Daily Pfennig: New & Improved!


By Chuck Butler

Sep 9 2011 9:02AM


In This Issue…

* The President and Fed Chairman get ignored…
* A perfect storm is brewing…
* Gold sees a huge selloff while Chuck types…
* Better data for Sweden…

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

New & Improved!

Good day… And a Happy Friday to one and all! Well, the NFL season began with a bang last night… Of course I didn’t see the game past the first half, but what I saw was great football! And with the void left in me by my beloved Cardinals inability to make the playoffs this year, I was ready for some football! Well… The President announced his “new and improved” jobs plan last night… more on that later… but first…

Front and Center this morning, I want to make a public service announcement, and make every aware that The U.S. has received specific and credible intelligence showing al Qaeda militants in Pakistan may be preparing to carry out car bombings in Washington, D.C., and New York City, timed to coincide with the 10-year anniversary of the Sept. 11 attacks. Be careful out there!

And why do they call it an “anniversary”? A day of that will never be forgotten by those of us that were alive on 9/11/2001… but an anniversary? Oh, well… more on the remembering of 9/11 later in the Big Finish…

OK… the currencies got whacked and whacked hard yesterday, as the risk tolerance for currencies has gone bye-bye for now… But as I said yesterday, the perfect storm is building for a period of dollar strength… Much like my joints ache when a storm is approaching, I feel this is building and unless the Fed does something to undress the dollar again, we could see an extended period of dollar strength… But that doesn’t mean the weak dollar trend is over! The Weak dollar trend will remain as the underlying trend here, waiting for the dollar to slip up again, and then right back on the tracks it will go!

Well.. the President announced his New & Improved Jobs Plan last night… It contains $450 Billion of new spending, although he said it would be paid for by closing tax loopholes, I somehow have a difficult time believing that will happen, and just like all deficit spending in the past, it will show up in the National Debt…

The good thing, for now that is, that didn’t happen is the announcement of a new HIA… I was convinced that he would pound the drum for HIA II… But didn’t… yet…

Big Ben Bernanke also gave a speech yesterday, and was providing some good “sound bites” but overall the markets had heard them all before and when it was all said done… we had Bernanke and the President give speeches on the same day, and the markets? Well, the markets have basically ignored both of them…

Well… the Fed Chairman, Big Ben Bernanke, was pounding the drum for stronger growth this year again yesterday… Big Ben said that the economy would “likely pickup in the 2nd QTR”… OK… now I’ve talked about this before, but we’re already into the 3rd month of the 2nd half of the year, and I’m not seeing it… And if you look at the Trade Deficit details yesterday you’ll see what I’m talking about…

First of all, the Trade Deficit narrowed in July from $51.6 Billion to $44.8 Billion… (that was good!) Exports were strong rising 3.6% VS June (the dollar was weak most of this year, right? ) and imports were down -.2%! What an anemic showing for imports! That means there’s no consumer demand! Why can a duffer at economics like me see this plain and clear, but yet we’re still saying the economy is likely to pickup soon? I guess he has a 50-50 chance of being right here… and when it doesn’t happen, he can always say that “something” else caused it… Because… that’s what economists do…

Well… the euro got hammered yesterday, and brought its pals along for the hammering VS the dollar… European Central Bank (ECB) President, Trichet, deep sixed the euro by downgrading the outlook for economic growth in the Eurozone. He also mentioned that the pressure on the downside for the euro had “intensified”… Nothing like hanging your currency out on a line, eh? As the day went on, it went from a bad performance to a really bad performance… but… at least our other “dollar offset” Gold enjoyed at $50 rise on the day!

And Gold is up another $3 this morning, trading back to $1,874 as I write. Seems like $1,900 is the line drawn in the sand for Gold, for the couple of times that it has reached that level, it has immediately lost a huge amount very quickly… So, for the Gold price manipulators, and again, folks, this is me, my opinion on what’s happening here… there is some evidence to this, but you have to do your own research and after you do, if you don’t agree with me, then you weren’t viewing the same evidence!

Any way… for the Gold manipulators, they have seem to have drawn a line in the sand at $1,900… Now it’s time for the markets to blow them out of the water! Let them take their short positions and go home… don’t go home mad, just go home!

I’m currently reading a report from Wiki-leaks about the Gold manipulation… and here’s the now exposed cable that will soon be read world-wide… The leaked State Department U.S. embassy cable – 09BEIJING1134, can be read at the Wiki-leaks site… I don’t think I can say much more about this except to say that in the cable, it is acknowledged that China is buying and hoarding Gold as a way to lessen the value of the dollar.

OK… I think another reason China has been buying and hoarding Gold is that they would love to back their currency with Gold… Now, it would probably be a percentage backing, like 50%, or 25% backed by Gold… but… think about that, and what I said the other day about China’s steps that they are taking to replace the dollar as the reserve currency with their renminbi… Imagine, that when China decides to float their currency that it has some kind of Gold backing, thus making it a “hard currency” right out of the starters’ blocks… That would give the currency credibility and make it very, very much attractive!

And I’ve stated that in my presentations on the steps that Gold is taking to eventually remove the dollar as the reserve currency… Remember when I told you that the “Dollar Hears a Hu”? when after stating on numerous occasions that their desire to remove the dollar as the reserve currency, China’s President, Hu, said, “the dollar currency system is a product of the Past”

OK… let’s talk about something else! In Canada today, they will have their own version of the Jobs Jamboree… The “experts” believe that employment gains will be around 21k… I truly expect this to be higher, and show a nice improvement over July’s gains of just 7,000… The Canadian dollar / loonie has really been stuck in the mud recently, but shoot Rudy, that’s better than a sharp leaded pencil in the eye! No wait! I shouldn’t say that, as I should be more sensitive, given I have only one working eye!

