Economic Data Returns.
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In This Issue.

* Range trading for the currencies.

* Gold & Silver soar on Friday.

* Days of doom & gloom for euros are over.

* The last time the Treasury bubble burst.

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

Economic Data Returns.

Good day. And a Marvelous Monday to you! Last week was void of economic data, and this week will end for all intents and purposes, early due to next weekend being the Labor Day Holiday weekend. But when we all come back to our desks, the following week it will be Fed FOMC meeting talk 24/7. I can hardly wait. NOT!

The week (last) also ended with Gold soaring higher by $20 on Friday, and getting all-so-near the $1,400 figure. Last week, I did an interview on the and was asked if I thought Gold could continue to be well bid if the Fed was undertaking tapering. I said yes, because there was so much uncertainty in the world. Start counting the "hot spots" economically or population wise and you'll run out of fingers and toes to count on! But something that I should have talked about as a reason I thought that Gold would remain well bid, was something that Mike Meyer talked about this past weekend in the Sunday Pfennig & Pfriends edition. The debt! Yes, we make be tapering, but we'll still be adding to the debt, and. let's not forget the balance sheet of the Fed, that now has tons of mark-to-market losses due to the rising Treasury yields. Oh, and guess what the U.S. is thinking of doing now. take a "bigger role" in Syria. UGH!

And don't forget. Big Ben Bernanke and the Fed Heads have done everything, said everything, and written everything they can in attempt to make the markets understand that tapering isn't a change in monetary policy, that interest rates will remain near zero through next year. So, short-term rates will remain near zero, and that should continue to support the price of Gold.

The currencies last week were very much range traded, with little moves up, countered by little moves down. The euro continues to trade in the 1.33 handle, but is beginning to look stale there, and needs to make a move higher soon, or see the markets move it back down. The European Commission reported last week that Consumer Sentiment increased to a 25-month high this month. Progress, as far as I'm concerned, continues to be made in the Eurozone, and the days of "gloom and doom" are in the rear view mirror. But remember the debt crisis wolf is always at the door here.

The markets just don't know which way they want to take the Aussie dollar (A$). One day they are pushing it higher, and the next day they are pushing it down. (I know I said that earlier, sorry to repeat) It's all about the Fed's decision to taper either in September or the following meeting 6 weeks later. Or never. I'm still of the belief that the Fed will begin to taper in September, no matter what the economic data says. They'll spin it so that the data says what the Fed Heads want it to say, and they'll announce the start of tapering. I'm just saying what I see folks, not what I want to see, for that would do us no good. Nobody listens to me until it's too late!

The U.S. economic data returns this week, and it will get squeezed in before the boys and girls head to the Hamptons. First up on the economic data docket this morning is July's Durable Goods Orders, which look like they will completely reverse June's 3.9% gain, with a -4% decline. One would think that data like this would put the Fed's tapering back on the shelf, but again, let me repeat, I don't think the data has anything to do with the Fed's wanting to start their tapering in September. Oh, and for those of you keeping score at home, on Friday, the U.S. announced that New Home Sales in July dropped -13.4%... And the previous 3 months data was revised downward by 69,000 homes that previously were reported as sold.

Friday morning, I told you about how the Brazilian Central Bank (BCB) had announced that they had approved a line of $60 Billion to intervene in the currency markets to sell dollars and buy reals. That news really boosted the Emerging Markets' currencies and the two best performing currencies for one day at least were the real and the Indian rupee. But as they say, what a difference a day makes. the rupee has given back all the lofty gains it recorded on Friday. I had mentioned to the desk, and anyone that was listening, which was probably very few, that I was concerned about the rupee's rapid rise on Friday, and that we might not still have the all-time record lows to buy at when it comes time to open our Evolving Markets MarketSafe CD. (see ad at the top, should you wonder what I'm talking about) But not to worry, we're back to those very low levels this morning. I'm not sure how to act with that!

Neil Young's The Needle & the Damage Done is playing right now on the IPod, and for a minute I was taken back to my guitar playing days, when I would sit on a stool during a band break and play by myself, and this song was a staple of my repertoire. Not that anyone cares about that any longer, but I was having a flashback that I thought I would share with you!

OK. London is on Holiday today, so the markets are already thin to start the week. New Bank of England (BOE) Gov. Mark Carney, will make his first public speech this week. It's a toss-up on whether Carney will deliver a dovish or hawkish speech. I think the markets are wanting a dovish speech, so we'll see what side of his bread gets buttered this week.

The IMM Futures Positions report from late last week, showed that past two weeks, US Dollar (USD) long positions have been reduced, with the best beneficiary being euro long positions. I report on the Futures Positions changes to show you what the Markets are thinking. Of course that doesn't mean the markets can't change their minds on a dime. Of course they can!

