Where's The Plan?
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In This Issue.

* 4-day euro rally gets stopped this morning.

* Eurozone Crisis meeting asks for an extension..

* Chinese manufacturing rebounds this month!

* Thoughts on Gold.

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

Where's The Plan?

Good day. And a Marvelous Monday to you! The white flag has been raised.. I've surrendered, and will remain home for this last week of treatments. My neighbor Paul, stopped by to see how I was doing yesterday, and told me I didn't look too good. And he's right. I look and feel like (*$&, so I'll write from home this week, complain about it, but remain here and nap between treatments. Like I said, this is the last week, so hopefully when we get to the second week of November, I'll be back to normal.

After a night where the Cardinals scored 16 runs, they were shut out! Talk about contrasting games! And talk about contrasting trading days. The euro has snapped a 4-day rally this morning, much like I said I thought would happen, when Eurozone leaders failed to produce an effective response to the Eurozone debt crisis. After reaching for the stars on Friday and trading at 1.3955, the euro has backed off about 1-cent to 1.3865, as I write, and Def Leppard is Bringing on the Heartbreak! (that's what's playing right now)

The euro is also having to deal with the fact that Eurozone services and manufacturing output fell this month at the fastest pace in 2 years! I would say that this is a very good indication that the Eurozone is heading to a recession. Ahhh.. but inflation is still around 3%... Oh, what an awful thing for the Eurozone to have to deal with. slow growth, and inflation. I wonder if we still have any of those buttons that Gerald Ford was so proud of, that had WIN on them.. (whip inflation now).. Yes, somehow someone in his administration thought that would get the job done. HA!

But if we've got a few crates of those sitting around in the basement of the White House, we should ship them over to the Eurozone. Seriously though. this is going to be a real drag for new European Central Bank (ECB) President, Mario Draghi. His Maastricht Treaty mandates that he (the ECB) provide price stability. on the other hand, the economy is going to be screaming for rate cuts. Who will win?

OK. getting back to the currencies. So, with the euro losing about 1-cent this morning, the rest of the currencies have also backed off.. For instance, the Aussie dollar (A$), which was well over $1.04, has fallen back below that lofty picture. Oh, those of little faith... Why are ye fearful of a little faith? I told you all that it was going to be a period of dollar strength and we would need to batten down the hatches. But so many of little faith, blew out of their currency positions. they attempted to catch a falling knife, only to get cut, and then watch the A$ climb back to parity and beyond. All I'm really saying here, is that if you feel the need to "get out". sell into strength, not weakness.

So. the euro is trading off by 1-cent, and the A$ is off about 1/2-cent.. the difference here, is that the A$ is getting underpinned this morning by a preliminary report out of China that showed the Chinese manufacturing index rebounded from 49.9 in September, to 51.1 this month.. remember, 50 is the line in the sand that indicates contraction or expansion, with anything above 50 representing expansion and anything below 50 representing contraction..

And as we've seen in recent years. good news like this from China, plays well with a stronger A$. There are those that are still calling for rate cuts in Australia, but again, I've said it before, and I'll say it again. I'm not buying it. Doesn't make sense to me one iota!

OK. what else is going on with the currencies I hear you asking. First let me get back to the euro for a minute. Yes, the Eurozone leaders meeting is still going on, so it's not fair to say that they haven't presented a plan yet. It just seems unlikely at this point, and I see the markets' reasons for selling the euro at this point. Eurozone leaders pledged they would have something concrete today. And today is slipping away. Like the great Clarence Carter song. or Paul Simon's slip sliding away.

There have been some ideas leaking out of the "meeting room".. . But just like I told you on Friday, that I would bet that the Eurozone leaders ask for more time, has occurred. And the final decision will be due on Wednesday now. And every hour the leaders go past the original Monday deadline, the euro will get punished. the institutional momentum had built up for a Monday print. So. this time, I agree with the markets reaction and their selling of the euro this morning.

What I never seem to get a grip on, or my arms around, is why strong, fundamentally sound countries, like Norway, get tarred with the same brush as the euro.. One day that will change.. but for now, it is what it is.

The other two dollar offsets (the euro is the main offset currency to the dollar), Chinese renminbi and Gold, are stronger this morning though, so, traders aren't "all-in" on dollar buying today. the renminbi was allowed to get stronger VS the dollar for the first time in about a week, as I'm sure the Chinese officials were sending a message to the U.S. lawmakers regarding the Senate's passing of the bill to punish Chinese exports.

And Gold, got a boost, when the Eurozone leaders didn't produce their plan today as previously discussed.

The Canadian dollar / loonie, continues to be highly influenced by the price of Oil. And with that in mind, you'll understand why the loonie has rallied in the past week. the price of Oil has rallied higher. The Russian ruble too has rallied on the rising Oil price.

Another petrol currency, the Brazilian real, which has seen so much volatility it would make your head do a Lind Blair impersonation, also has seen the currency gain as the price of Oil rises. I found this to be extraordinary given the fact that the Brazilian Central Bank cut rates 1/2% last week! Always, always I tell you tutor turtle, make sure that you only use the speculative money in your portfolio to buy reals. the volatility will make your head spin.

