A Pfennig For Your Thoughts

In This Issue…

  • Durable Goods surprise!
  • Germany’s economy… Love is in the air!
  • S&P warns New Zealand again…
  • Birthdays for Chris & Christine!

But first a word from our sponsor…


VENTURE TO ASIA FOR ULTIMATE PORTFOLIO DIVERSIFICATION.

Now there’s a great new way to invest in the active and healthy Pan-Asian currency market. With the new Asian AdvantageSM certificate of deposit from EverBank®, you have the opportunity to invest in a strategic mix of the region’s major currencies-in a single investment product. It’s your easy link to such currencies as the Japanese Yen, the Thai Baht, the Singapore Dollar and the New Zealand Dollar.

If you are one of the many who expect the growth in this region’s currencies to continue, then the Asian Advantage CD is the currency solution for you!

Click here to learn more about the new Asian Advantage CD today!


And Now… Today’s Pfennig!

The Dollar Storms Back!

Good day… And a Happy Friday to one and all! I head out on a jet plane tomorrow with my beautiful bride and little buddy to (hopefully) sunny and warm Florida! We’ll get in a few days of (hopefully) warm sun before the World Money Show begins on Wednesday… Chris will have the con with the Pfennig, until I take the con back on Thursday morning… In the meantime we’ll have Big Al’s last FOMC meeting, and a ton of data to sift through…

Well… The dollar came roaring back yesterday as the Durable Goods data came in stronger than expected… Seems that U.S. consumers couldn’t get enough of those big ticket items, like refrigerators, washing and drying machines, and other stuff… I think this is an indication that consumers are running out of steam… It’s like, let’s get this big ticket item that we know we won’t have to replace for 5 years out of the way before we batten down the hatches…

The dollar took no prisoners, either, yesterday! The Commodity Currencies of Aussie, New Zealand and Canada were like the little engine that could… They thought they could remain strong vs. the dollar… They thought they could remain strong vs. the dollar… But in the end they, too, succumbed to the dollar’s move, although the move vs. these currencies wasn’t as bad as vs. the euro and yen!

I find the move vs. the euro interesting in that, the signs all point to a strong recovery in Euroland led by Germany… Love is in the air… And Germany’s recovery is the new love child for the markets… So… With the euro falling back below the 1.22, I see it as an opportunity to buy at much cheaper levels than earlier in the week… Rate hikes in Euroland this year will come (I think), in March, June, and September… And that should provide the fuel to move the euro higher this year…

Remember, that most likely… The Fed will stop raising rates… And when a Central Bank stops raising rates, what’s the first thing that pops into the markets’ collective minds? When will the first rate cut come! We saw that with New Zealand, until the Central Bank Gov. Bollard said there would be no rate cut at this time… But anyway, what I was trying to get to was the fact that if the markets view the Fed cutting rates and the ECB raising rates… We could have a reversal of last year’s action!

I see where Chinese Central Bank Gov. Zhou was speaking at the World Economic Forum in Davos, Switzerland, last night and had this to say about the global imbalances… “Globalization allows savings to go from one country to another. Now, Chinese savings are going to other countries. Basically this is part of globalization. We needed to pay attention to whether this is a trend or not. The question is whether the current situation is sustainable or not. If not, we need to make changes to make the situation more sustainable.”

OK… The “other countries” he is referring to is the U.S. (and some Euroland), and he knows all too well that this situation IS A TREND! And I also think he knows in his heart of hearts that it is not sustainable… But… As usual… He didn’t give us any idea what could be done or what needed to be done to correct the imbalances…

But… You all know that I’ll take a stab at that anytime, anyplace! However, if I begin talking about what’s needed to be done, I’ll get all depressing, and it’s a Friday before a long weekend for me! Do I really want to go there getting all depressing? I don’t think so! But… In case you missed the 1,000 times in the past (OK, that’s an exaggeration!) that I’ve gone over this… It involves two things… A deep dark recession, and a dollar that loses 30-40% of its value vs. Asian currencies…

Whew! I got through that without getting myself down… So I’ve got that going for me! Speaking of something going for me… Our 2nd presentation in Orlando is going to be webcast! I can hear you saying… No way! And I say, “Way”… OK, enough Wayne and Garth… Yes, the presentation is going to be webcast, and then we’ll have a link on our website that will allow you to see it for 6 months afterward… So… If you can’t make it to Orlando next week and want to see the big boss, Frank Trotter, and the little boss, yours truly, on your computer screen… Well… You can! Just click on this link, and then scroll down till you find the Friday times slot with my picture on it… It will then allow you to register to receive the web cast… www.moneyshow.com … It’s Free!

Today, we’ll see GDP for the 4th Qtr, annualized… The prior reading was 4.1%, but this one is expected to come in much weaker at 2.8%… I don’t see how the dollar bulls could feel good about buying dollars yesterday, with this report hanging over the dollar like the Sword of Damocles… But then, the dollar bulls have been known to do weird things…

Standard & Poor’s (S&P) fired a shot across the bow of New Zealand’s credit rating last night… S&P said that the threat of a cut in the country’s credit rating has ramped up in recent months, with the Current Account Deficit the main culprit… I still think that this is just rhetoric at this point… We’ll have to wait and see… Hopefully nothing comes of this…

Well… The U.S. is about to hit the debt ceiling again… And U.S. Treasury Sec. Snow, will have to go beg Congress for additional room for additional debts… Oh… And I heard on the radio, so I don’t have the actual number written down anywhere, but the Budget Office has said that the Budget Deficit is set to increase by a huge amount in 2006… OUCH!

And before I go to the Big Finish… January is almost over, and we’re one step closer to the opening of the Iranian oil bourse, which is only going to accept euros for their oil… I would expect that the rhetoric regarding Iran is going to really pick up as we get closer to March…

Currencies today: A$ .7530, kiwi .6840, C$ .8715, euro 1.2190, sterling 1.7810, Swiss .7850, ISK 61.75, rand 6.1050, krone 6.6410, forint 206.60, zloty 3.14, koruna 23.3330, yen 116.60, baht 39, sing 1.6250, China 8.0616, pesos 10.4770, dollar index 88.87, Silver $9.7650, and gold… $561.62

That’s it for today… No football this weekend, and baseball hasn’t even started spring training… What’s a fan to do? I’ll talk to you on Thursday next week… Hope you have a great weekend… Oh! Tomorrow is Chris Gaffney’s birthday… And Monday is our little Christine, Caroline, Lorelei, pixie’s birthday! Someone is turning 30, but I won’t tell who it is! HAHAHAHA! Have a great Friday and weekend!

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

PFENNIG DISCLOSURE