All That Demand, And No Soaring Price?
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In This Issue.

* RBNZ Opens door to rate hikes.

* Poland & Brazil hike rates 1/4%

* OPEC leaves production unchanged.

* Data returns today.

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

All That Demand, And No Soaring Price?

Good day. And a Tub Thumpin' Thursday to you! June 9, is the anniversary of the first time Donald Duck was on the movie screen. So, we have that going for us today. Quack! It's also the birthday of Les Paul, who died in 2009. being a former guitar player, and now with my son playing the guitar, that has interest to us. Also, on Google today, they have guitar strings that you have click on and play music to honor Les Paul!

The week of "non-data" here in the U.S. continued on Wednesday, with the markets searching for a clue as to which direction to go, and the only news they had to work with was from Greece, which didn't bode well for the currencies, yesterday.

But lack-o-data ends today, with the Weekly Initial Jobless Claims, and. the April U.S. Trade Deficit. This Trade Deficit has taken on a life of its own, in that, we had a recession (I call an ongoing depression), and a financial meltdown, which one would think would bring this Trade Deficit in line. But NOOOOOOO! That's not happening folks, and why? Ahhh grasshopper, this has been discussed so many times in the past, but the point here is that the Manufacturing in this country has gone the way of the Pony Express. Sure, it still exists, and in some countries would be great! But for a country our size, it has wasted away in Margaritaville! And it's not enough to offset the Imports.

But then, if consumers weren't given stimulus checks in the mail, and other forms of steal-like measures to get us to spend, then Imports wouldn't be so huge. But then because we import so much Oil, one would think we would be foreign oil independent by now...

So. the currency and metals traders will get some direction today, and maybe take their collective minds off of Greece. We might also get a sniff of what the European Central Bank (ECB) is thinking, as are meeting as I type this morning. Remember on Monday, I told you that we would be looking for the use of the word "vigilance" and mention of the need to provide "price stability" from ECB President, Trichet. So. any mention of those two things, and I would think the euro gets a good push higher VS the dollar today. You see, by mentioning those two things, Trichet, cracks open Pandora's Box of rate hikes. Now, I've gone on record as saying that I thought the ECB would hike rates again in July. If the statement following the meeting today goes the way I believe it will go, then you can almost book 'em Danno for that rate hike in July.

Speaking of Central Banks. The Reserve Bank of New Zealand (RBNZ) met last night, and left rates unchanged. (remember, that back in March, the RBNZ cut rates to accommodate the economy after the earthquake) The RBNZ was quite upbeat in their statement following the meeting. You know, when New Zealand suffered that earthquake, I said then that I thought the Kiwi people would bounce back quickly. And the RBNZ admitted last night that they underestimated the speed and momentum that the rebuilding has taken on. That's key folks. because those words would lead me, or a trader to believe that it won't be long until the RBNZ is back at the rate hike table. (I'm betting that free undercoat that it comes in the 4th QTR of this year) The New Zealand dollar / kiwi, took the statement and ran! Kiwi has outperformed all currencies overnight!

Of course, RBNZ Gov. Bollard, who I'm no fan of, had to take his usual shot at kiwi strength, saying that it was ahead of itself. Hmmm. But then he did say that he would not be intervening, as intervention cannot move a trend. WOW! Love to hear a Central Banker say those words! Are you listening Japan? How about you, Brazil? Or Switzerland? And over in the U.S. with all your back-door intervention to keep the dollar weak?

Ok. did you see the results of the OPEC meeting? Well, if you haven't, just me telling you that the price of Oil is up about $2 this morning, would tell you it didn't go well, right? Yes, our friends (NOT!) over at OPEC now have problems. I mean these guys all cheated with production levels before, but now you've got a real problem in the fact that not all these guys like each other. In fact some countries are joining the rebels to defeat another country, and now they must all sit down together and make policy? I laugh, because that just cracks me up! That's not going to happen now, and it won't happen probably ever again. That's right, OPEC could be on the way out. And so. Oil is up $2 this morning. to $101

Down in Brazil, the country continues to fight inflation, and at the same time, stem the currency's gains. I don't see that working out too well for them! Yesterday, the Brazilian Central Bank raised their internal rate 25 Basis Point (1/4%), which surprised the markets. You see the markets had fallen into the trap of thinking that since the Gov't wanted to stem the currency's gains, that they wouldn't hike rates further for that would attract investors and push the real higher. Gotcha! It's one of those things like the entertainer that puts one hand out to signal to the audience to stop the applause, but the other hand is signaling for them to continue the applause.

The Brazilian Gov't sees inflation rising and reacts with rate hikes. Inflation by the way rose to just above 6.5% in April, which is the ceiling target for the Central Bank. So. once again, the need to fight inflation was greater than the Gov't's desire to have the real weaker. Which I might add is stupid. if they want to fight inflation, allow their currency to gain!

Well. Gold & Silver continue to get sold this week. I don't get it, but momma said there would be days like this, my momma said. Cheaper levels to buy, is the only thing I think of. The demand for the metals remains strong. Did you hear that the U.S. mint in San Francisco was told to take the dust covers off their presses? Yes, for quite a few decades now, all the minting of Silver coins has been done in Annapolis, (I believe), but with demand for Silver Eagle Coins so high, it looks like another mint will begin to push out coins again.

