G-20's Words Are Just Words.
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In This Issue.

* Dollar Bulls turn risk meter past Off!

* Gold & Silver see tons of selling.

* Fed Inflates the Treasury Bubble further.

* Brazil's wish comes true!

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

G-20's Words Are Just Words.

Good day. And a Happy Friday to one and all! A Friday that I'm glad is finally here, as yesterday morning I was already expressing how worn out I was from the "long week". And then someone reminded me that it was only Thursday! UGH! All these gyrations in the markets, and the goings on in Gold just weigh on me. I know I shouldn't let it, but it does.

Yesterday morning, I told you about how the currencies and metals had gotten ambushed by the dollar bulls overnight Wednesday and in the Thursday European session. Remember the goofy movie loved by young people, Dumb & Dumber? Well. that's what I think of when I think of Quantitative Easing, followed by Twist and Shout, I mean Operation Twist. When will they ever learn? OK, I really went another direction there, so let's steer back onto the update road, then we'll take a detour to the Chuck's opinion road.

Well, the finance ministers of the member countries that make up G-20 is doing what it can to smooth the markets this morning, by saying, "G-20 policy makers are committed to a strong and coordinated international response to address the renewed challenges facing the global economy." And the euro led the currencies to a stronger level. But how long will just "words" satisfy the markets? Not long, folks. We need to see actual action taken by G-20, and they won't do that. not yet anyway, and then no one knows what it is they will or can do!

I can tell you that the first thing they will do is convince the European Central Bank (ECB) to cut interest rates. The recent data from the Eurozone hasn't been anything to be all wired about, so, the pressure will be on first ECB President Trichet, and then Draghi, who takes over in November, to cut rates. And they will. and the euro will get trashed.

So. the brief uptick in the euro and other currencies this morning, probably won't last long, and in fact, now that I glance over the currency trading screens, I see the euro already slipping. The markets know there's nothing in the tank at G-20 but words. And that reminds me of the lyrics to a great Pink Floyd song... "haven't you heard, it's a battle of words, and most of them are lies".

OK. and the goings on in Gold. Talk about losing ground. Well, yesterday I was reminded that the $1,735 level Gold was trading at, had fallen back to the level it achieved just about 6 weeks ago! And then someone asked me if I thought the price manipulators were happy that Gold was falling. and I said, are you kidding me? They're probably selling too, they see an opportunity to pile on, without a flag, and that's what they're doing. I have a friend, that follows this stuff very closely and he tells me that there was an inordinate amount of short contracts thrown at both Gold & Silver yesterday by the bullion banks.

A year ago. Gold was $1,285.

So. can it fall further? Sure it can. and as long as the markets feel that the Fed's Twist & Shout is going to work and the U.S. economy will be saved, the dollar will hammer the currencies and metals. You know. long time readers will recall that I've said that the Treasury Bubble was going to pop one day and the mess it will cause for Treasury bond holder will be greater than the NASDAQ Bubble, and greater than the Housing Bubble. And now. I look pretty stupid, with the 10-year Treasury at an all-time low yield of1.74%... But think about this. didn't the U.S. Gov't continue to inflate the NASDAQ & Housing Bubbles long after it appeared the bubble was about to burst?

Well. I look at Twist & Shout as the Gov't inflating the Treasury Bubble. And think about the damage that will be caused when interest rates do rise in this country. The Fed Reserve told us all that they are going to go further out on the yield curve and buy longer dated bonds. Well, I for one, don't think interest rates are going higher in the next two years, but. I sure do think they'll go higher again before those longer dated bonds mature! The Fed's balance sheet will be a disaster!

Ok. I need to get away from this Twist & Shout stuff. it's beginning to give me a rash!

Down under in Australia, we saw something strange happen. S&P reaffirmed Australia's AAA rating with a stable outlook! Now, it's been sometime since we've seen S&P not downgrade a country's rating, so. things are looking good in Australia. In fact, the Reserve Bank of Australia (RBA) issued their Financial Stability Report last night and said that "the Aussie banking system is in good shape, relatively strong and better placed to cope with periods of market strain."

