The Dollar Rides The White Horse.
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In This Issue.

* ECB & Bundesbank talk supports the euro.

* Yen rallies.

* Norway, Canada and others in a bind .

* Gold on a losing streak.

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

The Dollar Rides The White Horse.

Good day. And a Happy Friday to one and all! Well after 5 days adrift, the passengers of the crippled cruise ship are back on terra firma. I bet they are very thankful for that! That must have been pretty bad. And I'm thankful I wasn't on that cruise! See. it's the little things, eh? I'm running a bit late this morning, as I slept right through the alarm clock. So, I need to get to what you all open this letter up to read. My conspiracy stories! HAHAHAHAHA!

Well, the dollar is riding on the white horse this morning, and all the currencies (except yen) and metals are bowing down to pay homage to the dollar. The euro attempted to break out with a move higher overnight, but was quickly knocked back down. The euro jumped to near 1.34 when Bundesbank (Germany's Central Bank) President, Weidmann, said that "one cannot say euro is seriously overvalued." European Central Bank (ECB) President, Draghi, chimed in and said that, "real euro exchange rates are around their long-term averages." So, all-in-all, some verbal support for the euro's current level.

OK. well, I said that the currencies were down VS the dollar except yen. And it took me by surprise too! There wasn't much in the way of information that would indicate why yen is rallying this morning. There was some talk about yen's appropriate range would be 95-100, but other than that, it's position squaring or profit taking, because there's no "real reason" to be buying yen, folks.

We do have the G-20 meeting going on, and I would think that some traders that were short yen, decided to cover the short ahead of the G-20 meeting, just in case there's talk about stopping Japan from pushing for currency weakness. I think all we'll get out of this G-20 meeting is nothing more than a statement that they want members to: refrain from competitive devaluation. Then get on their private jets and head home.

The British pound sterling is much weaker this morning, on the news that January Retail Sales fell for a second consecutive month. Retail Sales fell -.6% from December when they dropped -.3%... The spin doctors in the U.K. jumped on this drop right away, and blamed it on the cold and snowy weather conditions in the U.K. during January. So much for Bank of England outgoing Gov. Mervyn King, who earlier this week said that he thought inflation would accelerate in the coming months. I would think that given the size of the retracement in Retail Sales that he had better worry more about the economy contracting than inflation accelerating!

Last week I mentioned the Brazilian real and how it had rallied to a level below the 2 figure, and remained below 2 for the whole week, which was surprising, given the Brazilian Gov't's penchant for weakening the real. Yesterday, when I was doing the currency round-up, I noticed that real was even stronger than it was last week. And I said to myself, "self. I bet the Brazilian Gov't has something to say about this soon". and lo and behold, the Brazilian Finance Minister, Mantega, was out last night, letting everyone know that, "we will not allow for an over appreciation of the real, and we won't tolerate abnormal fluctuations".

This is what I feared last week when I mentioned that real was rallying. While I don't believe the Brazilian Gov't is going to pull out all stops to weaken the real again, for they need a stronger real to combat inflation that is running above their target level and has for the past two years. But, they will fight the appreciation every step of the way, in order to keep the appreciation orderly and under control. I still say to be careful here, and only use the speculative portion of your portfolio if you feel compelled to own real.

The Canadian dollar / loonie touched parity again yesterday, albeit briefly. the currency continues to remain near parity, which to me is a good level for loonies right now, given some of the things going on that we've talked about here. The Bank of Canada (BOC) would love to raise rates to squash the housing bubble in Toronto, but the rest of Canada still needs the accommodative rates. So, the loonie sits here, without any reason to move stronger and without any reason to move weaker.

Another country keeping their eyes on the currency and its appreciation is Norway. The Norges Bank would love to hike rates, but they don't want the krone to take off for the moon. These central banks from Canada, Norway, Sweden, Brazil, and others are all in the same boat. They would love to hike rates, but they don't want their currency going on a flight to the moon. I feel for them. but, if I were the captain of any of these ships, I would just stop the worrying, and do what's best for their economy, and having housing bubbles, and rising inflation are not good things for the economy!

And the good times for the Indian rupee didn't last one month! Remember a month ago, I told you how the rupee was on a good run, but wondered how long that would last. well, it lasted about a month. Too many questions hang over the rupee, right now, and until they are answered the rupee will be held accountable.

