A Coming Silver Shortage?
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In This Issue.

* Currencies attempt to bounce back.

* UBS & Citigroup say euro to drop.

* Chuck says hogwash!.

* Krona best performer overnight.

And Now. Today's A Pfennig For Your Thoughts.

A Coming Silver Shortage?

Good Day! . And a Marvelous Monday to you! I sure hope all the Mothers out there had a grand day. I think the ones at my house did. But then I can't be sure, as no one said a word about their day, and you know me, I think it's all sunshine and lollipops all the time! HA! My beloved Cardinals hung on to win one of 3 and avoid getting swept by the Pirates last night. Have I told you how much I dislike Sunday Night games? I'm sure I have so I won't get into that again, other than to say, I dislike Sunday Night games!

Do you know what else I dislike very much? OK, if you guessed disco music, then you would technically be correct! But what I'm talking about here is when I come in, and turn on the screens, and see the news headlines, that they've rehashed for hours, that if you're just now looking at them, they seem to be "new". And it's not until you see the actual currency prices that you can tell that the news story is "old". And so it was this morning, as I saw a headline story talking about the euro being down. But when I turn on the currency prices, I see that the euro is up this morning.

I see the UBS and Citigroup are calling for a decline in the euro. I bet they wished they had done that last week when it looked as if the euro was to hit 1.40 and not look back. They would then seem like geniuses! But here's my take on the euro folks. Now, I'm not saying that the euro can't see more weakness, but to me, it appears that the selling last week was a knee jerk reaction to what the markets believe will be European Central Bank (ECB) action in June. Therefore, all the bad stuff that could come from ECB action in June, has already been priced in! I would take the other side of that bet with UBS and Citigroup. that is if I could. But to them, I'm not even a pimple on their back side!

I see that an ECB member, Weidmann, who just happens to be considered, a hawkish member of the ECB, is scheduled to speak this week, not once but twice! That's a double dose of hawkish tone coming from the ECB this week. And if we get some stronger data from the Eurozone, as is expected this week, that could very well be good medicine for the euro. Tomorrow we get a ZEW report, and as the week goes on, Industrial Production, CPI GDP and some other 3rd tier reports. So, chances are cause I wear that silly grin, the moment you come into view. No wait! What I'm trying to say is that chances are that the euro could see some recovery this week, so take that. UBS and Citigroup! HA! Come on Chuck, that was no time to pull out that Johnny Mathis song, but, I, I, was just typing and it came out that way. OK, you're forgiven.

The Commodity Currencies / dollar bloc-currencies of: Australia, New Zealand, and Canada are all stronger this morning, as they attempt to rebound from last week's sell off late in the week. So, let's take a look at all three this morning.

Batting first, and hitting .9375, is Australia. With interest rate differentials ruling the currency air waves once again, Australia is situated just fine. They don't own the largest rate differential, nor do they have the smallest one when compared to the U.S., Eurozone, and Japan, and shoot Rudy. even the old guard U.K.. So, sort of like Goldilocks, the Aussie dollar (A$) is just right. Australia will announce their federal budget tonight, there shouldn't be any surprises.

Batting second and hitting .9180, is Canada. The Canadian dollar / loonie, got hit on the chin last Friday, when the Canadian jobs report showed that employment unexpectedly declined for the 2nd time in the last 3 months. But as with most economic data reports, that happen late in a week, the weekend heals all that ails the currency. And so it is with the loonie this morning, albeit a very small gain, but a gain nonetheless!

And Batting third and hitting .8625, is New Zealand. In baseball, your number 3 hitter in the lineup is your normally your best hitter, and so it is with this lineup of currencies. The New Zealand dollar / kiwi, enjoys the best rate differential of the dollar-bloc countries, and the best prospects for additional gains to that rate differential difference, as I still think that the Reserve Bank of New Zealand (RBNZ) has two more rate hikes up their sleeve this year. That's one of the reasons RBNZ Gov. Wheeler had to go swinging his "diss the currency stick" last week. But the RBNZ had to be happy about what their two previous rate hikes have already achieved, which is a drop in the bubblicious prices of houses.

