In This Issue.

*  Currencies eke out small gains.
*  Only 13 of 130 Eurozone Banks fail stress test.
*  Rousseff wins by a narrow margin in Brazil!
*  Silver Producers to do something about paper trades?

And Now. Today's A Pfennig For Your Thoughts.

A Busy Event & Data Week Ahead! .

Good Day!…  And a Marvelous Monday to you! WOW! Another amazing weekend, weather-wise here in St. Louis. It was warm enough to bring the sharts out again. That's how we say shorts here in St. Louis. Sharts. funny, eh?  And it's Warshington, now Washington!  I've worked diligently on correcting that speech habit over the years, along with a couple of other speech problems I had as a child. That's right, I went to speech school with my sister, Barbara. Nothing like singling out kids for a speech deficiency so that all their classmates know. But back then it was no big deal, so many kids were from immigrant homes, and had speech problems. I think about my speech problem a lot especially when I'm in front of an audience giving a presentation. I say to myself, “Please don't talk like Elmer Fudd, please don't talk like Elmer Fudd”..

Well, it's a HUGE week event wise, with 4 G-10 Central Banks meeting, and a handful of other Central Banks on the docket as well. The Biggest Central Bank to meet this week is the Fed, in which they will bring to an end Quantitative Easing/ QE. (for now that is. wink, wink)  Of all the Central Bank meetings this week, I think the only one that has a puncher's chance in the ring is Sweden's Riksbank, where they might do the dolt thing and cut rates that are already so low you can't limbo under them! 

I think we'll see the Reserve Bank of New Zealand (RBNZ) complain about the “elevated level” of their currency, (kiwi) but not move rates or anything like that.  But beyond those two, the rest will just be symbolic meetings, I think. So, getting back to the Fed meeting, yes, they'll bring to an end, this round of QE, but just to keep everyone's head screwed on straight, they'll repeat and emphasize the wording, that “interest rates will remain at current levels for a considerable time”.

So, this morning, heading into the week of Central Bank meetings, and data reports, the currencies led by the euro are a bit stronger VS the dollar, with the Chinese renminbi / yuan having a nice sized appreciation overnight.  The ECB released the results of their stress tests for 130 Eurozone banks yesterday, and while 25 Banks failed, 12 have already taken steps to solidify their balance sheets, leaving just 13 of 130, with real problems. That's a far cry from what was thought to be a real problem for the Eurozone and euro, as most observers thought that balance sheets at the Eurozone's banks were too weak.

So, that was proven to be a false accusation of the Eurozone banks. It was a powerful statement in my opinion. And apparently in the opinions of traders, because the latest Business Climate Index for Germany, as measured by the think tank IFO, showed the Eurozone's largest economy has Business Climate fall for the 6th consecutive month. The euro isn't winning any medals for being the best looking currency these days, but that doesn't matter when the dollar is getting sold.

Of course it would be preferable by the euro, if they had Gold Stars all over their fundamentals. But they don't. and so it carries on despite its warts.

Well, the election results from Brazil are in, and by the hair of the little piggy's chinny, chin, chin, the incumbent, Dilma Rousseff, won reelection. UGH!  Well, so much for the people of Brazil wanting to show Ms. Rousseff out the door, after her first term that brought gloom, despair and agony on the Brazilian economy and real. I guess the people there, love the pain. The scary part is now what happens to the real? Was the bulk of the bad news already priced into the currency? The real hasn't opened for trading yet this morning, so the opening should be quite interesting. I would step back here, and watch it all unfold, not wanting to get caught up in the melee.  Ahhh. Coming back now, and filling in this info. the real opened up down big time, folks, so apparently it wasn't all priced in. UGH!

Speaking of something already having the result priced in. What about the dollar? Don't you think that by now, the traders have figured out the Fed was on course to end QE this month? Sure there were a few who held out thinking there could be a pause of the cause in the Fed's, every 6 weeks reduction of their total bond buying, but those had to be very few at this point, for it has been in the cards for probably the last 3 to 6 months, that the Fed had blinders on at this point and were pointing to the end of QE/ bond buying/ money printing/ debt monetization/ crack cocaine for the economy.