The price of Gold continues to weaken, much to my surprise, and I'm beginning to worry about the shiny metal's price. I see where billionaire, George Soros, cut his Gold ETF holdings last quarter. and now I see where Dennis Gartman has put a short on Gold. But guys like John Paulson are maintaining their holdings, and I see where Peter Shiff is still calling for Gold to climb to $5,000 an ounce. So, there's two way trading, which is always a good thing. I saw one analyst, call for Gold to fall to $1,550 and then take off to the moon. I would think that if Gold begins to head toward $1,550, a lot of people will be bailing, thinking the bull market is over. But not me. I'll be looking to buy more at the much cheaper price!

Today, the U.S. Data cupboard has some juicy tidbits for us. Two of my fave Industrial Production and Capacity Utilization, will print their January outcomes.. U of Michigan Confidence for the first part of this month, and the Net TIC Flows. you know, the Net Foreign Purchases. which used to rule the data roost, but has been reduced to picking up the pieces, is always an interesting print anyway.

Then There Was This. This is a real treat for you all today. The Big Boss, Frank Trotter, sent me some notes from his travels, and I have them here for you. Frank is an excellent writer, when he can find time to write! So. here's the Big Boss!

"On Wednesday night here in Aspen we hosted a reception to welcome and introduce EverBank's mortgage team in the mountains to the community. It turns out that it was EverBank that was being introduced since each team member is well known as a true all-star in the market. It is clear that this solidifies EverBank as the premier jumbo mortgage lender in and near Aspen, Vail, Glenwood Springs and Telluride with more to come. It was great to meet all the clients and soon to be clients who attended and I enjoyed telling people about all the ways that EverBank can help with all the banking basics done right and provide opportunities for global diversification.

As we look how various things impact the global marketplace we forget sometimes Burke's reminder that "Those who don't know history are destined to repeat it." Along those lines I was walking our dog here in Aspen along an abandoned railway line now turned into a pathway. The snow was about knee deep and when I scraped a layer off what appeared to be a historical marker (now you know who reads those things). It said that the railroad had ceased to exist when President Wilson nationalized all railroads in 1917 due to "too much competition".

I do vaguely recall this chapter of American history, but hold on there partner - nationalization of all US railroads for too much competition has legal precedent? Humm . . . We have an example within the week of what happens to currencies when the government goes on a nationalization plan as in Venezuela (with Argentina seemly attempting to follow on as an acolyte). As Chris noted the other day this is not a political blog but political actions do impact the global markets. We remain vigilant when we hear "government can fix it" out of the mouths of politicians worldwide."

Chuck again. Thanks Frank! When Frank writes or talks, he makes us think.

To recap. the dollar is riding the white horse today, with all the currencies except yen, bowing down to the dollar. Yen is stronger due to what Chuck thinks is the closing of short positions ahead of the G-20 meeting, just in case something is said about Japan's pushing for currency weakness.A handful of countries and their Central Banks would love to raise rates to squash housing problems, but don't do it, in order to keep their currencies from taking off for the moon.

Currencies today 2/15/13. American Style: A$ $1.0335, kiwi .8485, C$ .9975, euro 1.3315, sterling 1.5480, Swiss $1.0825, . European Style: rand 8.8190, krone 5.5560, SEK 6.3475, forint 219.55, zloty 3.1415, koruna 19.0650, RUB 30.14, yen 92.70, sing 1.2370, HKD 7.7545, INR 54.22, China 6.2362, pesos 12.70, BRL 1.9590, Dollar Index 80.55, Oil $96.72, 10-year 1.99%, Silver $30.31, and Gold. $1,628.10 and, it's Friday, so here's the link to the U.S. Debt Clock. click here:

That's it for today. Well, did you have a nice Valentine's Day? I was visited by two of my sweethearts, darling daughter Dawn, and granddaughter, Delaney Grace (along with grandson Everett) yesterday. They brought me a cupcake and a handmade valentine card. We're all getting together tonight and getting fish dinners from the VFW hall. a staple for us during lent. I totally missed talking about my very good friend, and spring training buddy's birthday the other day. Happy Birthday, Duane! And Sunday is Mike Meyer's birthday, so Happy Birthday, Mike! He's a youngster, that thinks he's getting old. I told him, "don't rush it"! and with that. it's time to get this out the door. Thanks for reading the Pfennig, and I hope you have a Fantastico Friday!

Chuck Butler
EverBank World Markets

Posted 02-15-2013 11:23 AM by Chuck Butler
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