A 2-year High For Aussie Dollars!
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In This Issue..

* Euro rebounds from Friday sell-off...

* Banging on China again...

* Will FOMC announce more QE?

* Deficit spending continues...

And Now... Today's Pfennig!

A 2-year High For Aussie Dollars!

Good day... And a Marvelous Monday to you! Well... I did end up going to Columbia this past weekend after all. Tailgated with my kids, and then saw a game that wasn't exciting until the last minute! All-in-all, a fun time.

Speaking of fun times... That's what the currencies are having at the dollar's expense this morning, and while I've always said that the euro was the Big Dog, the star performer overnight is the Aussie dollar (A$)! The A$ is at a 2-year high VS the U.S. dollar, and is beginning to look a bit pricy, compared to the rest of the currencies in the world. But, we've seen this in the A$ plenty of times in the past. The A$ trades way past "fair value" because of the strong interest rate it pays.

The A$ is also getting some notice because the Reserve Bank of Australia (RBA) Gov. Stevens was in an upbeat mood in his speech last night, saying at one point that "Australia's growth in an increase from trend to something above trend, and that the fall in inflation over the past two years won't go much further."

This kind of talk brought the rate hike campers back in play... Although, I'm thinking that the RBA is finished with rate hikes this year.

Gold is also a star performer this morning, running up $6 to $1,281 with Gold's partner, Silver running up to near $21 again...

The euro has traded as high as 1.3120 overnight, and sits, as I write, right at 1.31.

the euro lost ground on Friday, almost immediately after signing off. The 1.3125 level I saw on Friday morning when I came in, continued to fall throughout the morning losing 1-cent before stabilizing. The selling came as a result of new fears that some banks in the Eurozone MAY incur deeper losses from the global financial crisis. The latest Eurozone bank with problems was the Anglo-Irish Bank in Ireland. The Irish Finance Minister said later in the morning that rumors around Ireland needing aid, were not true... Unfortunately, the damage had been done to the psyche of markets and their willingness to think that it was time to leave the so-called "safe haven" dollar, was too early...

I've said over and over again, that the euro isn't out of the woods just yet, and whenever something like this flares up, it proves the point. The good thing is that a euro at 1.30, is far better than on at 1.18, eh?

So... The Risk is On again this morning, although not all currencies are as "perky" as the A$!

I see where U.S. Treasury Sec. Geithner is still banging on China to allow "significant gains in the renminbi VS the dollar"... All I'll say about this, is that have you ever heard of biting the hand that feeds you? Well... I don't think the U.S. wants to tick China off here, so the likes of Geithner had better tread water carefully here... In fact...

China warned U.S. officials against trying to influence its exchange-rate policy by applying pressure. Foreign Ministry spokeswoman Jiang Yu said turning up the heat on the issue would not solve the U.S.'s trade problems with China and could make the situation worse. U.S. criticism of the renminbi's value has been driven by domestic political concern because Democrats fear losses in the midterm election, bank executives and economists said.

Well... Traders in Brazil, believe that Brazilian Central Bank President, Meirelles, is buying $1 billion dollars a day to stem the real's rise. Think about that for a minute... $1 Billion dollar ever day... Remember in 2005, when we had the "tax amnesty" for U.S. corporations doing business overseas to bring their profits home (repatriate) at a reduced tax rate? $300 Billion came home, and that brought about a dollar rally for most of 2005... So... If Meirelles can do this for 300-days, he might be able to replicate that dollar rally of 2005...

My guess is that he can't come close to doing 1/10 of that $300 Billion... But, he's going to hit it hard for as long as his ammunition lasts... And he's going to have to work hard, because the news from Brazil continues to be the stuff that rate hikes come from...

On Friday I saw that a record 1.95 million jobs were created in Brazil during the first eight months of this year, according to the Labor Ministry. The number is for the formal job sector, with positions that have a signed contract and labor and social protection. The creation brings Brazil's unemployment rate down to 6.9%...

I would think that an investor wanting to own reals, would use the "buy on dips" trading platform... Whenever the Central Bank buys dollars, would represent a dip, in reals...

But again, and I try to make sure I mention this any time I talk about buying reals... The real is an Emerging Market currency, and could very well get caught up in the selling of another Emerging Market currency. I truly believe that reals should only be bought and held with one's "speculative" portion of their investment portfolio...

Well, I received my latest Treasury Bulletin on Friday, and I usually go right to the Monthly Treasury Statement... I do this to make certain that the numbers recorded in the media are the actual numbers of the Fed.

Through August, with one month to go, the 2010 deficit is $1,259,597,000. this puts the average month at $114,508,000. so, if we have an average month in Sept with regards to the budget deficit, the annual figure would be $1,374,105 , which would be less than the number posted for 2009 ($1,415,724,000)... I guess we should kick our heels together and say YAHOO!