And the Japanese yen reached a post WWII high VS the dollar on Friday. and then traders all looked over their collective shoulders to see if the Bank of Japan was looking. I've told you all how the Japanese Gov't has increased the "intervention fund" that the Bank of Japan (BOJ) has at its disposal to keep something like this from happening. So. the fear of BOJ intervention, brought the yen back to 76 and change after trading well into the 75 handle on Friday.

You know me, I'm not a fan of intervention. but. here's the thing with the Japanese. the yen is overvalued and they know it, but the markets don't seem to care, so. the Japanese built this huge pile of cash to help the markets see the light. Japan's fundamentals are awful, except they are a country of savers. but that country of savers is getting old, and the young people aren't so hell-bent on saving. I just think that this 76 level in yen is outrageously high. when I began my career in foreign bonds, I could buy yen at 225. That's right 225! While that was undervalued, 76 is overvalued, by a wide margin!

And then, getting back to Gold for a minute. everything I read about shipments, receipts, holdings, and demand all lead me to believe that the price of Gold (& Silver) is being held down artificially. The deliveries to the Comex approved vaults continue to be at record levels. And the deliveries of that Gold & Silver are for holding of someone's metal. That's right. someone owns that metal, which means it has been bought, and if the deliveries are at record levels that means the buying is at record levels! And. that's just 1/2 of it, folks. the other 1/2 is shipped directly to people to want to bury it in coffee cans in the back yard.

Just kidding. but it's true.. 1/2 gets shipped, 1/2 gets safe kept in a vault with the owners name on it. So, the demand continues to be very strong, folks. so what's keeping the price of Gold suppressed in the $1,600 handle? Well.. you know what I think, for I've gone through this over and over again, until I'm blue in the face. Today, I'm just kind of red and green. with a fat lip that's turned white!

So. when will the regulators, or the Gov't for that matter look into this? Never is the answer, folks. You see, if you asked me out on the patio in the backyard I would tell you that it's the Gov't that's behind all this, for they can't have people losing their faith in the dollar. Now, I'm not smart enough to think of that myself. I read it in the Wikileaks memo that I gave you the link to a few months ago. But, like I said, I don't think I can say that here, but out on the patio I can!

Big Gold's commander, Jeff Clark, whom I've met, and talked to several times, said that "we are approaching a "back up the truck" moment for the gold sector. Now, Jeff is mainly talking about gold stocks here. but, I personally would say the same thing for physical Gold! But that's just little old me. HA, now that's funny, saying "little old me".

Then there was this. I had to laugh when I read this morning, that Merkel and Sarkozy (Germany & France), ordered Italian Prime Minister, Silvio Berlusconi to promptly reform Italy's economy and bring down its staggering debt and implement austerity measures. The Economist magazine's response to this was, "rarely has a member of the Eurozone, and a founding member of the European integration project been chastised so publicly"

I personally would side with Merkel and Sarkozy on this one, and my comment to Italy would have been more along the lines of. get your, you know what, in gear!

Of course, that's the same thing I would say to U.S. lawmakers! But they're too busy working on getting re-elected. and I'll stop there before I say something that would get me into trouble again! But first, I did see what would be a very funny comment if it weren't true. Spinning President Kennedy's famous speech when said, "Ask not what your country can do for you".. And then. an accountant says. because. we're broke!

To recap. the 4 day euro rally has ended this morning, as no plan for dealing with the Eurozone debt crisis was presented as pledged, instead they've asked for an extension to Wednesday. Gold takes this inability of the Eurozone leaders to come up with a plan, as a reason to rally. Chinese manufacturing rebounded this month, and the Chinese leaders allowed the renminbi to gain for the first time in a week.

Currencies today 10/24/11. American Style: A$ 1.0395, kiwi .8050, C$ .9935, euro 1.3855, sterling 1.5945, Swiss $1.1280, . European Style: rand 8.0255, krone 5.5555, SEK 6.5760, forint 214.55, zloty 3.1565, koruna 18.0245, RUB 30.83, yen 76.15, sing 1.2690, HKD 7.7785, INR 49.83, China 6.3755, pesos 13.64, BRL 1.7795, dollar index 76.41, Oil $87.92, 10-year 2.18%, Silver $31.51, and Gold. $1,656.25

That's it for today. A little later than usual, as I had to stop to make Alex breakfast, and lunch. Well, it was an ugly weekend for me.. outside it was beautiful, but for me, I didn't have a good time. I did get a smile, that hurts to do, when Albert Pujols hit 3 home runs in a World Series Game tying him with Babe Ruth, and Reggie Jackson. And. an even bigger smile, when my darling daughter, Dawn sent me pictures of Delaney in her tinkerbell costume, and Everett in his Peter Pan costume. she made them, and the kids looked so darn cute! You should see them! My Missouri Tigers got whacked by OSU. OK. I've been up for a while now, and I'm ready for nap. so.. I'll get out of your hair for today. And thank you for reading the Pfennig. Now go out and have a Marvelous Monday!

Chuck Butler


EverBank World Markets



Posted 10-24-2011 10:41 AM by Chuck Butler