Groundhog Day?
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    In This Issue.

    * Weak ZEW wipes out euro's gains.

    * RBA minutes push A$'s higher.

    * Xinhua calls for the world to change.

    * Gold gets whacked again, all paper trades.

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

    Groundhog Day?

    Good day. And a Tom Terrific Tuesday to you! Well, our super-great sports weekend here in Missouri turned ugly yesterday, but that doesn't negate the weekend's performances by the Blues, Cardinals, Rams and Tigers! The most impressive win was by my beloved Missouri Tigers, who somehow found a way to win at Georgia! This is turning out to be a special year for the Tigers, let's hope the injury to our quarterback doesn't upset the applecart.

    Speaking of upsetting the applecart. I checked the currencies a couple of times yesterday, as I tried to relax, and the euro was doing just fine, basking in the sun rays coming from the European Finance Chiefs who reported that Ireland and Spain would soon be weaned off aid and return to the bond markets. Ireland will be first to go next month, with Spain testing the waters of no aid, early next year. But then the applecart was upset this morning, by a weak German Investor Confidence report as measured by the think tank, ZEW. So, all the sun rays shining on the euro yesterday for showing signs that the Eurozone's plans to deal with debt are showing positive results have been wiped out by a weak ZEW this morning.

    The Aussie dollar (A$) is the best performing currency VS the U.S. dollar overnight. The A$ is receiving some love this morning from the minutes of the last Reserve Bank of Australia (RBA) meeting. The minutes revealed that the RBA members think that previous rate cuts are finally showing up in the economy, and that it would be "prudent to leave the cash rate at the existing low level while continuing to gauge the effects." Hmmm. Sounds like the RBA is pretty happy with the current levels and that the chances, in my opinion, of another rate cut have just be reduced, and thus, the A$ kicks some tail today.

    The trading level in the A$ this morning represents a 4-month high, and according to the chartists, it could see some additional recovery of the lost ground from earlier this year. So let's watch and see if the chartists are correct. But, I'll remind you of what I've said for many years now, going back to when the Pfennig was a hand written letter on a legal pad that was copied and put on the desks of the salesmen each morning. (obviously before email!) And that is trends are what move currencies, and trends begin and end because of fundamental reasons, and charts are just a way to tell you what happened inside of that trend. Not that they aren't important. The point is that fundamentals move currencies, not lines on a graph.

    OK. I was watching the news alerts yesterday, and all morning-long they were talking about a "meeting" at the White House between the President and Congressional leaders regarding the Shutdown and Debt Ceiling, that Oh, by the way, expires in 2-days. But, then later in the day, came the alert that the meeting was called off by the President. Remember a week or so ago, I talked about the analyst that said the risk of a default would come from the lawmakers waiting until the 11-th hour, and that could end up with no resolution? Well, that's starting to play out isn't it?

    Speaking of the inability of our lawmakers to negotiate, and keep our country from becoming the largest default in history, taking that title from Nazi controlled Germany. Well, the Chinese are not sitting quietly by, watching all of this unfold. And the official state-run Chinese news agency, Xinhua, ran an editorial on Sunday titled: "A de-Americanized world". Here's a snippet, and the link to the whole story (in English). "As U.S. politicians of both political parties are still shuffling back and forth between the White House and Capitol Hill without striking a viable deal to bring normality to the body politic they brag about, it is perhaps a good time for the befuddled world to start considering building a de-Americanized world."

    [Source: Xinhua, U.S. fiscal failure warrants a de-Americanized world, 10/13/2013]

    Not that I haven't been telling you all this was coming for a lot of years! I really get upset about this stuff. On one hand, I see this as just awful for the future of the U.S. not having the reserve currency any longer, and on the other hand, I have this little guy that keeps telling me that at least I warned everyone what all this debt and deficit spending was going to come to!

    I have a couple things on Gold this morning that I want to share with you. But before I get to those two things, let me tell you that Gold got whacked again on Friday and yesterday saw all the overnight gains wiped out. So, let's get to the stories on Gold.

    Our always full of sunshine office coordinator, Danielle, sent me a note on Friday morning, pointing out a story on about Gold. So, I opened it up and low and behold, there was my old friend, Sean Hyman, being interviewed for the article. I've found, over the years, that it's worth it to pay attention to what Sean says. He is a very smart trader, strategist, and chartist. Let's listen to why Sean thinks Gold is ready for a 20% rise in value in the next 1, 2 or 3 months.

    "Sean Hyman, editor of the Ultimate Wealth Report, a financial newsletter, says the reason for the bullish call is partly based on a view that under Janet Yellen the Federal Reserve is likely to maintain its hefty monetary stimulus, fueling inflation and boosting demand for gold as an inflation hedge. Gold is having a traditional pull-back and I think we will have another run up to the $1,500, $1,600 level in the next one or two or three months.

    Yellen will have the same concepts as Bernanke. So money will continue to be printed, the economy stimulated and interest rates kept low as possible and that's going to stimulate inflation, be good for commodities and bad for the dollar. I'm not a gold bug, I don't think every day and any day is a day to own gold, but I do feel we are now in that phase to own gold," Hyman said.

    Thanks Sean! Good to see you in print again!

    And then another long time dear Pfennig reader (thanks Terri!) sent me a very long article, that I cut a snippet from, for it talks about manipulation. "As a guy who doesn't ordinarily believe in conspiracy theories, I think there should be some further investigation as to who is selling, and why always at that time?" says Art Cashin, who runs US futures trading for Swiss investment bank UBS.

    Friday's drop was the fourth day running of suddenly heavy sell orders just as New York trading began. Surely anyone who wanted to liquidate a 25-tonne position - albeit a position consisting only of paper contracts, with no gold involved and with only a fraction of that bet's full value needed to place it - wouldn't do it all at once, in one massive sell order? Not unless making a profit was only a secondary concern.