Forgive me if I skip the celebration... $1.374 Trillion is too large of a deficit... Remember when I used to bang on the previous administration for $450 Billion deficits?

Now... You don't think that given the timing of the next monthly deficit posting, being close to the mid-term elections, that there would be any "funny business", or "cooking of the books" do you? Naaaahhhh.... They wouldn't do that! HA!

I had a reader send me a note the other day, telling me that the latest speech by the former Cartel Chairman, Big Al Greenspan, sounded much like my friend the Mogambo Guru.... Greenspan didn't actually use the Mogambo's line of: "We're all freakin' doomed", but he sure came close...

And then a reader lambasted me on Friday telling me that I was "deceiving readers" with my talk on the TARP and Stimulus, because I've not talked about how a lot of the TARP money went into banks to shore up their balance sheets, and not because they were about to fail. Well... If you all feel that way, then I apologize, I was merely trying to point out what a fiasco TARP and stimulus was, and that it has now been documented by the commission in charge of sorting out TARP. I did not, and have never tried to deceive you... Shoot, I even tell you that I'm short, overweight, and bald!

Well... This week's data will circle the wagons around the FOMC meeting tomorrow... The markets are 50-50 on whether the FOMC announce further Quantitative Easing or not at this meeting. One thing I'm sure the FOMC will do is reduce their economic outlook, or let me say this... If they don't reduce their economic outlook then they are liars! And I wouldn't want to have to explain that one, Lucy...

The data cupboard is empty today, but economic data will be restocked starting tomorrow.

CPI printed last Friday morning for August, and during the month of August, the Gov't tells us that after taking out food and energy, there was no inflation, and that brought the year-on-year number to a 1966 figure. Of course back in 1966, inflation was calculated correctly with no adjustments, book cooking, or substitutions... So... If you're on board with the Gov't you only felt 1.1% inflation in the last year... If you're like me, it felt more like 4 to 5%... So, way to go Gov't, keep those monthly checks going out with only 1.1% increases! UGH!

Then there was this... The demand for physical Gold continues to run at a very high pace, and I truly understand why, which I try to tell you about most days. This got me thinking about the two types of physical Gold there are. At EverBank, the Metals Select program offers the two types of physical Gold. The are called Allocated, and Unallocated or pooled. The Allocated type is where a customer specifies what Gold coin or bar they wish to buy. Example: American Eagle, Canadian Maple Leaf, etc. When you allocate your purchase of Gold, you will have to pay a "premium" or fabrication cost that the dealer charges for ALL purchases. The buyer will then have to pay for either shipping or storage. The Unallocated or pooled type is where a customer buys Gold bullion and pools it together with other holders of that bullion. Unallocated is the most cost effective way to buy and hold Gold, because there is no "premium" charged, nor do they pay for storage. If at some time in the future you would want your Unallocated balance of Gold, turned into Allocated, and shipped to you, all you have to do is pay for the "premium", and the shipping charges, for you already own the Gold. Hope that helps!

To recap... The currencies, led by the star performer, Australian dollars (A$), are stronger VS the dollar this morning. The A$ got a kick to a 2-year high when their Central Bank Gov. was very upbeat in a speech last night. The euro is near 1.31. Brazil's Central Bank continues their attempt to keep the real from getting too strong, by buying $1 Billion dollars a day last week! And Gold is $1,281 this morning... WOW!

Currencies today 9/20/10: American Style: A$ .9445, kiwi .7290, C$ .97, euro 1.31, sterling 1.5610, Swiss .9945, ... European Style: rand 7.1220, krone 6.0685, SEK 7.0260, forint 214.50, zloty 3.00, koruna 18.8150, RUB 30.98, yen 85.70, sing 1.3335, HKD 7.7660, INR 45.68, China 6.7137, pesos 12.78, BRL 1.7310, dollar index 81.18, Oil $73.70, 10-year 2.74%, Silver $20.95, and Gold... $1,282.20

That's it for today... Another loss for our Rams... UGH! Sure seemed to be quite a few "homer calls" against them yesterday... There were some exciting college games this past weekend, with a few overtimes, and my beloved Missouri Tigers pulling out a win in the last minute of the game! It was great getting to tailgate with my kids, and our good friend in Columbia, Kat! I won't get back to Columbia until Nov 13, so... I'm glad we decided to go! Little Delaney Grace had on a gold Tiger dress... So darn cute! Next Sunday I'll be in Jacksonville for the game at EverBank Field! Can't wait! Ok... Mike's here, so I must be running late... Time to go... I hope your Monday is Marvelous!

Chuck Butler


EverBank World Markets



Posted 09-20-2010 10:39 AM by Chuck Butler