A Pfennig For Your Thoughts

In This Issue..

  • A currency lineup addition!
  • Who’s cooking the books?
  • Commodity prices rebound…
  • I smell smoke…

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And Now… Today’s Pfennig!

Where There’s Smoke…

Good day… Well… Another range bound day yesterday, except for pound sterling which turned in a very bad performance after the U.K. reduced their growth estimates for next year… I think traders were a little hard on pound sterling, for this was just an estimate for next year, not a statement from the Bank of England that rates were coming down next week!

Before I go on, I want to announce a new currency to our lineup… I found out yesterday that the Icelandic krona no longer trades NDF… That means “Non-Deliverable Forward” and can cause liquidity problems, and delivery of the currency does not exist. Anyway… This is a forward trading, fully liquid currency now… Well, there are some restrictions, such as prices are only quoted in the morning/London session, and small trades will get spread away from the current spot, which means we’ll bundle trades to get the best execution… And it is a very small country, population wise…

However, those are little problems… The Icelandic krona (symbol ISK) has been a very good performer VS the dollar… In the last 2 years, it is up 17% VS the dollar, with this year’s performance down just .63%…. That’s awesome performance VS a dollar that has been correcting all year. GDP growth in Iceland is above 5%, and expected to go higher in 2006… And, there’s just one more thing that makes this currency exciting to offer… On a 3 month CD, We can pay an annualized rate of 8%! That’s right… I said 8%! And as long as we can bundle the trades, I’ll keep the minimum at $10,000…

We don’t have this on our website, so don’t go looking for it there, not yet… We don’t have it on our applications as a choice, you’ll have to write it in… But we’re ready to begin taking orders… 1-800-926-4922…

OK… I’m just so excited to be able to finally offer this currency… We’ve been waiting for some time now, and it’s finally here!

Yesterday, we saw a Gov’t report that said that consumer inflation for October was just 2.1% VS 2.0% in September… Do you believe this? I don’t! The headline number was 4.3%, and even that I question! So… If the Fed uses the reports that come from the same team that they play on, then rate hikes should end in December… However, I’ll even give the Fed some credit here, because they are not letting the wool get pulled over their eyes! They see inflation as a problem… My problem is that they came to the inflation fighting party way too late, and are now playing catch up… And the markets are rewarding them for this by buying dollars!

We also saw the NFPS (Net Foreign Security Purchases) data jump to $101.9 Billion… Now, I have to ask myself this question… If the Gov’t cooks the books for Labor, and inflation, why wouldn’t they cook them for this data? I mean, come on… Equities are no longer being bought by foreign investors, and when I look at the list of Major Foreign Holders of Treasuries, I don’t see any major jumps… It’s all smoke and mirrors to me…

However, that’s two consecutive months that the NFPS data was strong, and the dollar didn’t rally hard on the number… Has this piece of data jumped the shark tank? Maybe… We’ll have to check it out for the next couple of months…

So… Like I said, the dollar couldn’t rally on the strong NFPS, which I found to be strange… But I won’t look at gift horse in the mouth! Today, we get my fave… Capacity Utilization, the only forward looking piece of data, which is expected to remain around 79% in October… This is indicative of the “muddle through” economy, as it just cannot get the legs to move to the lofty levels of the just a few years ago… We’ll also see Industrial Production for October, which has been awful lately, and the Nov. Philly Fed Index… So, the currencies might receive some direction today from these reports…

It looks as though Canada will have an early election in January… Like I said before, this shouldn’t cause much pain for the loonie, unless the Bank of Canada gets ADD, and is distracted from their job at hand!

Recall last week, I told you that the “Technical Guys” were all over me like a cheap suit, letting me know that they knew the dollar was going to rally, and it was going to get even stronger before turning around next year? Well, that kind of talk is spilling over to the regular analysts, as I read more and more each day. I’m not here to say that it can’t happen… All I’m saying is that if it does play out this way, the storm clouds will have gathered over the dollar big time, and when it does turn around, the move will be vicious, because the fundamentals just aren’t in line with a further drop…

There’s a rumor going around, someone’s underground, no wait, no Eagles here… This is serious stuff, Chuck! There’s a rumor going around that Chinese Premier Wen Jiabao has called an emergency meeting on renminbi and the dollar ahead of President Bush’s visit to China this weekend. Hmmm…. Do you smell something? Yes, I do! I smell smoke… And when there’s smoke…. There’s fire!

Commodities have got the wind in their collective sails again, and that should spell good things for Aussie, kiwi, loonies and even rands… And did you see the price of Gold after hours last night? How does $482.35 sound? If Gold can continue to climb, and I think it can, I think it can, I think it can, STOP THAT! If it can… It will support rands, and Aussie… Did you know, that Australia is the world’s 3rd largest supplier of Gold? Well, now you do! And on that uplifting note… We’ll head to the Big Finish!

Currencies today: A$ .7335, kiwi .6870, C$ .8410, euro 1.1690, sterling 1.7205, Swiss .7560, ISK 61.86, rand 6.7160, krone 6.70, forint 215.77, zloty 3.40, koruna 25.11, yen 118.70, baht 41.18, sing 1.70, China 8.0845, pesos 10.656, and gold… $482.35

That’s it for today… Geez Louise, next week, we’ll be celebrating Thanksgiving! I’m only 4 weeks from my winter vacation too! You know me, I like to build those vacations up to a crescendo! Well… Our weather changed, and it is freezing outside! Whoa, there mother nature, it’s way to early for that! Chris is back today, so we have a full desk again… And just in time for ISK! Have a great Thursday!

Chuck Butler
President
EverBank World Markets
1-800-926-4922
1-314-647-3837
www.everbank.com

PFENNIG DISCLOSURE