Russia Proposes Alternative To Strike.
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In This Issue.

* So-called safe haven dollar gets sold.

* Gold & Precious Metals get sold.

* Chinese Industrial output beats expectations.

* Rupee enjoys best 4-days since 1973! .

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

Russia Proposes Alternative To Strike.

Good day. And a Tom Terrific Tuesday to you! The first song out of the starters blocks this morning, is the great song by Van Morrison, Into the Mystic. A great start to the day, I must say! Thanks to all who sent along notes to me yesterday... I always want to make certain that those that take the time to respond to me are acknowledged as doing so. I love the responses, as long as they don't get nasty. And I have to say that it's been awhile since that's happened. So. I've got that going for me, eh?

Well, the antipodean currencies of Australia and New Zealand are the top performers overnight. I'm still waiting for Reserve Bank of New Zealand (RBNZ) Gov. Wheeler to come out and talk down kiwi, but for now, it's all seashells and balloons for these two currencies, which is a welcome sight for holders of the two, given the downward direction these two have been on the past 5 months.

I think that the skinny on these moves higher is in the stories surrounding the reduced heat on a military assault of Syria. Yesterday, Russia proposed to negotiate with the Syrian Gov't to hand over the chemical weapons. The U.S. President thought that to be a worthwhile exercise, and said if it were successful the strike could be called off. Here in the U.S. the support for a strike is waning. the polls show that the U.S. population as a whole are not in favor of another war with a country that has done nothing to us. So, all this reduced tension, has allowed the currencies to rebound from that so-called flight to safety that has been going on, as the tensions rose over Syria.

OK. So, we have that going for us, right? I mean, no war is better, right? Of course it is, especially in this case. And I'll leave it at that. The only reason I talk about it, is its affect on the currencies.

The other thing that has given the two top performers overnight, a boost, is the news from China that adds onto the better than expected exports data from the weekend. Last night is was a stronger than expected Industrial Production number for August, which printed at 10.4% VS 9.9% last year. I would have to think that by now, given all the better than expected data that we've seen, all the negativity toward the Chinese economy would have been thrown out the window. And I would point out once again that the so-called experts on China, got it all wrong again. They've become like the weatherman. Wait, that's being mean to weathermen! These so-called Chinese experts should be made to write 100 times on the blackboard, "that I was wrong about the Chinese economy, again". HAHAHAHAHAHA!

Speaking of HAHAHAHAHAHA! The new Mogambo Guru book is out! Junior Mogambo Ranger Doug, did a fabulous job of putting this together, and you can go to Amazon and buy it now, by just referencing: Mogambo Guru. I was asked to review the rough draft of the book last year, and it brought back so many memories of what's happened over the years. For those of you new to class, and you don't know who I'm talking about, the Mogambo Guru is a friend of mine, who is Austrian Economics tried and true. I don't think JMR Doug will mind if I give you a brief snippet of the Mogambo.

On February 23, 2004, the Mogambo Guru wrote: "The American economy will probably not recover for at least a decade. There is no reason to expect that it will. The immutable laws of economics have not gone away, nor have they changed over much in the history of the world."

Long live the Mogambo Guru! And congrats on the new book!

OK, back to the currencies.. So, the economic data from China was better than expected once again, and the Aussie and New Zealand dollars are the top performers overnight. Yesterday, we saw the euro really drive higher throughout the day. This morning, the single unit is a bit lower, but basically flat at this point in the proceedings. Remember, the euro is the offset currency to the dollar. So, when people/ investors, etc. unwind their so-called safe-haven dollar buys, the euro is the main beneficiary. The euro rising in value doesn't mean that things in the Eurozone are all peaches and cream, it could very well mean that, but it doesn't have to mean that. Instead, a rise in the euro's value could be the result of unwinding dollar positions. And I think that was the case yesterday.

In Norway, elections are being held, and it appears that a new Gov't might win a majority. I don't expect any major changes here, so it's business as usual for Norway. The Norges Bank, Norway's Central Bank, is dealing with a real problem. A housing bubble and now an ever present rising inflation rate. Norway's August inflation rate surprised the experts to the upside once again, printing at 2.5% VS a year ago, (consensus was for a 1.9% gain).I read where 4 of the last 5 inflation prints have beaten the forecasts to the upside. I would have to think that the Norges Bank would see this as a trend, (hopefully they do, because I do!) and act appropriately.

The Norges Bank has always acted appropriately in the past, so I don't think they will fail to do so now. The markets believe in them too, because the krone is on the rally tracks this morning, dropping back below the 6 level. The Norges Bank meets next Thursday (after the Fed's announcement of Septaper), but the least the Norges Bank should do is make a very hawkish statement, if not hike rates. The markets are keen to this, and thus buying krones this morning.

When I was first asked why I included Mexican pesos in the new Evolving Markets MarketSafe CD, I pointed out that the new Mexican President, Nieto, had proposed a new pact for Mexico, that would reform things like: banking, education, taxes and other things. That would mean that the Mexican economy would be "evolving"! Well, President Nieto, has pushed through the first of his reforms, and now is tackling the fiscal reform that will show up in the 2014 budget. I don't like that the deficit could be 35% higher than in 2013. But it supposedly is a onetime thing. Hey, do you think that former President Bush II, thought the same thing when he first introduced a Budget Deficit? Oh well. Good news, and bad news for Mexico. the peso is still very cheap, and until some of these reforms get passed and begin working through the economy, the peso will remain cheap. Of course that's just my opinion, and I could be wrong.

