Good day. And a Marvelous Monday to you! Front and Center. Happy Birthday to my darling daughter, Dawn. More at the end.  Cards lose in the 19th inning, they sure didn’t play very good baseball this weekend!  The weather was fabulosio this weekend in the St. Louis area, so we had that going for us. Chris heads to San Francisco later this week for the San Francisco Money Show.  I sure wish I were going too. I sure do love that city!

Friday, we saw a lot of dollar buying to end the week. The currencies held the baton, orchestrating a gain for the week, until the dollar snuck up behind and snatched it away to end the week. The U. of Michigan Confidence report for the first two weeks of August, showed an increase and so did Leading Indicators for July. But I think it would be a stretch to think that those reports were the main reason the dollar rallied on Friday. Instead, I would think the reason could be placed squarely on the shoulders of book squaring.  But, the data didn’t hurt!

This morning, the euro is a bit stronger, as most of the currencies are VS the U.S. dollar. The euro is getting a boost this morning from the rumors going around, that someone’s underground and, no wait! Darn-it Chuck, stick to the story! Well, the rumors this morning center around the ECB bond buying program, that just last week, Angela Merkel, said that Germany didn’t have any problems with, just might take place.

The reports / rumors are talking about how the European Central Bank (ECB) is going to set limits for Eurozone debt yields, and pledge an unlimited amount of bond buying to maintain those limits. Whoa, there partner!  I sure hope they don’t make that announcement in public. Because I see all kinds of problems that could come of that! It’s far better to keep things like close to the vest and let the markets figure it out on their own.

And Germany’s Central Bank, the Bundesbank, has opened up a line of criticism of the ECB, saying that “The Bundesbank holds to the opinion that government bond purchases by the Eurosystem are to be seen critically and entail significant stability risks.”

Now. in the old days before the euro and the ECB were established. The Bundesbank was the cat’s meow. They controlled the monetary policy of the largest economy, and other central banks followed so closely to the Bundesbank that they could tell you what flavor gum the Bundesbankers were chewing! Holland, Denmark, Austria, and others had their central banks in the shadow of the Bundesbank. But. I’m afraid that’s all in the past. The ECB has the reins now. but, any kind of public debate will not be good for the euro.

We have a couple of weeks before any decision is made there, as the ECB governing council will meet in September, and discuss this program. But, for now, the markets like what they’re hearing.  And the best performing currency overnight has been the Aussie dollar (A$). And after a week that saw the A$ lose ground, on statements by the Australian Treasurer about the currency being overvalued, the A$ fights to gain that lost ground back.  The Reserve Bank of Australia (RBA) meeting minutes will print tonight, so the markets will be going over those minutes to see if the RBA mentions the A$ strength.

A Senior Currency Strategist at Westpac Banking Corp in Sydney had this to say about the A$… “While the Aussie might still be a little bit pricey at $1.04, I don’t think you want to be aggressive about short positions. I think the news out of Europe is getting a little better.”

This is a big week in the Eurozone, as the German Chancellor (Merkel), and French President (Hollande) will meet this week, to discuss Greece. This meeting will come after both will have had separate meetings with Greek Prime Minister, (Samaras).   There is no revealing of Greece’s progress in cutting deficit spending / debt this week, that has to wait for the September publication of the Troika report on Greece’s progress. Remember, that if the Troika doesn’t believe that Greece has done enough they will hold back the next scheduled tranche of bailout funds for Greece.

In addition, for those of you new to class. The Troika, is the name given to the members of the European Central Bank, The European Commission, and the IMF.  I know it might sound as though the rest of the Eurozone is ganging up on Greece, and being unfair to them. But. this framework was agreed to by the Greek leaders, in return for the second bailout funds.

There’s not a lot of “meat” in the way of economic data reports this week in the U.S.  We will see some housing data, and Durable Goods later in the week. The biggest banana in the data bunch this week will be the meeting minutes of the last FOMC meeting.  Yes, all those notes will beU stale. but, will at least give the markets an idea of the frame of mind of the Fed Heads.

OK.. moving along here. A dear reader, sent me a note the other day asking me, “if U.S. Treasury yields are rising, isn’t that good for the dollar?”  Well, yes, and no.  Yes, the dollar gets to fight with the other countries for yield differential trades. But, there’s a lot of trepidation here. how many false dawns have we seen in the past few years? Too many. too many times we’ve seen yields rise, only to be knocked back down again, and the markets are very well aware of that. So, they have not jumped in with both feet here. yet.  but if they do, they could give the dollar some love with the higher yields in Treasuries. But let me remind you what’s in the back of the minds of the market participants. The Fed participated in 61% of the Treasury auction last year. And they could turn the printing press on, and step up the buying at any time.  and for those of you that are going to throw a dart at me here. Yes,  I know there’s no actual printing press, it’s just a better way of describing the creation of dollars for the Fed to use to buy the Treasuries.