Well, it's good to see other people joining me on my bandwagon where I called for the Treasury Bubble to burst, and the consequences of keeping yields artificially low for so long was going to really cause a problem in the economy. Like it did the last time bond yields rose significantly. Do you remember when that was? How about 1987. and what else happened in 1987? (besides the Cardinals getting robbed of their 10th championship by the wind tunnel in the Metrodome?) How about the stock market crash!

OK. so there was an article on MarketWatch yesterday written by Brett Arends, that covered this same thing, so let's see what Brett had to say. " Ordinary investors should focus on the bigger picture. The Fed has announced that the era of Quantitative Easing (QE), and aggressive manipulation of long-term interest rates, is coming to an end. We are about to move, sooner or later, back to an era of "normal" interest rates. Typically, that would mean 10-year Treasury rates about two percentage points above expected inflation. Meaning today's 2.88% yield would become more like 4.5%.

At the start of May, the U.S. Gov't could borrow money for 10 years at 1.6% interest. Today, barely 4 months later, it has to pay 2.88%. "

Chuck again. Yes, in 1987, the interest rate on 10-year Treasury Notes surged 45% right before the October stock market crash. Compare that with the 80% hike that's just occurred now? Uh-Oh!

Before I head to the Big Finish today, I wanted to tell you about something that I just read that made my blood boil. I just got back from yelling at the walls, folks. Did you know that the Senate Finance Committee will not see any recommendations that they make as to which tax deductions they would like to see included in any possible tax reform, for 51 years, or 2064? What are the lawmakers afraid of voter backlash? Isn't that what being in office is all about? You either please the voters or get voted out. But when the public won't find out what you've been up to for 51 years, that's not right!

For What It's Worth. I saw this on Ed Steer's letter from Saturday, that he printed from The IMF's Christine Lagarde Is sending Big Bernanke a cryptic message. See if you can decipher what that cryptic message is.

"The head of the International Monetary Fund cautioned the world's major central banks Friday not to withdraw their unconventional support for weak economies too soon. IMF Managing Director Christine Lagarde said stimulative policies are still needed in key regions, especially Europe and Japan, which have struggled with prolonged weakness.

Lagarde and many global central bank officials fear the increased risks of a sharp economic slowdown in emerging markets while the U.S. Federal Reserve is signaling that it could slow its bond purchases later this year if the U.S. economy continues to improve. The Fed's bond buying has helped keep U.S. interest rates near record lows.

"Even if managed well," Lagarde said of a central bank's exit from easy-money policies, that could still present an "arduous obstacle course" for other countries. Lagarde said what's needed is greater policy coordination and cooperation for the sake of the entire globe."

Chuck again. OK. I could tell you, but that wouldn't be any fun. The best, response will be printed tomorrow in the Pfennig. But remember, this is a family letter! HA!

To recap. A trading range bound market for the currencies, all last week due to little to no economic data, will see more data this shortened week. Gold had a very strong performance on Friday, and traded within spittin' distance of $1,400. Rupees and reals rallied strongly on Friday, but rupees are seeing those gains wiped out this morning. Chuck gives his thoughts on why Gold will remain well bid in the face of Fed tapering. Of course that's just his opinion and he could be wrong!

Currencies today 8/26/13. American Style: A$ .9015, kiwi .7835, C$ .9505, euro 1.3375, sterling 1.5575, Swiss $1.0825, . European Style: rand 10.2325, krone 6.0415, SEK 6.5245, forint 222.55, zloty 3.1635, koruna 19.1865, RUB 32.96, yen 98.60, sing 1.2795, HKD 7.7550, INR 64.58, China 6.1680, pesos 13.03, BRL 2.3480, Dollar Index 81.44, Oil $106.52, 10-year 2.83%, Silver $23.98, Platinum $1,535.25, Palladium $753.25, and Gold. $1,394.19

That's it for today. We have a large number of August Birthdays in the office here, so Happy Birthday to everyone. Cardinals take 3 of 4 VS the hot Braves, so I think I'll take that any day! Just gotta keep it going! The College Football season starts this week (Thursday night!) and my beloved Missouri Tigers will start their second season in the SEC. I don't expect great strides to have been made from last year's debacle, but baby steps will be welcome! A BIG Congratulations to my wife's dad, Larry Stringer, who is a retired Captain of the St. Louis Fire Dept. On the side, Larry used to be a Shriner's Clown. Well, this past weekend, he was awarded with a lifetime achievement / President's award for his contributions to the Clowns. Larry has Macular Degeneration, so he doesn't see much any longer, But I'm sure he saw the pride in the eyes of his daughters that were there to share his moment with him. And with that. Let's get moving on a Marvelous Monday!

Chuck Butler
EverBank World Markets

Posted 08-26-2013 12:43 PM by Chuck Butler
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