In This Issue   Flight to the socalled safe h

first_imgIn This Issue. *  Flight to the so-called safe havens returns. *  Traders get a grip on the rising euro.. *  Poland to print their very first QTLY Trade Surplus! *  IMM Futures Positions see USD longs plunge! And, Now, Today’s Pfennig For Your Thoughts! U.S. Gov’t Gets Ready To Have Partial Shutdown. Good day.  And a Marvelous Monday to you! It’s the last day of September, and the last day of the 3rd QTR. WOW! 3/4’s of the year is in the books. All that economic growth that the Fed has been talking about that was going to take shape in the second half of this year, had better get on its horse or else, we’ll be talking about the last day of the year, and still be looking under rocks for that pick-up in economic growth that was supposed to be taking place.  Of course, we all know for a fact that those same calls for economic growth in the 2nd half of the year, have been taking place the last few years, without anything happening, so we’ve got that going for us, right? It wouldn’t take much for me to get on my soapbox this morning, and just let ‘er rip. But, then I probably wouldn’t be allowed to write to you tomorrow, so, I guess I’ll save all my soapbox speeches for the Butler patio. The Walker Brothers are singing When you’re without love on the IPod to start the day, so that calmed me down big time. So, now that I’m properly prepared to bring you today’s Pfennig, Let’s go! Well, while we were all getting giddy here in St. Louis, as our beloved Cardinals swept the Cubs and won the Central Division, our elected officials in Washington D.C. did nothing to avert a partial Gov’t shutdown that would take place at midnight tonight.  That would mean 800,000 federal workers who would be sent home tomorrow. Hey! I’ve got an idea to float around here, let’s throw it up against the wall and see if it sticks!  Let’s see how the Gov’t gets along without those 800,000 workers, and maybe, just maybe, they don’t need all them. OK, ideas aside, this partial shutdown would see national parks, and IRS centers close (OK, I’ll take one without a fight!), and those wanting to renew passports will have to wait. The Biggie here is that the backlog and from what I hear, that backlog is awfully long, but the backlog of veterans’ disability checks could increase.. So.. The strange trade mentality of traders see this as a reason to buy the so-called “safe haven” assets like Treasuries, dollars, yen and francs.  OK. I know I’ve gone through all this before probably going on 100 times by now, but these assets are the furthest things from “safe havens” in my mind!  But the markets are so drawn to these assets in times like this, and there’s no fighting city hall on this folks. It is what it is. So, if these assets are getting bought, that would mean the other risk assets of stocks, commodities and most currencies are getting sold.  The euro has fallen back below 1.35 this morning, but the move is small in nature, as the markets try to come to grips with the recent trend to buy euros and sell dollars. One of the currencies that is seeing green this morning is the Aussie dollar (A$). In recent days of trading, we’ve seen the euro and A$ move in opposite directions. If the euro is up, the A$ is down, and vice versa.  Doesn’t make much sense to me folks. but, that’s what the markets have decided is the trade. The A$ is well above 93-cents this morning, and that’s a good direction for the recovering currency.  But it’s not all seashells and balloons in Australia. and in an effort to bring you both sides of the ledger here are my friends over at RBC. Well, I was doing some reading the other day, and found a research paper by my friends over at the Royal Bank of Canada (RBC).  In the research they go through all the reasons they believe that the markets are being premature with their call that the Reserve Bank of Australia (RBA)’s rate cut cycle has ended, and then too that the A$’s rise because of that call, is also premature.  I didn’t like reading this info, because it’s opposite of what I feel is going on in Australia, but. In my effort to be balanced with my news, and not play favorites, I thought it best to bring these research results to you. BTW. The Reserve Bank of Australia (RBA) meets tonight. I would bet a dollar to a Krispy Kreme that the RBA will keep rates unchanged at this meeting. I think what this highlights is that the A$ is a two-way market right now, and that’s a healthy sign any time that happens to an asset, for it’s when everyone gets on the same side of the ship that we get into trouble!  