Gold Ends The Week Strong!
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In This Issue..

* The dollar continues to rally...                   
* No risk takers to be found...                  
* Simply awful data yesterday...                         
* Gold continues its rally...                                       

And Now... Today's Pfennig!

Gold Ends The Week Strong!

Good day... And a Happy Friday to one and all! A Fantastico Friday for me, as it was a Tub Thumpin' Thursday as well! You see, I got the results of my latest scans yesterday afternoon, and my oncologist is thrilled! (as I too am!) This marks 1 year of clean scans, and if it weren't for this rogue metastasis in my left eye, it would be all seashells and balloons! I go on Monday to see if the blood clot that has made things difficult for me for 15 months now, has finally dissolved. If so, there's another biggie off my list! I have to personally thank God, who has chosen to cure me, and it's probably a result of all you wonderful readers that have sent along good wishes and prayers... I also thank my family for their support, and my doctors who have never once not taken the aggressive course to getting me well...

OK... So, you can see why yesterday was Tub Thumpin' for me! And today, will be just as good, no matter what the currencies do, or the dolts in Washington D.C. do, or that my beloved Cardinals' third baseman had to have shoulder surgery yesterday!

I'm on cloud nine right now, but will be brought back down in about 2 hours when I'm going through my radiation treatment for my eye! UGH!

Well... Enough of all that, you didn't sit down with your cup of coffee to read all that, you want your currency / economies news! And I don't blame you! So... Without further babble, here we go!

Yesterday, we received some really awful data here in the U.S. but the dollar rallied... This just shows to go you that the Trading Theme of rewarding the dollar every time the data shows more deeper, darker, and dangerous times for the economy. What this does, is send the "risk takers" hiding behind rocks, and afraid to come out of the locker, they are as nervous as they can be... And no, it's not because they're wearing an itsy bitsy yellow polka dot bikini! It's because the waters for them are rough when the Trading Theme is in place.

With no risk takers, the currencies just don't have any support... Except for... Drum roll please... Japanese yen! I've explained this phenomenon so many times in the past 6 months that I just can't get myself to do it again this morning, but you know the story... Risk takers leave, unwind their "risky trades" and this all benefits yen... The yen is trading within spittin' distance of an 87 handle this morning... WOW! And to think people laughed at me for the last couple of years when I said this would all happen... That the carry trades would eventually unwind, and the high yielders would get sold, and Japanese yen would get bought thus producing a rally for yen...

Yen would tease us, and go to 105, 104, and then back to 110, 115... But I held true to my thoughts that the next leg down for the dollar would be VS the Asian currencies led by Japanese yen.

OK, so the dollar has the other "non-yen" currencies on the run going into the weekend. The data yesterday had a lot to do with this, so let's review what printed yesterday...

First of all, we had the Weekly Initial Jobless Claims... OMG! The forecast was for 542K Jobless Claims to have been filed last week... But the number was actually 589K! OUCH! That's crazy folks, nearly 600K people filed unemployment papers last week! First of all, these last two reports (last week was 527K), show that the drop below 500K in the previous two reports were not an indication of any kind that layoffs had bottomed, instead this was caused by the holidays, as I said at the time... A Head Fake as we call it in the markets... I think that this number is going to be maintained in the next few reports too, unfortunately!

Then we had the Housing Starts and Building Permits data... Housing starts for December collapsed to 550K, a new record low. Building permits for December also collapsed to a new record low of 549K. These two pieces of data go back a long way (1959)... You have to go back to 1991 for Housing Starts to show this kind of weakness and even then they were higher than this print... And you would have to go back to 1975 to show this kind of weakness in Building Permits... And again even then they were higher...

This, to me, is the adage that you're gonna get what's coming... The massive overbuild of houses in the U.S. in the past decade was bad enough... But then we had the massive credit crisis... I saw a headline somewhere that said the U.S. McMansions, were being "right-sized"...

There are scheduled data prints today... I think we probably need a day to recover from those three reports that printed yesterday!

OK... The tax cheater... Oh, that reminds me of the local guy here that had a big hit back in the 60's called "The Cheater"... Bob Kuban and the In-Men... Haven't you heard about the guy, known as the Cheater? He'll take your money and then he'll lie and cheat on his taxes...