So. with all this demand, why isn't Silver at $50 again? And Gold heading toward $2,000? If you really want to do something about it, contact Bart Chilton at the CFTC, and ask him. Maybe he can shed some light on this.

The Aussie dollar (A$) saw some selling after a weaker than expected jobs report last night. The unemployment rate remained at 4.9%, but the job creation was lackluster, especially for a county that had been knocking the ball out of the park, when it came to job creation. Looks like a cheaper level to buy this morning.

And the Polish Central Bank raised rates 25 Basis Points (1/4%) in a surprise move yesterday. the Polish zloty performed nicely after the rate announcement. I know that I don't talk about the Euro Wanna Be's very often, so I thought I would mention that there was a rate hike in Poland yesterday! The Euro Wanna Be's is a named that I coined for the countries that were thought to be on the "fast track" to joining the euro (back in 2003!), Poland, Hungary, and the Czech Republic.

OK. most of you know that I have long called for Treasuries to be the next asset bubble. Of course that was long before the Fed Reserve bought about $2.7 Trillion worth of Treasuries in their two rounds of Quantitative Easing (QE)! But, I still think that we'll see this happen in the long run. You know, Bill Gross, manager of the world's largest bond fund (PIMCO) also is not a fan of U.S. Treasuries, and has made investments accordingly. Right now, he and I look like we have egg on our respective faces, because the 10-year Treasury yield has fallen to 2.94%... But, historically speaking, history shows that Gross's calls often seem wrong before proving accurate.

"I certainly don't have any regrets," Gross said.

As far as myself. I feel as though I let people down that shorted Treasuries with TBT. but, like I said the other day. I normally see things long before they happen, and in the meantime people think I'm nuts for having said what I saw. So. patience.

Now. before I head to the Big Finish. I have to get this off my chest. OK. I want to first say that I in no way was referring or instigating anyone to shoot Ben Bernanke, yesterday when I said that no one in Atlanta had gone John Wilkes Booth on him during his speech. Believe or not, I actually had someone accuse me of instigating a shooting of Big Ben. Geez Louise! You know. if you want me to be bland like most newsletter writers, and not have fun with people, their statements, and policies, then. No wait! I can't change! I guess you'll just have to leave us.

I even had a guy tell me he was unsubscribing because of that statement. I told him, fine! I guess now you'll have to find some other place to learn about all these things for free!

Then there was this. According to a Washington Post Poll. barely half of the people surveyed support raising the debt ceiling. WOW! Do you think that people are finally getting a clue? The problem here is that a substantial number of the respondents think the U.S. will be seriously harmed if Congress doesn't increase the debt limit. So, just like the many times before, and there have been 80 times before that the debt limit has been raised since 1920, Nobody wants to do it, but it has to be done to keep us from going into default.

OK. I don't know where to start with this. No wait! I do know where to start! Start at the spending. reduce the spending and you won't need to add to the debt or raise the debt limit! Spend, Spend, Spend, is what we're all about and have been for a while.

Shoot Rudy, once again yesterday someone accused me of being political in the letter. Apparently, a newcomer to the letter. For had they been around for awhile, they would recall me banging on the previous administration for their deficit spending too! I am adamant about this folks. If I banged on the previous President for his $450 Billion Budget Deficits, I don't see how I can let this current President skate free with is $1.5 Trillion Budget Deficits! So. get your facts straight, before you play that politics card with me!

To recap. the week of no-data ends today, and the markets can get some direction from the U.S. Trade Deficit, and weekly jobs data. They can also see the color of the ECB's thoughts, when ECB President Trichet speaks after leaving their rates unchanged this morning. The New Zealand dollar was the best performer overnight, after the RBNZ left the door open to re-enter the rate hike room (probably in the 4th QTR). Brazil did hike 1/4%, and Gold & Silver continue to weaken, even with strong demand..

Currencies today 6/9/11. American Style: A$ $1.0595, kiwi .8260, C$ $1.0225, euro 1.4605, sterling 1.6420, Swiss $1.1910, . European Style: rand 6.7525, krone 5.3935, SEK 6.2060, forint 181.65, zloty 2.7070, koruna 16.5350, RUB 27.70, (the ruble always takes a leap forward when the price of Oil rallies), yen 80, sing 1.2310, HKD 7.7805, INR 44.74, China 6.4759, pesos 11.83, BRL 1.5815, dollar index 73.87, Oil $101.15, 10-year 2.94%, Silver $37.08, and Gold. $1,536.00

That's it for today. Well, we have the NBA Finals going on, the NHL finals going on, and Baseball heating up. A great time for a sports fan. Although unless the Celtics are in the NBA Finals, or the Blues in the NHL Finals, I only care about Baseball right now. My beloved Cardinals are winning, but doing it with smoke and mirrors, as key players are injured and out, with young kids taking their place. The Cardinals swept the Cubs last weekend, that was sweet! And with that. I had better get this out the door. Thank you for reading, and have a Tub Thumpin' Thursday!

Chuck Butler


EverBank World Markets



Posted 06-09-2011 7:07 AM by Chuck Butler
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