I had another dear reader send me a note and to tell me how the Columbian economy is booming, and wanted me to list some Latin currencies in the currency roundup. Hmmm. if I keep adding currencies that list is going to get pretty large, and I’ll spend all morning, checking currency prices instead of writing!  But. We’ll add them to the Review & Focus currency dashboard. So, if you get the R&F, you’ll see them there starting in October. (we’ve already sent the September issue off to the printing press)  But I agree with the reader, Columbia has been on my list of countries that I’m watching, for over a year now. The currency is just so limited and fairly illiquid.  But that won’t stop me! I have a new MarketSafe CD coming out soon, get ready!

The Japanese yen has been losing some ground in the past week.  As I told you in a Pfennig last week, the so-called “safe haven” destinations for money, that include yen, and Treasuries were getting sold.  Long time readers know that I threw in the towel on Japanese yen, as I kept saying that it was overvalued, and needed to weaken, and instead it would just get stronger VS the dollar. The Bank of Japan (BOJ) passed on their latest call for more stimulus at their last meeting, which didn’t help the yen.   I just think there are better currencies in Asia than yen. For the longest time, and I mean going back 20 years, when someone said they owned an Asian currency, you pretty much knew it was Japanese yen.  But it doesn’t have to be that way any longer!

In that same vein. going back quite a few years. when someone said they owned a foreign currency, you pretty much knew they owned Swiss francs. (that is unless they recently took a trip to Canada or Mexico! HA!)  Swiss francs were the bees knees. But, then Switzerland was dwarfed by the Eurozone, and soon it became all about the euro. And. the Swiss National Bank (SNB) decided to hurt investors with a huge devaluation a year ago, and since then, we don’t get many people looking to buy francs.

And then, I see where Bank of Canada (BOC) Gov. Carney will speak to Canadian Auto Workers Union this week.  You can bet that there will be calls to weaken the Canadian dollar / loonie. But, there’s not much the BOC can do. The loonie is stronger due to investors buying up Canadian bonds, as safe havens.  Now. in my opinion, which you know means I could be wrong, but in my opinion, Canada represents a safe haven much more than the Japanese yen, or U.S. Treasuries!  Yes, I truly understand that the size of the Japanese and U.S. bond markets dwarf Canada’s. But, given the strong banking sector in Canada, and the strong domestic demand of the economy, (we’ll see proof of that this week when Retail Sales prints) and steady government. safe haven is written all over Canada. again, that’s just my opinion!

The price of Oil continues to climb higher, trading into the $96 handle this morning. There is talk now about the U.S. Gov’t releasing some of the oil reserves in an attempt to dampen the prices and prevent high energy costs, which could wipe out any gains the economy has made.

Then There Was This. From Moneynews.com. The U.S. government’s debt held by foreign entities hit a record $5.2923 trillion in June, CNSNews.com reported, citing Treasury Department data.

In January 2009 the U.S. government owed $3.0717 trillion to foreigners entities, the news service added.

China was the top creditor to the U.S. government, though Japanese entities were a close second.

“Although the Chinese maintained their place as the top foreign owners of U.S. debt in June, they are not the top owners of U.S. debt in the world,” CNSNews.com reported. “That distinction belongs to the U.S. Federal Reserve, which according to its July monthly report, owned $1.667 trillion in U.S. government debt in June.”

Chuck again. I don’t know what scares me more. having so much of our debt held by foreigners, or by our own central bank!   I hear you saying, who do you want to own out debt, Chuck?  I don’t want debt to have to own!  Knowing that’s nearly impossible, I don’t know. I just don’t know. it’s like we’ve painted ourselves into a corner. if we step to the right, it’s bad, and if we step to the left it’s bad.  But then, I began warning about the growing debt in 2001.

To recap. the currencies folded like a cheap tent on Friday to the dollar. Some second tier economic data was good for the dollar, but it had to be more than that driving the dollar higher. This morning, the currencies are attempting a move back at the dollar, as the ECB plan to buy bonds, is gaining traction, except with the Bundesbank.  The Aussie dollar is stronger this morning, and the RBA meeting minutes could give us a clue about the RBA’s feeling toward the strong A$.

Currencies Today 8/20/12. American Style: A$ $1.0450, kiwi .8085, C$ $1.0115, euro 1.2310, sterling 1.5695, Swiss $1.0250, . European Style: rand 8.3120, krone 5.9370, SEK 6.6810, forint 225.65, zloty 3.3065, koruna 20.2370, RUB 32.08, yen 79.50, sing 1.2545, HKD 7.7570, INR 55.75, China 6.3590, pesos 13.10, BRL 2.0145, Dollar Index 82.63, Oil $96.13, 10-year 1.85%, Silver $28.14, and Gold $1,615.30

That’s it for today. Yes, I won’t say how old my darling daughter Dawn is today, but she’s still looks like a young lady! Dawn shares a birthday, with our little Christine’s son, Jamieson. And Dawn’s college roommate, Kat, was in town yesterday, and it was her birthday, so we sang Happy Birthday to Dawn & Kat! So, birthdays all around!  The college football talk is really heating up, with all the anticipation of my beloved Missouri Tigers moving to the SEC this year. I sure hope they can be respectable in that league! It was great seeing Kat yesterday. When she attended Mizzou with Dawn, she came home with Dawn all the time, and it was like I had two daughters.  Oh, and Dawn’s husband, Jerry, wanted to be mentioned this morning too. HA!  I hope you all have a Marvelous Monday!

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