The Risk Fears Return To The Eurozone.
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In This Issue.

* Relapse to dollar buying.

* Yen slides further.

* New Carry Trade appears to be real.

* It's Turkey Day!

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

The Risk Fears Return To The Eurozone.

Good day. And a Wonderful Wednesday to you! The day before Thanksgiving! So, in keeping with Pfennig Tradition, here's a snippet of the Turkey Day song by Adam Sandler. "Turkey for me, Turkey for you, Let's eat the turkey in my big brown shoe. Love to eat turkey at the table, I once saw a move with Betty Grable" A very funny song, but the best part is watching him attempt to sing it without laughing at his own singing and the words to the song! OK. an upbeat way to start today, right? That's right baby! I'm all revved up and ready to go! So. let's go!

Well. we had a relapse of dollar buying yesterday. It does appear to have been a one day and done thing, but still, the currencies and metals were unable to add to the gains they had the previous day. Part of the dollar buying was brought about by this rift that's going on between the Eurozone leaders and the IMF over. you guessed it. Greece! You know, I keep hearing people say that Greece doesn't need austerity, it needs growth. And economic growth is needed by every country. But let me explain something to these uninformed people that don't believe austerity to be worthy.

If Greece or even the U.S. for that matter, didn't have this huge weight of debt weighing on them, their leaders could focus on growing the economy. But this huge weight just keeps getting in the way, so. you must remove the weight, at least part of it, before the economy can grow at clips that are needed. Not the 1.9% or 2.2% stuff the U.S. has been posting. Shoot Rudy, the Gov't alone can spend enough to generate 2% of GDP! But is that real economic growth? Hardly. So. austerity is needed to get some debt out of the way of economic growth. And yes, I'm fully aware that first there will be some pain from the austerity, but as the football coach used to tell me. There's no gain, without pain.

It's my opinion, and of course I could be wrong, so I'm fully aware of that, and don't need thousands of people telling me I'm wrong.

Getting back to the Eurozone, Greece and the IMF. What a tangled web they weave, eh? After a period of somewhat calm in the Eurozone, the risk fears are returning to the Eurozone. and that will weigh heavily on the euro, just like it did earlier this year. German Finance Minister, Wolfgang Schaeuble, said, "We have a series of options on the table on how to close the financing gap (for Greece). We discussed the issue very intensively, but since the questions are so complicated we didn't come to a final agreement." And the beat goes on, with unfinished business regarding how to deal with Greece. Another meeting was scheduled for Nov. 26.. But right now, I would guess that meeting will also be a waste of time.

The Japanese yen is continuing its turn on the slippery slide. The yen fell to an 82 handle which is the first time we've seen it that weak in about 7 months, and then it was going in the opposite direction! If this yen selling continues to weaken the currency, then I'll finally get this huge albatross from around my neck! Yesterday, I told you about how there was talk in the markets about using yen as the funding currency of the new Carry Trade. I said then, that this could be the actual end of yen strength if the new Carry Trade were to take off.

And don't look for the Japanese Gov't to step in the way of this yen selling. In fact, not that I would like to see this, but. since the Japanese Gov't is so hell-bent on having a weaker currency to introduce inflation in their economy, I would think that this to be the best time for them to intervene in the markets and sell yen. if everybody else is selling yen, this is the Gov't's opportunity to pile on! And if that happens, folks. this ride on the slippery slope for yen will last much longer.

I mentioned yesterday that Brazil's Gov't hadn't finished their beating down of the real. That the Gov't had just taken a breather. well. "they're back"! Brazil's President, Dilma Rousseff told a Brazilian newspaper that "Brazil's currency is overvalued". That tells me that even with the real at a very weak 2.08, that the Gov't is looking for more weakness. I totally dislike Gov't's getting their hands in the cookie jar and messing with these things. So, let's see. I'm going to list the currency cookie jar manipulators.

The U.S., Japan, China, Brazil, Switzerland, and I'm sure there are more, but these countries make a habit of manipulating their respective currencies. China, at least doesn't sell their currency to keep it from gaining. But they are still guilty of manipulation..

