China's Trade Surplus Widens.
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In This Issue.

* Currencies drift lower on Tuesday.

* Both Chinese exports & imports fall.

* Gold continues to recover.

* A new baby girl today!.

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

China's Trade Surplus Widens.

Good day. And a Wonderful Wednesday to you! Mother Nature is giving us a light show in the sky this morning, as Thunder Storms move through, with very loud thunder, and a lot of lightening. There's rain too, so the old Fleetwood Mac song about how thunder only happens when it's raining, is holding true! It's a BIG DAY for long time colleague and friend, Mike Meyer and wife Sarah, as Sarah will be having their first baby today. It's a little girl, and you should have seen the smile on his face yesterday, as I wished him good luck.

Well, today is also the day that the markets have been waiting for, the day that Big Ben talks to the NBER people. The NBER (National Bureau of Economic Research) is the unit assigned to tells us when we're in a recession, and when the recession ends. Of course, they always tell us after the fact. And, I'm in an opposite corner from them on the recession ending in 2009. I still believe that we have a depression going on in search of a bottom.

Getting back to Big Ben. I told you all yesterday that I thought he would disappoint the markets, as they think he'll throw them a bone on policy, when he's probably only going to talk about the history of the Fed. Remember, he's talking to a bunch of people that don't stray too far from their HP calculators. But, the markets don't listen, especially to a sideshow Harry like me.

Yesterday, saw the currencies drift lower most of the day, while Gold held its early morning gains. This morning, the euro has recovered some lost ground from yesterday, as it has slid below 1.28 at one point in the proceedings.

This morning, the only real piece of news came out of China, where we saw their Trade Surplus Widen in June. Recall the other day I gave you a preview of this data, and told you that the forecasters had imports falling 6% in June, and I said if that holds true, it's not good for the Chinese economy that has had so much emphasis placed on generating domestic demand to offset exports. Well, imports were not as bad as forecast, but exports were worse than forecast, falling 3.1% in June. So, overall, a mixed bag of data here. And I think that you have to consider that the numbers are probably are closer to "real" given the fact that the inflated over-invoicing between China and Hong Kong saw some crackdown last month.

I almost forgot to mention that the Fed's FOMC Meeting Minutes from their last meeting where Big Ben Bernanke threw a cat among the pigeons, will print this afternoon. The markets will be looking for two things. 1. The real "give & go" between Fed Heads on the Tapering decision, and 2. Any discussion about when the Fed Heads think that the first rate hike is going to occur.

Basically, I think all this looking under the hood, while a good exercise and one that should be undertaken more often by both the markets and media, is going to be for naught in the coming months, when the Fed finds that they painted themselves into a corner and the economic data isn't showing them what they need to carry out their tapering.

I was talking to Joseph Stolzer, our research guru over in Wealth Management the other day, and I was explaining that the Fed might jump the gun, become an Oklahoma Sooner if you will, and begin tapering before the unemployment rate hits 7%. How? Well, as the lovely Lisa the economic professor told us last week, unemployment data is a lagging report. So, if Big Ben sees the unemployment rate tick down to, say. 7.3%, he could say, "the trend is indicating that we'll hit 7% in the coming months, so I'm beginning to taper now".

Hey! The sooner he begins the sooner we get to the point where the economy no longer has this prop. And then we'll see if QE was the miracle elixir that the Fed said it would be, or. will the economy resemble Tiny Tim (from A Christmas Carol, and not that ukulele playing whack-job) leaning on a crutch, in need of a new prop? I'm betting a dollar to a Krispy Kreme that it's the latter of the two.

