latest report. Manufacturing, is getting hit from two sides. first the U.S. economy. and second the rebound of the dollar.

And this really hurts. Yes, I know it's from last year, but, just to wrap it up. The annual survey of the Labor Dept, shows that Incomes fell .6% in 2010, after a 1.1% drop in 2009. And that spending fell 2%, which happens to be only the second decrease since the Gov't began the survey in 1984!

An email friend/ reader sent me a note on how he sees the relationship between the Mexican peso and the price of Silver. He wrote a nice article that appeared on and can be read here. Nice job Scott!

Then there was this. from one of my all-time fave writers. the great Richard Russell. on Gold. "Wealthy people don't sell their gold, their homes or their insurance policies. The idea is to have purchasing power even when nobody else has any purchasing power. The great fortunes are made when you're buying and there's blood on the streets.

It's easy to make money in a hard-money bull market, but hard to hold on to those profits. I look at gold and silver, not as a play for profits, but as an accumulation of hard assets, in a world that it drowning in fiat money, and a world that will probably print trillions more of irredeemable paper. The word now is patience and no faith in the world's politicians who will print 'money' forever in the hopes that it will float us out of the recession."

Chuck again. Richard Russell. you can't get any better than that! If I'm still writing in 20 years, maybe some younger guy will quote me, and I can only hope they have the same respect for me, as I do Richard Russell.

Hey! As I get ready to head to the Big Finish. I look over at the currency screens and see that the euro is pushing higher this morning, and taking the usual suspects (currencies) along for a ride. I don't see anything pushing the euro higher, so I'll head to the Big Finish with a smile.

To recap. The currencies were unable to add to their gains reported yesterday, and until just a few minutes ago, were trading in a tight range. The euro has gained some ground this morning, and is pushing the other currencies higher too. Gold couldn't hold its gains from yesterday morning, and after hitting a higher of up $70, it closed to up only $22. UGH! Home prices continue to fall. and U.S. consumers continue to lose ground with wages.

Currencies today 9/28/11. American Style: A$ .9935, kiwi .79, C$ .9785, euro 1.3660, sterling 1.5670, Swiss $1.1190, . European Style: rand 7.8485, krone 5.7075, SEK 6.71, forint 211.10, zloty 3.2335, koruna 17.92, RUB 31.84, yen 76.40, sing 1.2820, HKD 7.7940, INR 48.69, China 6.3940, pesos 13.35, BRL 1.8055, dollar index 77.39, Oil $84.34, 10-year 1.98%, Silver $30.90, and Gold. $1,649

That's it for today. Maybe I'll be able to stay awake for the whole game tonight. but I doubt it! Little Delaney Grace was at the house when I got home yesterday, she came running to me, to give me a hug. She is so darling! And she sings all the time! All the time, did I say all the time? She just makes up lyrics to go with tunes in her head. Hmmm. I wonder where she got that? Eddie Money's Two Tickets to Paradise is playing on the I-Pod this morning. I think I could go for that! Two Tickets to Paradise. Bet you could too! And with that. let's get this Wonderful Wednesday started!

Chuck Butler


EverBank World Markets



Posted 09-28-2011 10:58 AM by Chuck Butler
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