The cat that Fed St. Louis President, James Bullard, threw out among the pigeons a couple of weeks ago, saying that “QE could be extended”, was proven to be merely a lifesaving ring that he was throwing out to the stock market. But this end of QE, is simply an end for this round. I still believe that in a few months, the economy will show its true stripes without the help of liquidity, and inflation will continue to drop back, and the Fed will have no choice but to come back to the QE Table, or. risk undoing all that they had done in the past 6 years!

I see that one of my fave economists/ authors, Richard Duncan, agrees with me on this thought that the Fed will be back at the QE table soon after ending this current round.  The Daily Reckoning (www.dailyreckoning.com) had a snippet from Richard Duncan in their Friday letter, that I think most of you would find interesting. You should check it out!

So. I said above that there was a nice appreciation given to the renminbi / yuan overnight, which is interesting, as it comes ahead of the one piece of data China has to print this week. The official Gov't report on manufacturing (PMI). Recall that the HSBC/ Markit PMI showed a slight increase that was surprising to the markets, and the this version of the PMI report is usually the more “subdued” report. So, I guess what I'm saying is that if the Chinese leaders allowed a nice appreciation of the renminbi / yuan, then they've probably seen the results of the PMI that will print on Thursday.

I hope I'm right on all of that, given that Global Growth needs for China to remain strong, and help pull Global Growth out of its doldrums.

When I came in this morning, the Aussie dollar (A$) was up ¼ of a cent. But that has all been taken away while I've been carrying on about the Fed and QE. An article on the Bloomberg says that the A$ pared its gains on A$/ yen selling led by European Banks. Hmmm. Probably the case, as the yen is eking out a gain this morning.   The A$/ yen cross is not one that we get into a lot, given that most of us are dollar based investors and only care about the relationship of a currency VS the dollar. But as I've explained on numerous occasions over the years, 22 years to be exact, all crosses eventually come back to the currency and the dollar. The cross trading of euro/ yen over the years has been monumental, and in the end effects the euro and dollar, and yen and dollar.

The euro gain I talked about above, has been wiped out too. Oh well, the gains were small, so nothing gained, nothing lost, right?  I guess I should start writing later in the morning, and that would take care of those early morning gains, that get wiped out. Hey, now that's an idea, I could sleep in, wake up without an alarm, and then start to write. You could have the letter by, say 11 am. That won't work, you say? OK. I really didn't want to change things anyway.

The Indian rupee get whacked overnight, as the Gov't is discussing a new tax on fuel. The World Bank issued a report on the potential of India and said that India has the potential to grow at 6% to 7%…  Then it just so happens that the Indian Gov't issued a forecast for 2015 GDP, and they showed it at 5.6%…  That's not 6% to 7%, now is it? But, at 5.6% it's still steady Eddie, and gives the new Indian leader, Modi, room to grow. Which I still believe he will unlock the Indian economy, and good things are coming in India. Of course that's my opinion and I could be wrong.

Gold is flat this morning, and just can't seem to put together a week of gains and it's been that way for over a year now. Up, down, turnaround, and no, I'm not doing an exercise here, I'm talking about the direction of trading in Gold. Up one day, down the next, and then a turnaround.

I saw a story this past week, while doing some reading, outside of course, as it was fantabulous weather, and came across a very interesting story/ idea. Keith Neumeyer, the CEO of First Majestic Silver Corporation, the world's largest primary sliver producer, announced that his company is seeking a joint action with other silver producers to end the present manipulation of the silver market.    Whoa there Partner, he's suggesting what? That's right, you heard me loud and clear. His plan is to withhold Silver production from the markets to cause the price to rise to the point where present speculators in “paper silver” will be forced out. 

Whoa! Now that's a very intriguing plan, don't you agree? I sure hope he's successful in organizing this plan, and carrying it out to a successful rise in the price of physical Silver.  You see, these producers are losing money as the cost to produce Silver is over $20, but yet the metal remains around $17, so this is a plan by the largest producer to change that. All power to him! May the force be with you, Mr. Neumeyer!

The U.S. Data Cupboard is chock full-o-data and event stuff this week. We already talked about the FOMC Meeting that will take place on Wednesday this week, but before we get there, we'll see Durable Goods Orders tomorrow, and the S&P/ CaseShiller Home Price Index , along with Consumer Confidence. Then after the FOMC meeting, we'll see the first print of 3rd QTR GDP, Personal Consumption, and then finally on Friday, two of my faves, Personal Income and Spending.  So, all in all, a very busy week, with lost to talk about data-wise, which can be quite boring at times, but I think this week will be quite entertaining!