    "If you were to round up the usual suspects, your first instinct would be to pull in the Federal Reserve and other central bankers along with the funds that do their bidding," says The Australian newspaper. "After all, gold is the enemy of the money printers. The more money being created out of thin air, the more people trust those yellow bars."

    OK. Then on Friday, my very good friend Rick B, sent me a twitter alert that he received that said, "U.S. said to open Criminal probe of Currency Market Rigging". To which I replied to him, "These guys are always barking up the wrong tree. The currency market is a $5 Trillion a-day market, how do they figure that someone could manipulate a market of that size? These guys would do much better going after the Gold price manipulators!" To which he replied, "Maybe that's next". We can only hope!

    The Sovereign Wealth Fund in Norway, announced that they are nearing $1 Trillion in assets. They tried to smooth some ruffled feathers when it was announced that they owned $61 Billion in U.S. Treasuries, by saying that they believe that "U.S. Treasuries are still one of the safest investments" - Hmmm. Interesting take, don't you think? Sure if they had to take a $61 Billion hickey from a U.S. default that would be bad, but at $1 Trillion in total size, not exactly going to break the bank!

    The Norwegian krone, just can't seem to break the "follow the euro around" trend. The euro is weaker this morning on the ZEW that we talked about above, and vis a vis so too is the krone. All this doesn't make any sense to me folks. Norway is NOT in the Eurozone! It has its own fundamentals, which by the way blow most countries' fundamentals out of the water, and that sovereign wealth fund, that's nearing $1 Trillion in assets.

    Two months ago, I did a radio interview with Pimm Fox at Bloomberg radio and the subject was India. I talked about how beaten and beleaguered the Indian rupee was at the time, but that things were beginning to get brighter for India and the rupee. I then went on to talk about some of the programs that the new Reserve Bank of India (RBI) Gov. Rajan, was planning on implementing that, if implemented, could turn the rupee around. Well, the turn-around has happened, but the currency has a long way to go to catch up with the losses it incurred so far this year.. But then, all the programs haven't been implemented yet!

    One of my favorite all-time movies is Groundhog Day. Doesn't it feel like we're stuck in the movie with the hope of a debt resolution every day, only to have that smashed like a bug on windshield, going on day after day?

    For What It's Worth. Another story, this time in the U.K. Telegraph, about the U.S. dollar's reserve status being questioned. "All great empires - from the Greek, to the Roman, the Spanish and the British - have at their heart a dominant means of exchange which is very much part of their political and social hegemony. Once upon a time, it was Roman coinage which was the world's pre-eminent currency. In more recent times it was the British pound. Today, it's the US dollar to which international investors flock as a safe haven for their money. Highly liquid and apparently reliable - until recently at least - nothing else comes even remotely close to the greenback's dominant position in the international monetary system.

    That this position - what Giscard d'Estaing referred to as America's "exorbitant privilege" - could so casually be put at risk by politicians on Capitol Hill is an extraordinary spectacle that may be indicative of a great power already seriously on the wane.

    A steady erosion of trust which began with the financial crisis five years ago has reached apparent breaking point with the pantomime antics on Capitol Hill. The search for long-term alternatives to the dollar is on as never before. Regrettably, there aren't any, or not for the time being in any case. Everyone can only look on in horror as the US commits apparent economic suicide. "

    Chuck again. Apparently the writer of this article for the U.K. Telegraph, hasn't heard of the steps that China has been taking to make their currency the next reserve currency of the world. So, yes, technically the writer is correct to say "there aren't any, or not for the time being" but I think he was remiss in not mentioning the steps China has taken already.

    To recap. The euro has erased all gains it had yesterday with a weak ZEW this morning. The A$ is stronger on the RBA's meeting minutes, signaling that the RBA will wait to see how the previous rate cuts filter through the economy, thus no rate cut for now. It's Groundhog Day with the U.S. debt talks, and Gold gets whacked again, and again, and always at the same time of day, and only in paper trades. In other words, the sellers don't have the Gold they are selling.

    Currencies today 10/15/13. American Style: A$ .9530, kiwi .8385, C$ .9655, euro 1.3495, sterling 1.5940, Swiss $1.0915, . European Style: rand 9.9555, krone 6.0135, SEK 6.4905, forint 218.75, zloty 3.0985, koruna 18.9790, RUB 32.27, yen 98.55, sing 1.2430, HKD 7.7545, INR 61.84, China 6.1412, pesos 12.99, BRL 2.1825, Dollar Index 80.63, Oil $101.90, 10-year 2.73%, Silver $20.70, Platinum $1,365.20, Palladium $707.00, and Gold. $1,260.67

    That's it for today. Well.. a grand time was had by all at the wedding in Columbia, MO this past Saturday, the bride, was beautiful, and you should have seen the flower girl (Delaney) and the ring bearer (Everett). And then at the reception, Delaney ruled the dance floor all night! I got to see the 1st half of the Tigers upset of Georgia before heading to the church. Then my beautiful bride kept elbowing me for checking the score on my phone during the ceremony! Hey! It was a HUGE game! I got to go to Game 1 of the NLCS Friday night with good friend Rick, and lasted the whole 13 innings! My beloved Cardinals had better learn how to hit the ball again ASAP! Carry On, Wayward Son, by Kansas is playing on the IPOD this morning. Good thing to do, eh? And with that, I thank you for reading the Pfennig, and hope you have a Tom Terrific Tuesday!

    Chuck Butler
    EverBank World Markets

    Posted 10-15-2013 1:42 PM by Chuck Butler
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