HAHAHAHA! Our soon to be brand spankin' new Treasury Secretary, a.k.a. "the cheater" Tim Geithner is already going after the Chinese... I know why he's doing this right out of the starters blocks... He's trying to get everyone to get their minds off his personal problems with the IRS, the agency that he now heads! Now... Here's a memo from me to "the cheater"... Ahem... I would think the Chinese are now laughing their socks off, at least the old Treasury Secretary didn't have skeletons in his closet, or at least we didn't know about them!

Now, here's a guy with little credibility, in the eyes of the Chinese (I believe), telling them that "President Obama believes you are "manipulating" its currency"... Here we go again folks... Blaming the Chinese for our problems... When we should be getting down on our knees and thanking them for buying all our debt the past decade... OK... This has gone on enough, time to go to something else, I could feel my blood pressure rising, and I'm not in the mood to be in that frame of mind today!

The Fed's FOMC meet's next Wednesday... I don't expect the Fed to go the remaining 25 Basis Points (1/4%) to zero, as there's no reason for them to use the last arrow in their quiver, no matter how small that arrow is... Besides, they've done all this cutting and have little to show for it. I think it would behoove them to sit back and give the previous rate cuts a chance to work... That is if they are going to work... Remember, it's been my stance, that it's not a case of the cost of credit causing the credit crisis, it's a case of the lack of liquidity causing the credit crisis... So... In my mind... I didn't see the need to cut rates all along, and especially not to near zero! But, the longer we're here at near zero, the better my call for soaring inflation by 2010 to have a chance to come to fruition!

And the beat goes on for the pound sterling... Every day, there's more and more reason to not touch pound sterling with someone else's 10 foot pole! The Gloom and Doom is everywhere in the U.K. and analysts, and pundits are lining up to take their turn swinging the stick at the U.K. piñata... The selling of pound sterling has gotten so strong that it is now carrying over to the euro on the crosses... The euro has to deal with being sold on the crosses, and is the main reason the euro is flirting with falling below 1.28 as I write...

And after those last couple paragraphs, I'm going to go to the Big Finish on a good note, and talk about Gold... You know... You can't always think just about Gold's relationship with the dollar... Yes, I know, we're all, for the most part, dollar based investors, so that's all we care about... But you see there's more when you pull up the carpet... For instance, earlier this week I talked about how Gold and the dollar were rallying... Well, a look under the carpet tells us that Gold is rallying even more against the Russian ruble... So, knowing this, we can better understand the Gold and dollar rally at the same time. I hope you're with me on this, as I really don't know a better way of explaining this relationship...

So... Gold looks as though it will end the week with a weekly gain... I have to say that all this dollar strength is beginning to get pretty questionable, and THAT could be another reason for Gold's strength. Oh, and it's up $15 this morning!

Currencies today 1/23/09: A$ .6425, kiwi .5180, C$ .7920, euro 1.28, sterling 1.3570, Swiss .8570, rand 10.35, krone 7.0840, SEK 8.4120, forint 226.25, zloty 3.4525, koruna 22, yen 88.10, sing 1.5080, HKD 7.7570, INR 49.25, China 6.8490, pesos 14.20, BRL 2.3520, dollar index 86.52, Oil $42.84, Silver $11.50, and Gold... $873.60

That's it for today... It was 60 degrees here yesterday, WOW! But that won't last long, the January thaw, is short lived, as a cold front moves through this afternoon! I love warm sunny days, which is why I truly enjoy going to Florida in the spring before it gets too hot in the hot tub there! I see where U.S. Corporations are lining up to cut their dividends... Better get used to this in 2009... No three day weekend this week, but a welcomed weekend nonetheless, as I get to sleep in, and skip radiation treatments on the weekends! Thanks again for all who sent along encouraging remarks, and good wishes to me yesterday... I'm guessing I'll hit the "wall" sometime this afternoon, so I have that to look forward to! Time to tie this all up in a bow and send it out! I hope your Friday is Fantastico!

Chuck Butler
EverBank World Markets

Posted 01-23-2009 9:17 AM by Chuck Butler