And as far as the euro is concerned. there’s obviously a two-way market here, for those of us that believe the Eurozone is making the right moves and in 3-5 years things will look much better here are far and few in between. But those that believe the Eurozone is still going to collapse are holding fast to those beliefs, no matter how much space is put between now and those days when things looked bleak in the Eurozone. And we all know that if the euro survives and continues to move along nicely, that the currencies surrounding the Eurozone will get healthier. Remember the “Euro-Wannabes”?  That was the name I gave the three currencies from Poland, Hungary and the Czech Republic back in 2002..  They were thought to be on the “fast track” to euro acceptance. I have to say that I’m glad that all three of these drug their collective feet, and waited to join the euro. For a number of reasons that is. But now, you see, these three were able to independently adjust their monetary and fiscal policies to work around the Eurozone recession. And now, it is thought that Poland will print their very first ever Quarterly Trade Surplus this week. That would put Poland among the Emerging Markets that have good Current Account balances. Why is that important? Well. for those of you new to class, the Current Account consists of a country’s Trade Balance and foreign direct investment in the country.  So, if you have a Current Account Surplus, then you have a “treasure chest” of reserves should the “easy money” of Quantitative Easing dry up. So. things are looking up for Poland. and as long as the euro continues to recover along with the Eurozone economy, the other Euro-Wannabes will see things looking up too! Inflation, it’s sure an interesting topic. We certainly haven’t seen any wage inflation here in the U.S. in a very long time. But does that mean that inflation doesn’t exist elsewhere? No. Over the years I’ve written about the rising food prices, and how packaging of food just keeps getting smaller so that the price won’t rise, but in reality the price per “x” does rise. It’s all a trick that’s used. Speaking of tricks, do you remember the gas shortage here in the U.S. in the late 70’s? The gas guys tried to “trick us” by changing the price per gallon to price per a metric measurement. Back then, U.S. citizens had a backbone and put their feet down and the “gas guys” switched back to price per gallon. This past weekend I was reading the local weekend paper, and came across a story on the St. Louis Fair in 1979. The story said that at that time, you could buy a 2-piece box of fried chicken with a roll and a piece of pecan pie for. are you ready for this?  $1.75  So, inflation is all around us, and now that Home prices are recovering we don’t have deflation in Housing like we did for the past few years. I think this is the “whole plan” by the Fed Heads, to inflate the economy. It’s certainly what economist Paul Krugman would like to see. My problem with the whole “inflating the economy” is that economist act like inflation is something you can just turn off with the flick of a switch. We all know that to be not true. So then how high does the inflating go before things get out of whack? That’s the problem I have with the whole process. So, if the Fed Heads are looking to inflate the economy that would also mean inflating the dollar. I would have to think that the alternative at that point would be to own Gold. But then that’s just me, my opinion, and I could be wrong! Well, the IMM Futures Positions last week showed that the dollar bulls are picking up their stakes and moving. Net long positions in U.S dollars ($) plunged by more than 48,000 contracts, taking the $ long positions to the lowest levels seen since mid-February earlier this year. The top 4 currencies gaining on the drop in $ positions were: euros, loonies, sterling and pesos. As I’ve explained before. the IMM Futures Positions could be indications of what traders see for a currency, but can also change in a NY minute. So, they should be taken with just a few grains of salt at a time. Gold was all over the place, up, down, all around, on Friday, but finally ended up $12 on the day. We’ll see just how the markets feel about Gold this week with the partial U.S. Gov’t shutdown looming. And the U.S. data cupboard is void of any 1st Tier data today. Last Friday, we saw Personal Income rise .4% and Personal Spending rise .3%… So, that makes two consecutive months of not spending more than we make. And the Spending data was stronger than expected, so that was a good sign for the economy, but remember, we had back-to-school spending going on in August.  And the U of Michigan Consumer Confidence slipped a bit for September.  No real data today, means drifting for the currencies, that is unless we get a definitive move on the U.S. Gov’t partial shutdown. Ok. before I head to the Big Finish today, I wanted to talk about something, calmly, I might add.  