In This Issue   Gold flipflops all day   I

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first_imgIn This Issue. *  Gold flip-flops all day. *  It’s all about the Debt Ceiling. *  ESM issues a bond! *  Switching to the so-called Safe Havens. And, Now, Today’s Pfennig For Your Thoughts! Money For Nothing Good day.  And a Marvelous Monday to you! The autumn chill returned to our area this past weekend, football weather is here, time for a bonfire and flannels! My beloved Cardinals are in deep dookie and are in danger of being blown out of the playoffs in the first round! UGH! But the rest of the weekend, sports wise was good, so I’ve got that going for me! It’s day 7 on the partial shutdown (PS), and the autumn chill that has returned to the Midwest, is also making things frigid in Washington D.C. as more and more warnings are being shouted from the rooftops that the U.S. could default and the results would be catastrophic. I say, well, if someone would have stopped to think about where all the deficit spending was getting us while it was going on for the past decade, that maybe, just maybe, we would not be having to wring our hands in fear of a default right now!  Hey! You can’t blame me! For I have been warning anyone that would listen to me for so long, that when I began warning about the deficit spending, I used to be mistaken for a young Bruce Willis! HA! The bond market doesn’t seem to be worried though. They know, just like me, that in the end, we won’t default, and the debt ceiling can will get kicked down the road once again. And ever since the initial move in the dollar (down), the currencies have been in a very tight trading range. The bias to sell dollars remains, but no one is paying attention to it right now. So, what I think we have here is the bond and currency markets waiting for the next shoe to drop. That shoe could be the next time the Fed Heads meet, and announce that they are not beginning to taper. One time, surprise me, second time is a trend.  Or. most likely, it is the Debt Ceiling expiration that’s coming quickly upon us.. This morning, the currencies are mixed, with the euro up a bit, but below 1.36, the Japanese yen stronger on thoughts of a U.S. default, but the Antipodean currencies are weaker.  A story on the Bloomberg this morning caught my eye. The title read: “Dollar Rebound Predicted by Most-Accurate Forecaster”.  So, you know I just had to check it out to see why the “Mr. Most-Accurate Forecaster” thinks the dollar will rebound. I’m not saying it can’t, I just want to know his reason. And that reason turns out to be, that he believes the U.S. economy is strong, and will outperform economic growth of the Eurozone, and Japan. So, at this point, I’ve got to think that “Mr. Most-Accurate Forecaster” has been eating the same fortified with 8 essential vitamins, cereal that the Fed Heads were eating, for this sounds like a lot of the Fed Heads, to which, and you can check this in the archives, I’m on record saying months ago that the Fed Heads were being overly optimistic about the economy when they began talking about tapering. That’s all I’ll say about this, for what do I know? I mean, “Mr. Most-Accurate Forecaster” probably has a research team the size of the population of Rhode Island! But. so do the Fed Heads. Friday morning, I received a notice from a currency dealer that said “The First ESM Benchmark Syndication is Expected for Next Week.”   And my eye lit up! And here’s why! The ESM is the European Stability Mechanism.  I explained months ago what this was all about, but to make a long story short, the ESM is a bill funding program that’s been in place for about a year, that’s used to provide liquidity and long-term funding to the countries that need it. The difference between what was being done for the last year, and now is the ESM is going to issue a bond in syndication. In other words, take requests. RFP   request for proposal, as many contract salespeople know all about, and me with my city governance background. Understand this process.    But the biggest thing is the ability to do long term funding with the aim to establish a benchmark curve and a liquid secondary market over time. The first issue will be used to cover the Cypriot bailout and refinance bills for the Spanish banking recapitalization program.  This is all good for the euro going forward, folks.. At least that’s my opinion, of which I could be wrong! So. in the biggest display of “why was that done?” . You know the 800,000 government workers that were sent home last week? Well, the House passed a bill on Friday to pay these furloughed workers retroactive pay. So. what the 800,000 Government workers are getting right now, is a paid holiday. Paid for by taxpayers of course! You know, the people that go to work every day, produce something, generate wages, and pay taxes. So, why did we send those workers home, knowing that it wasn’t going to save us money in the first place?  Reminds me of the Dire Straits song: Money for nothing. The Pentagon ordered furloughed employees back to work this past weekend. Yes, we do have a couple of wars going on, and I would think that if there were people that are needed to be at their jobs it would be these people, that is as long as we feel we have to fight wars in other countries. Wanna save some big bucks for the country and make a whole lot of people happy, happy, happy? End the wars. And don’t stop with the wars overseas, how about here at home? The war of drugs, poverty, and so on. We’ve not made any headway on any of these over the years, so why continue? There are more people considered to be in Poverty Levels now than ever, so, great job fighting that war! The U.S. Debt stuff has taken over as what’s on the minds of the market participants. Tapering, Schapering. The Debt Ceiling is what it’s all about now.  