The best performing currency overnight is the Swedish krona. the key to the krona's success in gaining VS the dollar overnight, when the Norwegian krone couldn't eke out a gain, was a report on Swedish House prices. The Swedish House Price Indicator rose to a 60 level in April VS 55 in March, and that news has the rate hike campers out in the street again. We see this periodically in Sweden, the krona jumps higher and leads the pack overnight at times, and then the rest of the time it drifts along, with no clear direction.

I'm not giving up on the krona or the krone, folks. both of these countries have excellent fundamentals, and one of these days, Alice!

The Indian rupee sure has been taking a ride on the rally tracks lately. Overnight the rupee slipped below 60 (rupees are a European priced currency which means as the price drops the greater the return VS dollars) There's an election going on in India right now, and the exit polls show that the main opposition party will have victory. the Indian people have grown tired of the ruling party's corruption scandals and economic slowdown. So, in change lies opportunity, right? That's what the markets feel will be the case for India. I think that as long as the Reserve Bank of India (RBI) keeps their Gov. (Rajan) then they'll be OK.

Gold is up $7 this morning, but still below $1,300. More uncertainty in Ukraine over the weekend, has led to Gold being marked higher this morning. Again, I'm of the opinion that with all that's going on in Ukraine, that Gold should be kicking tail and asking names later. And I don't see any resolution to the conflicts and tensions and uncertainty in Ukraine, any time soon.

I was doing some reading on Friday, and came across something that Silver guru Ted Butler (no relation that I know of) wrote about Silver. Ted was quite happy about the fact that he received some correspondence from the GAO (Gov. Accounting Office) that they were looking into his allegations of Silver price manipulation. But the next thing he said really caught my eye. "After more than 25 years, I know better than to place all hope for ending the silver manipulation on any one government agency. Besides, I know the coming silver shortage will accomplish that in time anyway."

The comment about the coming silver shortage, really caught my eye.. So I began to do some additional research on this, and found out that for many years, the world used more Silver than it has produced. But I bet if you asked Joe on the street, he would probably say, "Shoot Rudy, there's more Silver in the ground than you can shake a stick at". And he would be wrong!

Many financial analysts, investing experts and even geologists believe that a Silver shortage is upon us. Peak Silver if you will.

Now, knowing this part, the next part will lead you to believe, and that is if you believe in supply and demand dictates price, that Silver should be on the road to rally town, yeah, yeah, we're going to rally town, yeah, yeah, we're going to have some fun, we're going to fool around, we're going to rally town!

According to metal expert Luke Burgess, "Despite the lack of global stockpiles, new technology will continue to discover more industrial applications for silver, putting a further strain on world supplies." Right in line with this assertion, the Silver Institute predicts that silver demand for industrial purposes will increase by 36% by 2015.

Uh-Oh.. increased uses equals increased demand, and with limited supply.

The U.S. Data Cupboard has the Monthly Budget Statement for April today. The April statement has been quite interesting these past few years, given that April is the collection month of taxes (for most) and in the past few years, the Gov't can't even book a gain in April. So, we'll have to see what this year brings us. I suspect, a deficit, as usual. And then we'll see the color of the 1st QTR Mortgage delinquencies and foreclosures. Not that they are market moving data prints, but in my mind they should be!

Before I head to the Big Finish today, Chris sent me this the other day, and since it mentions my economics mentor Hy Minsky, I knew it had to be something that you would like! So, here's a guy talking about risk.

An inherent level of systemic risk? Most people intuitively feel Karl Popper's observation that: "In an economic system, if the goal of the authorities is to reduce some particular risks, then the sum of all these suppressed risks will reappear one day through a massive increase in the systemic risk and this will happen because the future is unknowable". In other words, suppress risk somewhere and it comes back with a vengeance to bite you on the derriere at some later date. Look at 2008 as an example: we cut up credit-issuing risk into tiny parcels and distributed it across the system through securitization, only to see the banks take on a lot more leverage and ultimately sink their balance sheets on instruments they failed to understand. Hyman Minsky summed up this inherent contradiction well when he stated that "stability breeds instability". In other words, the more stable a thing is, the temptation rises to pile on leverage, which makes that "something" more unstable on the back end.....leading to a Minsky Moment"

Chuck again. Do you know how to reduce overall risk in your investment portfolio? Come on, I've talked about this for years, and years now! That's right, it's a proven fact that by adding currencies and metals to your investment portfolio that you reduce the overall risk of that portfolio.