The Aussie dollar (A$) got whacked yesterday, in the one day and done dollar buying. But, I really don't expect that downward move yesterday to last. You see, as I explained yesterday, if the "new Carry Trade" is for real. The options to buy higher yielding currencies in the Carry Trade are limited. And when you get down to it, the only one that makes sense is the A$... real, pesos and rand are too volatile to work well in a Carry Trade. So, if the "new Carry Trade" if for real, and yen is the selling / financing currency. The A$ looks to be the default buying currency.

But all that's predicated on the talk that there's a new Carry Trade. And of course, I know that with the yen proceeds investors aren't tied to buying a higher yielding currency, they could choose to buy high paying dividend stocks, or high yielding bonds. But, that's not how it has worked in the past.

Moving along. The Weekly Initial Jobless Claims which normally print on Tub Thumpin' Thursdays, will be moved up to print today. the experts are forecasting a 410,000 number for unemployment claims filed last week. WOW! The U. of Michigan Consumer Confidence survey for the first two weeks of Nov. will also print. Big deal, right? And then on the back pages of the newspaper, in a corner where most people won't see it, you'll see Leading Indicators for October. And I would look for a fall from the previous rise of .6%... because..

The economic reports like Industrial Production, Durable Goods Orders, and Factory Orders have all taken the Nestea Plunge since their mid-year peaks folks.. have you been charting the data reports? For instance. The latest print of Industrial Production has dropped 1.4% from its July peak. You might say, but Chuck, the devastation from Sandy, is probably hurting these numbers.

Well, maybe. But not as much as you would think, for the declines have been spread out over the months, not just in October. What I think is really happening there folks, is that Companies, etc. are gearing down for the Fiscal Cliff.

Then There Was This. Did you hear about these goings on at Hewlett Packard (HP)? This isn't stock talk, but instead scandal stuff. HP announced that they had to take a more than $8 Billion write down on an Accounting Misstatement at a British Company it bought last year for $10 Billion. HP says that there were "serious accounting improprieties, disclosure failures and outright misrepresentations at Autonomy Corporation PLC." When the former managers of Autonomy were made aware of the allegations, they said, they were "shocked" at the claims.

Chuck again. I just had to put that story in the Pfennig today. makes you shudder to think about buying another company doesn't it? And. as colleague John Pataky said in a meeting yesterday, "it gives new meaning to the word Autonomy, doesn't it? "

To recap. We went into a relapse of dollar buying yesterday, but it appears to be a one day and done deal. The euro is being trampled on again by Greece. The risk in the region is being brought back to life, and our calm is dissipating. Yen is getting whacked almost daily now, and leads Chuck to believe that the talk of a new Carry Trade are real.

Currencies today 11/21/12. American Style: A$ $1.0370, kiwi .8140, C$ $1.0030, euro 1.2805, sterling 1.5935, Swiss $1.0635, . European Style: rand 8.9570, krone 5.7270, SEK 6.7350, forint 219.50, zloty 3.2220, koruna 19.9040, RUB 31.21, yen 82.35, sing 1.2250, HKD 7.7505, INR 55.12, China 6.2296, pesos 13.02, BRL 2.0980, Dollar Index 81.01, Oil $87.53, 10-year 1.66%, Silver $33.10, and Gold. $1,727.25

That's it for today. and. for this week for me. Hopefully Chris will pick up the conn on the Pfennig on Friday. Congrats go out to Mike Meyer and his bride, Sarah, as they announced that they are expecting a baby. Good stuff! Did you see that a kid at an Iowa div 3 school scored 138 points in a basketball game? WOW! I don't care if you're playing in the backyard, 138 points is unbelievable! OK. if you're one of the millions of people that will be traveling for Thanksgiving, please be careful. don't drive fast and take chances! OK. I have this thought for you for tomorrow. You know I told you about the writer in my local paper, the Life Sherpa. well he had this in his notes the other day, and I loved it! A recently married couple wrote in to ask about the have and have nots for a Thanksgiving dinner table. the have nots: resentment and anger. The haves: the people you love.

And with that. I wish you a very Happy Thanksgiving.

Chuck Butler


EverBank World Markets



Posted 11-21-2012 11:29 AM by Chuck Butler
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