The higher interest rates and fears that the Gov't will intervene to support the currency has been manna from heaven for the Brazilian real. The real has really taken a liking to these supports. But the move higher has been very swift, and that scares me. I keep waiting for the Brazilian Gov't to pull these supports out from under the real just like they did before! Maybe they will, maybe they won't. That's what makes the real so volatile. But for now, the supports are there, and the real is responding positively.

And as long as I'm on this Emerging Markets theme this morning, I might as well talk about how the Indian rupee has now booked 4 consecutive days of rallies, all from the first day on the job changes made by Reserve Bank of India (RBI) Gov. Rajan. Geez Louise, if he can get this kind of response from the markets on making just one change, you have to wonder when he'll show us what else is up his sleeve! The Bloomberg says that this is the biggest 4-day gain in the rupee since 1973. The 5.6% gain in the past 4 days, has cut into the huge losses of the rupee this year, but have a long way to go to erase them!

Speaking of 1973. 40 years ago. I received my notice in the mail that our 40 year High School reunion is coming up. The Roosevelt High School (of St. Louis) Class of 1973. OMG! 40 years ago? AYE, YAY, YAY! I do plan on attending.

OK. Speaking of stories on the Bloomberg. I also this one that caught my eye. "The dollar is moving in tandem with stocks for the first time since 2008. The 90-day correlation between the U.S. dollar index and the S&P 500 Index turned positive last month, indicating the greenback is becoming more appealing as the outlook for U.S. growth improves."

I tell you this because, you know me. I think that the economy's improvement has all been tied to stimulus. So, this could be a two-edged sword for the dollar, folks. Here's the skinny on what I'm talking about. First, I've said this before so it should come as no surprise, that I think the Fed will begin to taper and then within 6 months realize they should not have, as the economy reacts negatively to a reduction in stimulus, and the Fed comes back to the bond buying table. Or. 2. The Fed delays tapering. that signals to the markets that the economy isn't strong enough. Both of these outcomes will not be good for the dollar.

And before I head to the Big Finish. Gold is off by $14 this morning, as the need for safe havens hits the shiny metals too. Don't forget we still have the Debt Ceiling negotiations next month and other things that will, in my opinion, underpin Gold.

For What It's Worth. from the Globe and Mail. "Tax records will be shared around the world by 2015 as part of a G20 pledge to crack down on individual tax cheats and global corporations with complicated arrangements aimed at paying as little tax as possible.

The topic of taxation in a global economy has become a major political issue of late, as multinational firms like Apple and Starbucks have faced scrutiny over their corporate structures. Further, investigative reports into the use of offshore tax havens by the world's wealthiest individuals added momentum to the view that governments are getting short-changed of much needed revenue.

As business increasingly moves online and international, cash-strapped governments approved an aggressive timeline to adopt the automatic exchange of tax information among the G20. The deal was solidified after China, the last holdout, agreed to the plan just days before the summit in St. Petersburg.

"We are committed to automatic exchange of information as the new global standard," states the G20 final communiqué. The G20 says they will work out the details of the plan throughout 2014 with the goal of having the system in place by the end of 2015."

Chuck again. Reminds me of: If you drive a car, I'll tax the street, If you try to sit, I'll tax your seat, if you get too cold, I'll tax the heat, if you take a walk, I'll tax your feet. Cause I'm the taxman, yeah, I'm the taxman, and you're working for no one but me. - The Beatles.

To recap. The heat / tension that surrounded the calls for a military strike on Syria, has subsided for now, as Russia proposes a plan to get the chemical weapons. This has removed the need for safe havens, and the dollar is getting sold this morning. It all began yesterday, suddenly I'm not half the man I used to be, no wait! I was talking about how yesterday the currencies began to rally, and the A$ and kiwi were the best performers overnight.

Currencies today 9/10/13.American Style: A$ .9285, kiwi .8050, C$ .9665, euro 1.3245, sterling 1.5705, Swiss $1.0695, . European Style: rand 10.0225, krone 5.9450, SEK 6.5635, forint 226.25, zloty 3.2190, koruna 19.50, RUB 33.07, yen 100.35, sing 1.2690, HKD 7.7545, INR 63.78, China 6.1612, pesos 13.08, BRL 2.2750, Dollar Index 81.89, Oil $108.46, 10-year 2.95%, Silver $23.25, Platinum $1,477.03, Palladium $686.13, and Gold. $1,369.26

That's it for today. Well. tomorrow is the funding deadline for our Evolving Markets MarketSafe CD... I know it seems like we just announced it. Tomorrow is known for something much more than our funding deadline. I don't need to remind everyone what that is. An early start to the first Monday Night Football Game, allowed me to watch the first half, which was very interesting. Went straight home to my recliner yesterday, and fell asleep for about 4 hours, which is longer than usual for me, but awoke to feeling better. So I had that going for me! The first week of Fantasy Football was good, as my team won the first matchup . And the Cardinals are back in action tonight. It could be a record day for heat here, so stay cool. And with that, I hope you have a Tom Terrific Tuesday!

Chuck Butler
EverBank World Markets

Posted 09-10-2013 5:49 PM by Chuck Butler
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