For What It's Worth. Well, not that the country will deal with this for another year, as the lawmakers extended the government's borrowing authority to next March, It's nice to know that should they reach an end, that the decisions on who to pay could be worked out. I found this on Reuters and for some reason I thought it to be important. It's the debt, Chuck! Oh, yeah, that's right!

"The Treasury Department has admitted for the first time that the government is technically capable of prioritizing payments if Congress triggers a default crisis by failing to raise the country's borrowing authority.

In a letter to Republican Congressman Jeb Hensarling, a senior aide to Treasury Secretary Jack Lew said the New York Federal Reserve, which pays the principal and interest on government debt, would be "technically capable" of continuing to make those payments while Treasury halted other payments if the United States was unable to borrow more money. The official stressed, however, that such a system is untested.

Lew and other Treasury officials insisted during last October's debt limit crisis, when the U.S. came close to defaulting on some government obligations, that "prioritization" - a contingency strategy where bond payments are made while other outlays such as Social Security payments are halted - was not feasible.

In testimony to Congress, Lew said last October the government's payment systems weren't designed to decide who gets paid and who doesn't. "It would be chaos," Lew told Congress.

During the debt ceiling crisis last year, when House Republicans threatened not to extend the country's borrowing authority, Obama administration officials were at pains to dismiss the idea of any contingencies, lest that encouraged enough lawmakers to take the country over the brink and into default.

Yet lawmakers and analysts have long suspected that in the event of a default, Treasury and Fed officials would seek to keep current on bond payments to keep investors from panicking, while halting other payments as cash reserves ran out."

Chuck again. Well, that's a "nice to know" thing, eh? I sure hope we don't ever get the opportunity to see if it works! But somehow in the back of my mind, I'm thinking that come next March, we will.

To recap. The Dollar-bloc currencies of Australia, Canada and New Zealand are all back on the rally tracks this morning, as is the euro. Has all the additional stimulus been priced in for the euro? Chuck thinks it could be. Swedish krona is the best performing currency overnight, and the Indian rupee slips below 60, on exit poll results. Chuck talks on end about Silver, this morning, so make sure you check that out!

Currencies today 5/12/14. American Style: A$ .9375, kiwi .8625, C$ .9185, euro 1.3760, sterling 1.6900, Swiss 1.1270, . European Style : rand 10.3360, krone 5.9155, SEK 6.5530, forint 220.60, zloty 3.0400, koruna 19.9170, RUB 35.19, yen 101.95, sing 1.2505, HKD 7.7515, INR 59.84, China 6.1625, pesos 12.93, BRL 2.2120, Dollar Index 79.84, Oil $100.25, 10-year 2.64%, Silver $19.44, Platinum $1,436.13, Palladium $806.56, and Gold. $1,294.93

That's it for today. Well, it's back! What's back? The heat is back! Not that I mind the heat outside, in fact I welcome it! It's the heat in this office on Monday mornings. I've complained about the sauna during the summer months for years now! Oh well, what am I going to do about it? As Edwin Starr sings: Nothing, absolutely nothing, say it again! The Lindbergh boys' Water Polo team got the playoffs started in the right direction with a romp on Saturday, now the getting' is going to get tough. I had three turkey breasts on the Big Green Egg smoking up a storm yesterday. They were delicious! Our little Christine returns from her fabtabulous trip to Italy, today. We sure missed her last week! My morning sickness finally ended yesterday morning. I even got to drink a cup of coffee while reading the Sunday newspaper. And no sign of it this morning, so I'm past that, thank goodness! I gave the Big Boss, Frank Trotter, a ride last week, and he had a chuckle at some of the songs being played on my XM/ Sirius 60's station. I was just reminded of that, when the Buckinghams song: Don't You Care, just played. OK. welcome back Christine! And I hope everyone has a Marvelous Monday!

Chuck Butler
EverBank World Markets

Posted 05-12-2014 12:09 PM by Chuck Butler
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