S&P downgraded Italy to BBB from BBB+ yesterday, adding to the drop in the euro during the day. What would you expect from Italy other than a downgrade? Their rating should have never been as high as it was, but then I don't know if you ever read Matt Taibbi from Rolling Stone Magazine, but I find him to be one of the best researchers in the country, and has a flair for expressing how he feels about things with colorful language at times. But Matt explained in a recent article how the ratings agencies worked before, during and even still the financial meltdown. So. if you read that article, you know that I don't need to say anything further here about this. (I think that if you just Google Matt / ratings agencies, you'll probably get a link to the article)

OK. let's move along, these are not the droids you're looking for. The Brazilian Central Bank meets this afternoon, and since they have surprised the markets with rate hikes at their last two meetings, why not make in three in a row! The interest rate futures guys believe that we'll see at least a 50 Basis Points (1/2%) rate hike this afternoon. Some in the markets are keeping the light on for a 75 Basis Points (3/4%) rate hike. But I think that's really going out on a limb, and I'm not going out there that far!

A 50 Basis Point rate hike would bring the total rate hikes that Brazil has made in the past three months to 125 Basis Points (1.25%). Usually, a currency would be flying off the shelves and soaring to the moon if they saw 125 Basis Points in rate hikes. But not the Brazilian real. You see, investors have been treated very poorly here the past couple of years, and it will take a lot more than higher rates to entice investors into dipping their toes back in the real's waters.

The price of Oil continues to rise above $100 at $104.75 this morning. You know that the goings on in Egypt that could very easily spread to other Middle East countries, is responsible for this move in the price of Oil above $100. I did notice the other day when I filled my car up with gas, that the "gas price" hasn't been artificially pushed higher yet. I hope that remains the case.

And I think that knowing that the rise in the Oil price is from fear, this is the reason the petrol-currencies that include: Norway, Canada, Brazil, Russia, and so on, haven't seen their currencies push the currency appreciation envelope too far. The gains in the price of Oil could be wiped out very quickly should a resolution come about.

Remember about a week or so ago, I told you that the drop in the Aussie dollar (A$) and kiwi looked to me to be overdone and that we could see a bit of a rebound? Well, the past couple of days have appeared to me to be that rebound. I spent a lot of time talking about the A$ yesterday, and my outlook for one of my fave currencies of all time, so I won't go there again. And that's the great thing about the Pfennig's new blog-site. All you have to do is to go to: and you can read the archives, and check to make certain that I'm not just making stuff up when I say that "I said this, or that".

We have a current poll on the website, that asks the question, "When do you think the Fed will start to taper Quantitative Easing efforts?" I urge you to go there and make your pick, it's always nice to have a large sample to analyze when it's completed.

Our past two Economic roundtable discussions have contained a lot of talk about the Emerging Markets. Yes, the Emerging Markets have really gotten whacked since the FOMC tapering talk began last month. A ton of investments into these markets left in fear that if the U.S. doesn't need QE / stimulus, then it's getting ready to take off, along with higher interest rates, and there's a reduced reason to look for opportunities in Emerging Markets.

I personally think that these investors that left the party in Emerging Markets did so too early. Sure it seemed like the right thing to do at the time, take profits and go home.. But remember, once of the reasons that Chuck likes the Emerging Markets is that they don't have the debt structures of the established countries of the world (U.S. , Japan, U.K. and Eurozone) And therefore their economies won't be weighed down with having to deal with excessive debt. And, I would think that IF the U.S. is really OK, that would be a good thing for Emerging Markets, because that would be a good thing for global growth. And if the U.S. isn't OK, then the search for alternative investments will return.

The good thing about the Emerging Markets these days is that if you're interested they are having a blue-light special on prices. The bargain basement pricing in Emerging Markets is here, and being someone that usually takes the other side of what everyone else is doing, that's very enticing to me! It's like one of those things that you buy cheap now, knowing that things don't look too good, but you think and hope that somewhere down the line, it would have gained in value. It's why people years ago, hoarded things like gas station signs, and Buffalo nickels, it sure seemed like a dumb thing then, and through the years of ridicule by friend, family and neighbors, and then one day.. You get to have the last laugh!