One would think that any country that’s not experiencing a possible default would have a currency that’s gaining against the dollar right now, but that’s not the case. It’s all a bunch of “wait-n-see” Right now, it seems that the Usual Suspects when it comes to what the markets call “safe havens” are in play here. Japanese yen, Swiss francs and to a lesser degree, euros seem to be the only real winners, as we begin Day 7 of the PS, and draw one day closer to the Debt Ceiling expiration of Rocktober 17th. Japan has a greater Gov’t Debt than the U.S. but, they aren’t running into the possibility of a default. And Swiss francs? Some old habits just don’t die. The Markets’ participants have viewed francs as a safe haven for so long now that even with the franc tied to the euro, they still go there.  Hey! I’ve always told you that the markets are fickle. and at times have a very different viewpoint than logic would say. The Antipodean currencies of Australia and New Zealand are both seeing some selling this morning, but the moves are small in nature (less than 1/4-cent). There’s not much going on in this region of the world this week. Australia will report their September labor numbers later in the week, and that’s it.. (at least as far as I can see).  These two currencies have really bounced around a lot lately. You have to be patient here. Gold spent another day on Friday, flip-flopping around, going from positive to negative and back to positive, but remaining above $1,300. This morning, Gold is up $2, but we all know that a small gain like that is vulnerable to the whims of the NY traders. I read a note from the author of the book on “Greenspan’s Bubbles” Bill Fleckenstein this past weekend, where he was talking about Gold. Let’s listen in to Bill Fleckenstein. “At some point there will be big move to the upside (in gold), and we will play catch-up for some of the monetary crimes that have been committed in the last couple of years … My belief is that we saw the lows and that gold is going to work its way higher from here, and at some point it will accelerate. … It’s just mind boggling to me that people in America are so comfortable with the inflation that we have, and they act as though it’s deflation.  It’s rather stunning to me, the particular strategy now amongst people when they raise prices is they shrink the size of what they give you and they don’t call it a price hike.” Chuck again. I like what Bill Fleckenstein usually has to say, and have for a long time. He’s a very logical thinking person, and you can’t beat that! The U.S. Data Cupboard is still being adjusted because of the PS. We’ll begin to get some data this week though. in fact I’m told that the Jobs Jamboree will take place tomorrow. But don’t hold me to that, we are talking about Gov’t schedules! And before I go to the Big Finish. Man. did I ever just blow by the American priced currencies on Friday, UGH! I meant to type: American Style: A$ .9445, kiwi .8340, C$ .9705, euro 1.3605, sterling 1.6075, Swiss $1.1075 I have no idea what happened, just goes to show you that even though you do something 5-days a week for over 20 years, you can still mess up! For What It’s Worth. I saw this come through the email from MarketWatch on Friday, and thought it to be interesting. The article is about how the writer believes that the panic in Gold is over, and he can tell by watching the flows into the ETFs. Here’s a snippet.. “Gold outflows have been steadily declining since peaking in April 2013, said Nick Brooks, head of global research and investment strategy at ETF Securities. Outflows that month were at $8.7 billion. He said the main reason for that reduction is that the “bulk of shorter-term tactical money that went into gold over 2011 and 2012 has now been cleared” and gold ETP holdings are now back at 2010 levels. After record outflows from gold-backed exchange-traded products in the second quarter, outflows slowed down significantly in the third quarter. Investors were quitting their gold funds, just not with the urgency they showed in prior months.” Chuck again. You know me. I’m not a fan of the ETF’s. I’m a “physical ownership” kind of guy. But I think this information is good to know, given that the masses opt for the ETF’s, so flows are important. To recap. The markets seem to be in wait-n-see mode. In one corner we have the question of when the Fed will begin to taper if ever. And in the other corner we have the PS and the looming problem of the Debt Ceiling expiration growing closer, and the warnings of catastrophe should we default hanging over the markets like the Sword of Damocles. The bias to sell dollars remains in place, but the trading ranges are very tight. And Gold keeps flip-flopping, like a fish that jumps off the hook while in the boat! Currencies today 10/7/13. American Style: A$ .9420, kiwi .8295, C$.9690, euro 1.3580, sterling 1.6080, Swiss $1.1070, . European Style: rand 10.0270, krone 5.9860, SEK 6.4450, forint 218.25, zloty 3.0920, koruna 18.7930, RUB 32.26, yen 96.90, sing 1.2475, HKD 7.7545, INR 61.89, China 6.1480, pesos 13.14, BRL 2.2110, Dollar Index 79.98, Oil $102.66, 10-year 2.62%, Silver $21.92, Platinum $1,388.75, Palladium  $699.80, and Gold $1,316.97 That’s it for today. I had a great time at my H.S. reunion Friday night, my old football teammate Dean Collins was in attendance and I hadn’t seen him in 40 years! WOW! Lots of people I hadn’t seen in awhile. Then Saturday night, we had a get together with some clients and I got to meet a few clients and get a couple of them to sign up for the Pfennig!  My beloved Missouri Tigers won big at Vanderbilt, and have started the season 5-0, but have a tough row to hoe this weekend when they travel to Georgia. Blues blast Florida 7-0 Saturday night, and our Rams beat Jacksonville, although I don’t think you can hang your hat on beating them this year. Well, I’ve got people living with me all watching Duck Dynasty with me. They used to laugh at me, but looks who’s watching it now! And on that note. Thank you for reading the Pfennig, and 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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