In This Issue…

* Currencies & metals rally on ECB news…
* Fed to devalue dollar by 33%?
* Japan posts smallest CAD since 1996…
* The Misery Index, deux…

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

ECB Changes Stance…

Good day… And a Wonderful Wednesday to you… I’m going to stop here for a moment of silence for Harry Keough… God rest his soul… Very much sadness on the desk yesterday and today, as we learned that Ty Keough’s dad had passed away during the night. Harry Keough, was a soccer legend, as his only son, Ty is. Harry played on the U.S. national team that beat England in the World Cup in 1950, and went on to coach St. Louis University to 5 NCAA Championships. And in a soccer crazy city like St. Louis, that’s like being knighted! Harry was a friend to us on the trading desk, I could shake his hand, and he would call me by name. Our thoughts are with Ty, his mom, and the rest of the Keough family.

Not sure, where to take the letter today, as those things that hit home, and the heart, are far more important than what’s going on in currencies and markets… That’s one thing I have learned in my life, is that things like markets, work, and other things will still be there. Family is more important…

OK… I know that Ty wouldn’t want me to not write today, so I’ll give it the old College try…

The currencies began to get some wind in their sails yesterday mid-morning, and soon an all-out rally was taking place. The currency rally was led by the euro, just like in the old days, and the euro was getting bought like dealers were giving them away for free! You see, the rumors of some backing off their previous stand, the European Central Bank (ECB) that is, really got the euro on the rally tracks, and then the real strong push higher came when those rumors were proved to be true…

Here’s the skinny… The European Central Bank has made key concessions over its holdings of Greek government bonds that will contribute to a reduction of Greece's debt burden. The ECB has agreed to exchange the Greek government bonds it purchased in the secondary market last year at a price below face value, provided the debt restructuring talks under way find a successful outcome.

The ECB won't make a loss on the transaction, but it is not clear whether the bank will exchange the bonds at the below-par price at which it purchased them or whether it will make a profit.

I find this to be very interesting, as the ECB previously didn’t want any part of this trade… And once again, I point to the fact that I told you last month that there would some changes to the ECB’s stance, and that some semblance of calm would come over the Eurozone… Not that they are out of the woods, by any stretch of the imagination, it’s just that calm now, means that all the negativity gets drowned out, temporarily.

So… the euro has stretched all the way to 1.3280, overnight… And the rest of the currencies are following the old Big Dog’s lead.

And Gold really took off! The shiny metal gained back all it had lost the previous two days, as the flight to dollars and the so-called “safe haven” was reversed. I would really like to see Gold have some real direction though… It goes up $25, and then goes down $25… But, I did look like the Mighty Oz yesterday when I said that that it could be a good move to buy some Gold at the cheaper price, at that time…

I have a couple of things to go over this morning that just made my blood boil yesterday… I think I’ll just give the story an intro, and then give you the link… That way if you’re not interested, you can skip ahead…

First… I saw this story and my blood pressure just began to tick higher and higher… here’s the story title: Congressional earmarks sometimes used to fund projects near lawmaker’s properties… and here’s the link.

And another one from the Washington Post… titled: Some legislators send millions to groups connected to their relatives… I know, I know, this stuff can’t be made up… you can read it here: http://www.washingtonpost.com/politics/congress/capitol-assets-some-legislators-send-millions-to-groups-connected-to-their-relatives/2012/01/10/gIQAyrzdxQ_story.html?wpisrc=al_comboNP

And now for this one… It’s a story on the Forbes.com site, regarding the Federal’s Reserve’s explicit goal, to devalue the dollar… read it here.

A friend of mine sent this to me, and asked me what I thought… I said… “It’s nice to see someone other than the Butlers, Rogers, Caseys, Gallands, Bonners, and Wiggins telling people that this is happening, and what it’s going to do the dollar’s value, and the purchasing power of the dollar!”

Yesterday, Big Ben Bernanke talked to the Senators, the lawmakers not the hockey team that our St. Louis Blues beat 3-1 last night! Of course, in my opinion, Big Ben would have had about the same understanding of what he was doing if he was talking to the hockey team! And that’s a discussion for another day… But what Big Ben did get across to the lawmakers, was that the U.S. Congress should focus for now on economic growth rather than budget deficits. “Abrupt action to reduce the deficit in the next few months could seriously damage the recovery.” –Ben Bernanke

Torn between two lovers, is what the lawmakers feel like right now… The have the general public banging on them to cut deficit spending, and they have the Fed Chairman, banging on them to promote growth… I know, it’s like a comedy skit, with the bad conscience image on the lawmakers’ collective right shoulder, and the good conscience image on the left shoulder… Who will win? I bet you all know which one I would side with if I were a lawmaker, even if it didn’t get me reelected, because it’s the right thing to do!

Whew, you should have seen how strongly I was banging on the keys for the last part of the previous sentence! Poor keys… They did nothing to deserve getting banged on like that! HA!

I would tell Big Ben… Look buddy, you’ve cut rates to near zero and held them there for over 2 years, and you tell us they’ll stay there for another 2 years… You’ve implemented two rounds of Quantitative Easing… The Gov’t has done cash for clunkers, tax rebates, stimulus, and many other stupid pet tricks to promote growth… But like the two old ladies in the hold hamburger commercial… Where’s the beef, Ben?

