Veteran's Day

Good day… And a Terrific Tuesday to you! A Veteran’s Day Tuesday! This is a Banking and Federal Holiday today, so the bricks and mortar banks are closed, and there will be no mail delivery, and of course your friendly neighborhood Government worker gets the day off. I’m here, in the saddle, writing the Pfennig like it’s a regular work day, and the boys and girls will begin to gather in about 2 1/2 hours from now. We’ll get all caught up, return some calls and head home today.

Since today is Veteran’s Day… I thought I would begin today with a snippet from a Veteran’s Day poem called “Heroes” by Jared Jenkins…

For every life, there is a soul
For every soul, there is a life
For those who have died, we show great appreciation and remembrance
For those who live, along with them live the horrific memories of battle
Some, memories of defeat
Some, memories of victory

Our veterans were more than soldiers
They were, and still are heroes

OK… Well… All that build up yesterday about how the markets liked the sound of the Chinese announcement to inject $586 billion worth of renminbi into their economy, dissipated early on in the NY market yesterday. As I left you, the euro (EUR) had climbed above 1.29 again, but ended the day around 1.2740. This is tied directly to the trading theme, and that’s all I have to say about that… Have a great day, and I’ll talk to you tomorrow…

HA! Had you there for a minute! The dollar rallied once again, when the deep, dark, dangerous clouds returned, and the risk takers that had come out of the woodwork on Friday, disappeared, which left the currencies hanging out on the line. Gold rallied $10, which is really counter-intuitive to the risk takers disappearing and the dollar rallying… But it did, and I’m not here to argue about that!

As I said yesterday, the data cupboard was bare with no data to report Monday… With today being a holiday, we won’t get our next glimpse of the awful fundamentals data until Wednesday. In the overseas version of a data cupboard, the German Investor Confidence (as measured by the think tank, ZEW), surprised on the good side, with the index rising in October… This index had been on the slippery slope for the past few months. The news is that the index rose because the European Central Bank (ECB) stepped to the plate a couple of weekends ago, and made good contact with the financial meltdown in Europe.

Again… Let me say this loud and clear, folks… There’s a HUGE difference in these central banks that are now providing liquidity… Some do so from a position of strength like the ECB and China… and others do so from a position of weakness (the Fed).

But the good report isn’t doing anything to help the euro this morning, as the overnight stock markets didn’t fare too well, which has led to U.S. index futures being off… And all that means a rotten trading day, thus keeping the risk takers on the sidelines, and the dollar being the king of the hill.

And… All this means the Japanese yen (JPY) is back on the rally tracks! I see this morning where BNP Paribas says that their Elliott Wave chartists believe yen will trade to 96.85 in the next week. Of course you know me folks… Trends are what move currencies… Charts merely tell you or give you an excuse as to why a currency moved in that trend. In this case… We all know that while the deleveraging is going on during the credit market squeeze, that dollars and yen are the only two currencies to gain (Chinese renminbi (CNY) goes back and forth)…

Back here in the Good Old U.S.A…. The accountants over at Fannie Mae announced that the $100 billion pledge to them “may not be enough”. This announcement came after Fannie posted a record $29 billion loss and confronting more difficulty in issuing and refinancing debt. I guess the folks at Fannie thought, Shoot Rudy, if AIG can go back for second helpings of bailout funds, then we can too! I think we should all get used to this, as I said when all the original plans to bail out these firms were announced… These bailout funds are going to be like cocaine to those needing bailouts, and they are going to need more and more.

And the Wall Street Journal reported this last night that… “The Federal Reserve said Monday it will allow American Express to become a bank-holding company, saying ‘unusual and exigent circumstances affecting financial markets’ justified a fast approval of the company’s application. The surprise move would give American Express access to new low-cost financing from the Federal Reserve.”

Before it’s all said and done, we’ll all be one big happy family… No – make that dysfunctional family of “bankers”. Shoot, they may as well bring the automakers into the fold too, they need some of the low-cost financing from the Fed too! I could really go off on a tangent here… But, I’ll keep it on an even keel, as it’s not like there’s anything I can do about all this, so why get too upset with all these dolts!

So… The bad fundamentals – no…make that awful fundamentals – continue to mount for the United States to deal with… But before we can deal with the awful fundamentals, we have to deal with the credit markets squeeze… No ifs, ands or buts. If we can get the lending going again, and I’m not talking about to individuals, I’m talking about between banks, and with corporations, then the focus will return to the fundamentals. That’s my story and I’m sticking to it!