I saw a story flash across the Bloomberg TV this morning, saying that "investors dump BRICS". Yes, that was a flashy market a few years ago, the BRICS (Brazil, Russia, India, China and S. Africa was added later) And while they just didn't pan out the way I thought they would, I still believe in their power as a whole, with the largest populations, large commodity resources, and lower debt problems. Sooner or later, they'll figure it all out, folks.

The price of Gold is up $5 this morning to $1,256 and change.. We have certainly seen a change in sentiment toward the shiny metal, as the metal bashers have stepped aside and allowed the metal lovers to line up to buy their fave metal. Physical demand is still strong, folks, but will need to get stronger to really get Gold going again. And all this healing in the price of Gold this past week, could get wiped out this afternoon, with the FOMC meeting minutes and Big Ben talking. I don't see it that way, but given a grenade from left field is always possible, we have to be aware.

For What It's Worth. This is a really sad piece today folks (most days are given the things I put in this section!) and I wouldn't blame you if you skipped it and went to the Big Finish. No use beating around the bush, here goes.

"The U.S. Department of Agriculture estimates that a total of 101,000,000 people currently participate in at least one of the 15 food programs offered by the agency, at a cost of $114 billion in fiscal year 2012.That means the number of Americans receiving food assistance has surpassed the number of private sector workers in the U.S. According to the Bureau of Labor Statistics (BLS), there were 97,180,000 full-time private sector workers in 2012. The population of the U.S. is 316.2 million people, meaning nearly a third of Americans receive food aid from the government."

Chuck again. I know that people from time to time need help. Look, I am the son of a truck driver of the 50's & 60's, he was the union steward of the local Teamsters Union. There were so many times when he was on strike when I was a young man, and when he was on strike, there was no income to buy food in our house. There were once 7 Butler kids, so this was no small task to get us fed. When assistance was received there was so much social stigma with it. My mom was embarrassed to go to the store, and once we were off of the assistance, we were off! And I know that most people feel the same way about receiving assistance. But with so many people on the Gov't's list now, you have to wonder if people will fall into a trap of once receiving assistance, continue to receive it, nobody gets hurt, right?

I could go on and on about who wants what out of all of this, but I won't. I just find it very alarming, and as long as those that continue to receive assistance there will be a loss of self-respect and independence. And the America that we grew up with, slowly goes away.

To recap. The currencies drifted lower yesterday, but are attempting to recover this morning. China's Trade Surplus widened in June, but both exports and imports fell, leaving more questions than answers about China and global growth. The FOMC meeting minutes and Big Ben Bernanke speaking is what the markets have been waiting for, and both will be delivered this afternoon, so strap yourself in. And Mike & Sarah Meyer are going to see their first newborn this afternoon. it's a baby girl.

Currencies today 7/10/13. American Style: A$ .9210, kiwi .7860, C$ .9515, euro 1.2825, sterling 1.4915, Swiss $1.0315, . European Style: rand 10.0180, krone 6.1235, SEK 6.7610, forint 229.10, zloty 3.3745, koruna 20.1890, RUB 32.90, yen 100.15, sing 1.2755, HKD 7.7570, INR 59.65, China 6.1652, pesos 12.88, BRL 2.2585, Dollar Index 85.28, Oil $104.76, 10-year 2.64%, Silver $19.35, Platinum $1,372.87, Palladium $709.20, and Gold. $1,256.35

That's it for today. Well. I did another radio interview on Yorba Radio yesterday. Michael Yorba has asked me to be a regular on his show every Tuesday at 2. Here is the radio's website so you can hear what I had to say yesterday in the archives, or cue it up for next Tuesday! I know that I can't do "every Tuesday at 2", but I think most Tuesdays will work. Plus it really takes away from my "nap time" , so I'll have to monitor that! The Blues Image is playing their song, Ride Captain Ride, right now. a good oldie. Sorry youngsters. Good luck today to Mike and Sarah Meyer. Their lives begin to change today, when their baby girl enters their lives. And with that, I hope you have a Wonderful Wednesday!

Chuck Butler
EverBank World Markets

Posted 07-10-2013 3:38 PM by Chuck Butler
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