I would continue to tell him that I’ve decided to go another direction now… I’m going to find ways to cut the deficit burden, and remove the shackles holding back small business… Now, put that in your pipe and smoke it!

But… I’m not a lawmaker…I don’t play one on TV, and I didn’t stay at a Holiday Inn Express last night! However, I was once an elected official of my little river town, an Alderman… But then lost a reelection by 1 vote! And then found out that a lot of friends and acquaintances that would have supported my reelection didn’t vote, because they thought I would win easily… I decided then that lawmaking, even in a little river town, wasn’t my cup-o-tea…

Ok… enough of that! Hey! The Chinese renminbi after seeing weeks of give and take in the value, finally pushed higher VS the dollar last night, reaching an 18-year high! Of course, the news regarding Greece had a lot to do with this move higher, but add to that, the fact that Chinese Vice President, Xi Jinping is on his way to visit the U.S. and when the Shumers and Grahams try to box Xi in a corner and badger him about China’s currency policy, Xi can simply point to the fact that the renminbi is at a 18-year high VS the dollar!

I have to mention the move that the Mexican peso has been on for the past month… I’m not a fan of pesos, but they sure have gotten some wind in their sails with all the talk about the U.S. economy recovering… That alone should make you want to back away from pesos, because if the U.S economic recovery is lacking terra firma, like I believe (and the Fed or else they would be keeping rates near zero for two more years, and laying groundwork for more QE), then the peso rally could be short-lived… But for now… it’s trading like it’s the new pet rock!

Another currency that has been very strong for some time now, but looks to me to be very overvalued, the Japanese yen is seeing some selling this morning on the news that the Ministry of Finance (MOF) reported that Japan’s Current Account Surplus for calendar year 2011 was the smallest since 1996… it’s still a “Surplus”, but it’s dwindling away…

And then yesterday, I told you about the Misery Index… and how the U.S. Misery Index had increased in 2011… Well, a very astute reader mentioned to me that since I talk about John Williams and Shadow Stats all the time, that instead of using the Gov’t numbers for the Misery Index, I would use the Shadow Stats numbers… Well… very good point!

And so… the U.S. Misery Index goes from 11.30% per the Gov’t, to 29% per Shadow Stats… OUCH! Reminds me of the old Hee Haw skit… Gloom, despair, and agony on me. Deep, dark depression, excessive misery…

I just had a flashback to a Saturday night in my mom and dad’s kitchen, with their smaller TV showing Hee Haw, and me thinking, I’ve got to get out of this place! But, now that I think about it, the thought provides me with fond memories…

Then there was this… Remember a couple of weeks ago, I told you about Byron King, and his story about the U.S. becoming energy independent? Well… according to the Wall Street Journal, “the U.S. has reversed a decades-old trend of increasing dependence on foreign energy and is closer to complete energy self-sufficiency than it has been in nearly 20 years. Data from the Energy Dept. show that through the first 10 months of 2011, the U.S. met 81% of its energy requirements from domestic sources.”

Chuck again… WOW! That’s great news! But, then why is the price of Oil still around $100? Ahhh, grasshopper… The cost to get the oil or natural gas out of the ground remains very high… and until those costs come down, if ever, the price of gas at the pump will remain high… In fact, I saw a story on HLN yesterday morning, saying that gas would reach an average price of $4 a gallon by May! UGH!

To recap… The currencies and metals began to rally yesterday mid-morning on rumors that the ECB was going to ease their stance on holding Greek debt, and when those rumors were proved to be true, the currencies and metals rallied even more strongly. Chinese renminbi reached an 18-year high VS the dollar last night, ahead of a visit to the U.S. by the Chinese Vice President. And the Japanese Current Account Surplus is at the lowest level since 1996…

Currencies today 2/8/12… American Style: A$ $1.0830, kiwi .8385, C$ $1.005, euro 1.3278, sterling 1.5890, Swiss $1.0960, … European Style: rand 7.5375, krone 5.75, SEK 6.65, forint 217.80, zloty 3.1460, koruna 18.69, RUB 29.75, yen 76.95, sing 1.2445, HKD 7.7540, INR 49.14, China 6.2935, pesos 12.66, BRL 1.7205, Dollar Index 78.47, Oil $99.38, 10-year 1.98%, Silver $34.40, and Gold… $1,746.40

That’s it for today, and this week for me… Chris will have the conn on the Pfennig until I get back in the saddle next Tuesday. I’ll send Chris some views from the Orlando Money Show for his Monday letter, but other than that, it’s all Chris! I got to have lunch with one of my fave people in the world yesterday… many of you know her… Kristin Kuchem… She’s gone on to do something that makes her very happy, because she’s around her kids all day… And she looked great! There will be a memorial service for Harry Keough at St. Francis Xavier this Saturday… I’ll be in Orlando, so I’ll miss it, but my thoughts will be with Ty and his family. And with that, I’ll get to work so I can get out of here and to the airport this afternoon… I hope you have a Wonderful Wednesday!

Chuck Butler
President
EverBank World Markets
1-800-926-4922
1-314-647-3837

www.everbank.com