You know… One thing that I talked about last summer – and was even quoted in the Wall Street Journal talking about – was the fact that, with the low interest rates in the United States, the dollar had replaced the Swiss franc (CHF) as a funding currency in the carry trade. And since then, the borrowing rates in the U.S. have gone even lower… But carry trades are not too popular at the moment, with risk taking on the sidelines… So the affect on the dollar at this point is minute. But, this explanation helps with the “reason the dollar is rallying”. I’ve explained more times than I care to that with carry trades unwinding, the “funding currency” which was sold short, gets bought to cover the short position, and so, just like Japanese yen, the dollar rallies…

And while I’m talking about the weird things going on in the United States, I thought I would give you a snippet of a letter that Ted Butler (no relation, that I’m aware of) sent out regarding what he feels is manipulation of silver. Here’s the other “Mr. Butler”…

“This week, I received a copy of a letter, dated October 8, sent from the CFTC to a California Congressman, Gary G. Miller. It discussed allegations of a silver market manipulation because of the data in the monthly Bank Participation Report. The data in that report for August showed that one or two U.S. banks held a massive short position in COMEX silver futures of 33,805 contracts, or more than 169 million ounces. This is equal to 25% of annual world mine production, and was up more than five-fold from the prior month’s report. After this position was established, silver prices fell more than 50%, in spite of a widespread shortage in retail forms of investment silver.”

So, there you go! Ted Butler believes he has the proof of manipulation in silver, but what’s the government going to do about it… Ahhh… As one of my all time faves, Edwin Starr, sings… Nothing, absolutely nothing, say it again!

There was an article posted on CNBC’s website yesterday that listed companies here in the United States that are announcing layoffs… This was not a pretty scene folks… But if you want to check it out, click here…

Yesterday, I told you the “news of the weird” with the announcement by the Fed that the guy who was responsible for risk management at Bear Stearns (the now defunct Bear Stearns I might add) was hired to head the group that oversees the purchase of the toxic waste bonds by the Fed. This to me is akin to putting the fox in control of the hen house! Anyway… A long time reader sent me a note regarding this announcement… “I read somewhere about this appointment in several places last week on the web. One ‘source’ actually suggested perhaps he was hired just to keep his mouth shut, as who would better know how really toxic the traded paper is and what really lies out there?”

OK… You know me, I’m not one to put speculation in the Pfennig, especially when it appears on a website… But, this really struck a chord with me (probably C Major 7 my favorite chord!)… And it appeals to my conspiracy theory blood… Let’s just hope it’s not even close to the truth!

I hear that the major oil companies that are attempting to get oil out of the oil-sands in Canada have decided to halt the spending there. For those of you not familiar with the oil-sands in Canada… These are the world’s biggest energy reserves outside Saudi Arabia. Getting the oil out of the ground here is a real problem and costly, and with the price of oil dropping since July, the oil that are companies drilling here have decided to cut back on the costs. I don’t understand this decision, as this IS the time to drill!

Currencies today 11/11/08: A$ .6685, kiwi .5830, C$ .8385, euro 1.2740, sterling 1.5575, Swiss .85, ISK 182, rand 10.1825, krone 6.90, SEK 7.875, forint 210.50, zloty 2.2050, koruna 19.89, yen 97.75, baht 34.94, sing 1.4980, HKD 7.75, INR 48.10, China 6.8250, pesos 12.88, BRL 2.2050, dollar index 86.02, Oil $60.30, Silver $9.97, and Gold… $739.15

That’s it for today… Funny thing happened this morning as my alarm went off… Jim Croce was singing, “I hope I didn’t wake you…” I said, “OF COURSE YOU DID!” HA! Then as I was sitting here typing away, the rain was pelting against the window, and the great song by POCO was playing on the radio… Bad Weather… I saw some more previews for the new season of 24 last night… Can’t wait for that to start again! This coming weekend, I’ll be in New Orleans for the New Orleans Investment Conference. This is the granddaddy of all investment conferences, and has been a “go to” place for the gold bugs over the years, as it was started by THE Gold Bug, Jim Blanchard… I really moved up the roster of speakers at the New Orleans Conference this year. Last year, I was the very last speaker of the Conference… This year, I’m the second to last speaker! See how I’ve moved up in the world? HA! That’s OK… It’s a good crowd… The Big Boss, Frank Trotter, is filling in for me on an investment panel Saturday morning, as I don’t arrive there until Saturday afternoon. Then he leaves as I arrive. Two ships passing in the night! OK… Well, I would just like to say Thank You to anyone that reads this letter that is, or was in the service for this country… And Thank You to those that are no longer with us to read the Pfennig. Sure hope your Tuesday is Terrific…

Chuck Butler
November 11, 2008