The Norwegian krone, has really seen a flood of money going to it from Swiss francs, as investors unload francs in fear that the Swiss National Bank will begin to intervene to defend the floor they put in VS the euro…

Speaking of that Swiss move… our friend, Jim Rogers, was talking to CNBC about the Swiss move, and called it, “a huge mistake”… He went on to say… “The move "will work for a while, but the market will have more money in the end than the SNB. The Swiss central bank risks losing "a lot of money buying up lots of foreign currencies which they will eventually sell at a loss," he explained. And then finally added, “Another risk is that the central bank will totally debase the Swiss franc trying to keep Switzerland 'competitive' which will then destroy the traditional Swiss financial industry.”

I haven’t seen Jim a few years, but he looked well on the clip I saw… I’ll let you in on something… Jim, used to be a Pfennig Reader… I don’t know if he still is, but if he is, he’ll let me know!

And in China… they didn’t like the SNB move either! Li, Daokui, an influential economist and advisor to the Chinese Central Bank, said that the SNB move was “like drinking poison to end thirst”…

Ok… stop the presses! Gold has just dropped $30 in a heartbeat! What in blazes is going on here? Is this more price manipulation? Come on… demand is still so freakishly strong for Gold, that it couldn’t be Mom and Pops deciding to sell their Gold all at once at 5:45 in the morning! And the drop in price is gaining strength with Gold down now $35… I shake my head in disgust… total disgust I might add!

Ok, back to regularly scheduled programming… The Swedish krona is stronger this morning, bucking the trend to buy dollars, after a report showed industrial production blew past the “experts” forecasts… This is the first piece of “stronger” or “better” data that Sweden has seen lately, so the pent up demand for the currency is showing after one good economic report.

And then… G-7 begins a meeting today, in France. The Japanese have already stated that they intend to appeal to the group to appreciate Japan’s concern about excessive yen gains… So, there’s a chance that FX moves will be discussed this weekend, although normally, G-7 meetings are pretty void of real stuff!

Then there was this… my friend, Jeff Opdyke, at the Sov. Society did an update on Doug Casey’s original description of what real money was… So, here’s Jeff… “Good money, as Aristotle first laid out in the 300s B.C., must meet four criteria: divisibility, durability, portability and scarcity (another word for Aristotle’s “intrinsic value”). what about gold? Divisibility certainly is possible. Durability and portability are unquestioned. As for scarcity... well, miners around the world produced just 76.8 million ounces of gold in 2010, according to the U.S. Geologic Survey — the equivalent of about a quarter ounce of gold for every American.

Fed Chairman Ben Bernanke with his double-barreled quantitative easing campaigns created through fiat a combined 1.7 trillion dollar units — enough to fatten every American wallet with an additional 5,452 dollar bills.
Which is scarcer?”

Chuck again… Thanks Jeff! I’ve known Jeff for about 8 years, as he used to write for the WSJ… and about 8 years ago, he wrote in Personal Finance about how it would great if U.S. investors could easily invest in foreign currencies… I read that, and sent him an email immediately, telling him about EverBank’s currency products, and thus, we got to know each other!

To recap… The President’s New & Improved Jobs Plan was announced last night, and the markets have basically ignored it… The dollar is swinging a mighty hammer this morning, with most currencies down VS the dollar. Gold is getting sold by the bucket full suddenly, and has Chuck scratching his head and wondering if this is yet another Gold price manipulation… And Sweden printed a stronger than expected Industrial Production number this morning, giving the krona a lift.

Currencies today 9/9/11… American Style: A$ $1.0515, kiwi .8295, C$ $1.0070, euro 1.3815, sterling 1.5945, Swiss $1.1370, … European Style: rand 7.25, krone 5.4420, SEK 6.4340, forint 202.75, zloty 3.12, koruna 17.70, RUB 29.83, yen 77.80, sing 1.2245, HKD 7.7940, INR 46.56, China 6.3880, pesos 12.63, BRL 1.66, dollar index 76.62, Oil $87.65, 10-year 1.99%, Silver $41.41, and Gold… $1,833.50 (still dropping like a rock this morning) and since it’s a Friday, don’t forget to check out the debt clock, click here:

That’s it for today… Well.. Sunday will mark a decade since the attacks on the U.S. soil that happened on a bright and clear Tuesday morning, that I will never forget… the hair on the back of my neck stands up just thinking about all that… We had new columns put on the front of our house last year, and my beautiful bride has not allowed me to tack up a flag holder on one of them yet… So, I’ll have to figure out another way to fly old glory on Sunday… we all should! Ok… before I can’t see what I’m typing from the water in my eye, I’ll switch gears here… My beloved Missouri Tigers have a very tough assignment tonight in the desert, late night with Arizona State… I’ll have record it, for there’s no way I can stay up that late… game time is my usual bed time! And finally, the Rams begin their NFL season on Sunday… Good luck to both teams! And then we had better get going here, and call this a Fantastico Friday… Now go out and have one!

Chuck Butler
EverBank World Markets


Two decades ago, Chuck Butler embarked on his extensive career in foreign investments as the Director of Operations for the Fixed Income Division of the Mark Twain Bank. He oversaw the clearing and custody of all bond department trades and Mark Twain portfolio transactions.