But all that isn't helping the Aussie dollar (A$) right now, as the currencies across the board, except Chinese renminbi and Japanese yen, are getting hammered as a whole by the dollar. Oh, and that "slipping" I saw earlier has turned into a rout on the currencies and metals again this morning. So much for G-20's so-called "soothing words"!

And in a smart aleck tone, I'll say. I told you so! To the Brazilian Central Bank! These guys have really made a mess of things. it wasn't that long ago, that the Brazilian Central Bank (BCB) was ranting about how strong their currency, the real, was. They threw everything, including the kitchen sink at their currency in an attempt to stem the real's rise. They even cut interest rates while inflation was still above their inflation target ceiling! Well. as Airplane's Steve McCroskey said. "I picked the wrong week to. "

The BCB has to be feeling that they "picked the wrong week to cut interest rates".

Yes, at first, the real did what the BCB wanted it to do. it lost ground. But now with the Risk Off meter turned all the way to past OFF. The real has lost 17% in just 4 weeks! The real hasn't seen these soft levels in over 2 years. So guess what the BCB had to do yesterday?

The intervened in the market to support the currency. Now, isn't that just great? 4 weeks ago, they wanted their currency weaker, and now they want it stronger! I always say, and probably said it here when it happened that when a Central Bank does things to debase their currency, and publicly admit that they want their currency weaker, they won't like what the markets do to them. The markets will see that the Central Bank gets their wish. BIG TIME! So. be careful what you wish for. for it might just come true!

Then there was this. I received a great note the other day from my friend, the Mogambo Guru. I know there are tons of Mogambo Guru fans that read the Pfennig. The Mogambo is in good health, and is playing a lot of golf these days. He told me that me: "I have decisively proved, once and for all, that higher-priced golf clubs do NOT automatically make you a better golfer, despite what you read in the golf magazines." Which really made me laugh. I've missed reading what the Mogambo has to say. But now have found a website where you can listen to podcasts of radio interviews that the Mogambo does now. you can catch up with the Mogambo here: www.mogamboguru.com

To recap. The G-20 Finance Ministers met and tried to soothe out the markets, and at first their words did have a soothing affect on the currencies. But that didn't last long and the rout is back on the currencies and metals this morning. S&P reaffirms Australia's AAA rating. And in a strange twist of fate. Brazil had to step in and support the real, which they have attempted to debase for the past year!

Currencies today 9/23/11. American Style: A$ .9750, kiwi .7775, C$ .9685, euro 1.3460, sterling 1.5415, Swiss $1.1025, . European Style: rand 8.3335, krone 5.85, SEK 6.9125, forint 216.15, zloty 3.3430, koruna 18.4155, RUB 32.20, yen 76.25, sing 1.30, HKD 7.7960, INR 49.48, China 6.3875, pesos 14.07, BRL 1.9050, dollar index 78.42, Oil $81, 10-year 1.74%, Silver $32.90, and Gold. $1,708.30, and as we do each Friday. here's your chance to peak at the U.S. Debt Clock. you might want to focus on the figures in the lower right, as they are the "unfunded liabilities". scary stuff folks. www.usdebtclock.org/index.html

That's it for today. A truly embarrassing and deflating defeat yesterday by my beloved Cardinals. I just have one question for the Cardinals Management. The 2nd most storied Baseball organization, and we can't find a shortstop? The one we have now, almost gave the game away with a an error that T-Ball player would have caught the night before, and yesterday, his error led to a 6-run 9th inning that spelled defeat! I shake my head in disgust, but... carry on. My beloved Missouri Tigers are 22-point underdogs to Oklahoma. They play tomorrow night on the FX channel. I'll watch the game, but I don't think it will be pretty, like last year, when the Tigers beat #1 Oklahoma! The quarterback from that Tigers team will be starting quarterback for the Jacksonville Jaguars this Sunday. And with that. I bid you farewell. I'll get out of your hair for today. Thanks for reading the Pfennig. and let's go out and try to make today a Fantastico Friday!

Chuck Butler


EverBank World Markets



Posted 09-23-2011 11:45 AM by Chuck Butler