Remember a month or so ago, I wrote one morning asking why we never learned anything. That day I was on my soapbox about the relaxed lending rules that were being implemented by lenders once again. Well, here’s another sign that we’ve never learned a darn thing. Margin debt is nearing the sky high levels of 2007. For those of you new to the term “margin debt” think of it as buying stock on loan. That’s it in simple terms, but in reality, it’s leverage. You buy stock and only put up 50% of its value, which means you can buy twice as much with your money.  I ran a margin dept at a large regional brokerage house when I was 21 years old. I know that awful feeling people get when you call them and tell them they need to deposit more money or we will begin to liquidate their account.  Back in the days before the financial meltdown I used to write about how then Fed Chairman, Alan Greenspan should be raising the initial Fed deposit percentage to 65%… That would have nipped the rise to the unsustainable levels of 2007. We saw margin debt rise to lofty levels in 1999 too. We all know what happened then. So, I just can’t see this ending up with smiles and laughter. It hasn’t before, and this time won’t be any different. Again, though, that’s just me, my opinion, and I could be wrong. For What It’s Worth. I saw this on Bloomberg last Friday, and you’ve got to stop and think about this for a minute. The purchasing people at Wal-Mart are pretty smart cookies, and I think they are telling us something about the economy. “Wal-Mart Stores Inc. is cutting orders it places with suppliers this quarter and next to address rising inventory the company flagged in last month’s earnings report. Last week, an ordering manager at the company’s Bentonville, Arkansas, headquarters described the pullback in an e-mail to a supplier, who said others got similar messages. “We are looking at reducing inventory for Q3 and Q4,” said the Sept. 17 e-mail, which was reviewed by Bloomberg News. U.S. inventory growth at Wal-Mart outstripped sales gains in the second quarter at a faster rate than at the retailer’s biggest rivals. Merchandise has been piling up because consumers have been spending less freely than Wal-Mart projected, and the company has forfeited some sales because it doesn’t have enough workers in stores to keep shelves adequately stocked.” – Bloomberg Chuck again. Yes, and then this morning I saw on Bloomberg an ad where they tell you how to research what companies are on the supply chain for Wal-Mart. Because obviously those companies will be affected. Ahhh, the relative ease of research these days. To recap. The U.S. Gov’t is ready to have a partial shutdown tonight at midnight, which will begin to hurt quite a few things, and people. It’s a shame that negotiating a budget / debt ceiling deal comes to this? But what else is there to use?  The so-called “safe Havens” are getting bought which means Treasuries, dollars, yen, and francs are at the top of the lists. Of course, Chuck thinks calling these assets “safe-havens” is an oxy-moron. Like Jumbo Shrimp, and my fave (think funny) one is “rap music”, now that’s an oxy-moron if I ever heard one! Currencies today 9/30/13. American Style: A$ .9325, kiwi .8285, C$ .9705, euro 1.3495, sterling 1.6140, Swiss $1.1045, . European Style: rand 19.06, krone 6.0185, SEK 6.4145, forint 220.85, zloty 3.1305, koruna 19.0595, RUB 32.46, yen 97.60, sing 1.2555, HKD 7.7540, INR 62.61, China 6.1480, pesos 13.21, BRL 2.2515, Dollar Index 80.27, Oil $101.82, 10-year 2.61%, Silver $21.74, Platinum $1,415.50, Palladium $727.28, and Gold. $1,337.41 That’s it for today. As I mentioned above, congrats to my beloved Cardinals that won the National League  Central Division crown Friday night. My friend Dennis Miller, the author of Retirement Reboot, sent me a link to a story on Fox Sports about how most of the Cardinals’ star players are home grown. Pretty cool. thanks Dennis! I got to see my Missouri Tigers win their football game Saturday night. We sat through some light rain with our ponchos on, so it wasn’t too bad. I have 5 days to lose 50 lbs ahead of my 40th H.S. reunion this coming Friday night! HA! We hosted some Washington University Business School students last Friday, and I was asked about my career path. Hmmm. Let’s see, I was playing my guitar, traveling around the country, basically living out of a VW microbus. Yeah, that’s a good place to start! You should have seen their jaws drop when I told them I had hair down to my shoulders and didn’t have two nickels to rub together. But when I  then told them I started out in the business in the mail room, they about fell out of their chairs! Ahhh, times have changed. Oh well, I’m sure I’m missing something today, somebody’s birthday, etc. but. I’m running late, so I’ll get this out the door and take my beatings later for forgetting something. I hope you have a Marvelous Monday! Chuck Butler President EverBank World Markets 1-800-926-4922 1-314-647-3837last_img

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