For What It's Worth. A dear reader, (Thanks Bob!) sent me this story complete with a graph from the Fed St. Louis, that I can't include in the text only letter, and by the time I got it all approved for the Pfennig Blog site, www.dailypfennig.com, it wouldn't have any meaning. But here's the gist of the story, which is depressing, I'll admit.

“The Social Security Administration has just released wage statistics for 2013, and the numbers are startling.  Last year, 50 percent of all American workers made less than $28,031, and 39 percent of all American workers made less than $20,000.  If you worked a full-time job at $10 an hour all year long with two weeks off, you would make $20,000.  So the fact that 39 percent of all workers made less than that amount is rather telling.  This is more evidence of the declining quality of the jobs in this country.  In many homes in America today, both parents are working multiple jobs in a desperate attempt to make ends meet. Our paychecks are stagnant while the cost of living just continues to soar.  And the jobs that are being added to the economy pay a lot less than the jobs lost in the last recession.  In fact, it has been estimated that the jobs that have been created since the last recession pay an average of 23 percent less than the jobs that were lost.  We are witnessing the slow-motion destruction of the middle class, and very few of our leaders seem to care.”

Chuck again. Yes, this is all true, folks. wages in the U.S. continue to be a real problem for the economy, and for those that draw those low wages. I think it has more to do with all the part-time jobs that people are working these days. But, nevertheless, it's a problem, and one that's not likely to be corrected any time soon. Oh, and if you want to read the whole article you can find it here: http://theeconomiccollapseblog.com/archives/50-percent-of-american-workers-make-less-than-28031-dollars-a-year

To recap. A very busy week with events and data that will be highlighted by the Fed meeting on Wednesday that will bring about an end of this round of QE/ bond buying, etc.  Chuck goes through explaining why the Fed will be back to the QE Table in a few months. The currencies were eking out some gains in the early morning, but by the time Chuck got to the Big Finish they were wiped out. The Riksbank is the only Central Bank that has a chance of doing something to rates this week, even though 4 of G-10 Central Banks will meet along with a handful of other Central Banks. And the RBNZ will take their meeting as an opportunity to whine about the “elevated level” of kiwi.

Currencies today 10/27/14. American Style: A$ .8800, kiwi .7870, C$ .8900, euro 1.2675, sterling 1.6105, Swiss $1.0515, . European Style: rand 10.9620, krone 6.6175, SEK 7.2865, forint 243.30, zloty 3.3305, koruna 21.8465, RUB 42.25, yen 107.90, sing 1.2760, HKD 7.7570, INR 61.30, China 6.1446, pesos 13.59, BRL 2.5530, Dollar Index 85.68, Oil $81.15, 10-year 2.27%, Silver $17.22, Platinum $1,255.00, Palladium $782.75, and Gold. $1,231.00

That's it for today. Well, some very sad news late last night. Cardinals young outfielder, Oscar Tavares died in a car accident, along with his girlfriend, in his home country of the Dominican Republic. The Cardinals have seen their share of untimely deaths of players in the past 12 years. I just couldn't believe the news when I heard it, but it has been confirmed. Our thoughts and prayers with his family.  He was just 22, and quite a talent. UGH!  Well, the World Series sees the Giants with a 3-2 games lead, but heading back to K.C. for the final two games (if needed).  That's the same situation the Cardinals were in back in 2011, and went on to win the final two at home, with that still the greatest game in World Series history, Game 6, acting as a springboard to the Game 7 victory and their 11th World Championship. No matter what, the Royals have had a fun season for their fans. Our Lambs, I mean Rams, were a disaster again yesterday, and the Blues beat the Blackhawks on Saturday night! Boy I remember when a Blues/ Blackhawks Saturday night game was the place to be, the games, the fights, the rowdy fans. I guess it's lost some of that in recent years. Oh well, probably for the better. Yeah, right, I say!  Well, it's time to go, so I hope you have a Marvelous Monday!

Chuck Butler
President
EverBank World Markets